US stocks close lower as Middle East tensions escalate

US stock markets closed lower on June 3 as escalating tensions in the Middle East and rising crude prices weighed on investor sentiment. All three major indexes—Dow Jones, S&P 500, and Nasdaq—fell, with the Dow dropping 1.21%, the S&P 500 losing 0.74%, and the Nasdaq declining 0.89%. Tech and financial sectors led declines, while energy stocks rose due to higher oil prices. The latest round of US-Iran air strikes intensified regional hostilities, raising fears of a prolonged Strait of Hormuz closure. This stoked inflation concerns, with markets now pricing a 41.1% chance of a Federal Reserve rate hike in December, up from 9.1% a month ago. New York Fed President John Williams maintained that current monetary policy remains appropriate despite inflation risks. AI-related stocks showed resilience, with chips gaining 1.4% overall, though six of the Magnificent Seven AI megacaps fell. Meta Platforms was the lone gainer, rising 4.2%. Meanwhile, the S&P Software & Services index dropped 4%, reflecting ongoing fears of AI-driven disruption. Asset managers faced pressure after Switzerland’s Partners Group restricted withdrawals from an $8.6 billion private equity fund, causing KKR, Blackstone, Blue Owl, and Ares Management to decline between 3.9% and 4.2%. GameStop surged 6% following a reported rise, while Broadcom fell 4.5% after earnings. Economic data showed stable labor markets and expanding services sectors, but rising input prices and geopolitical uncertainty dampened corporate spending. The Fed’s Beige Book report highlighted growing economic activity but noted pervasive fallout from higher energy costs linked to Middle East conflicts.