Equity indexes dipped on Tuesday as U.S. inflation climbed, oil gained for a third straight day, and the dollar rose amid fading hopes for a deal securing the Strait of Hormuz.
April U.S. consumer prices rose sharply for a second straight month, marking the largest annual inflation increase in nearly three years. This reinforced expectations the Federal Reserve will keep rates unchanged. The conflict with Iran has driven up oil prices, increasing costs for gasoline, diesel, and jet fuel, with economists anticipating second-round effects in coming months.
President Trump announced Monday that a month-old ceasefire with Iran was 'on life support,' after Tehran's response to a U.S. peace plan revealed deep divisions. U.S. crude rose 4.19% to $102.18 a barrel; Brent climbed 3.88% to $108.25.
'Speculation about the Iran conflict flaring back up has pushed oil prices higher,' said Emily Roland, co-chief investment strategist at Manulife John Hancock Investments. She also noted rising Treasury yields added pressure on stocks.
A decline in semiconductor stocks weighed on sentiment, and a pullback in South Korean technology shares dragged down the KOSPI index, which fell 2.3% after hitting a record near 8,000 points.
On Wall Street, the Dow fell 0.54%, the S&P 500 dropped 0.80%, and the Nasdaq Composite slid 1.36%. MSCI's global stock gauge fell 0.89%.
U.S. Treasury yields rose on supply disruption fears and the CPI data. The 10-year yield climbed 4.5 basis points to 4.457%; the 30-year yield rose to 5.0211%. The 2-year yield increased to 3.998%.
The dollar index advanced 0.41% to 98.37. The euro fell 0.42% to $1.1732; sterling weakened 0.64% to $1.352. Against the yen, the dollar strengthened 0.3% to 157.63.
Gold prices fell 1.41% to $4,667.29 an ounce as fading ceasefire hopes added to inflation and interest rate concerns.