New York (TDI): United States shares declined on Tuesday, as tensions between Israel and Iran mounted. The S&P 500 index declined 0.8% to 5,418.17 as the tech-heavy Nasdaq 100 declined 1%, led by airline and tech stock losses.Â
The CBOE Volatility Index (VIX) remained at 22, showing heightened investor fear, as President Donald Trump summoned his national security team and demanded Iran’s “Unconditional Surrender.”
Fear of the possible participation of the United States in the Middle East war has created a pervasive risk-off sentiment. “The confluence of soft economic news in an environment that is becoming more and more complex in foreign affairs has market participants taking on a bit of a risk-off tone,”
Interactive Brokers senior economist José Torres said. United Airlines and Delta Air Lines were two of the biggest decliners in the S&P 500, each tumbling more than 4%, and top tech stocks fell also with geopolitical concerns.
Read More: Global Outcry Grows Over Israel’s Attacks on Iran
Oil prices were high, with West Texas Intermediate crude at around $75 a barrel. Analysts warned that a rise to $120 is in the cards if Iran were to cut off shipping through the Strait of Hormuz.
“That would be a huge negative for the equity market,” said Deutsche Bank’s Jim Reid. “A sharp fall and a gradual rebound would be the likely outcome.”
The retail sales figures added to the nervousness in the market, reporting a seasonally adjusted fall of 0.6% in May—the largest fall in a month since January. Spending at restaurants and bars fell by 1.7%, the largest fall in two years.
“If the consumer starts to roll over, it could lead to job losses and a vicious circle,” Northlight Asset Management Chief Investment Officer Chris Zaccarelli cautioned.Â
As the Israel-Iran war enters its seventh day, market volatility is likely to continue. Geopolitical risk is escalating and economic signals are deteriorating, prompting investors to prepare for more volatility in the coming future.
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