US MARKET CLOSE | Dow Falls Over 400 Points as Oil Tops $90 on Iran Strikes; Fed Hike Odds Rise to 68%

US stocks closed lower on Tuesday as a fresh round of American airstrikes on Iran drove oil prices higher, while a bond market selloff and speculation over the Federal Reserve's next interest rate move kept buyers on the sidelines, according to Sina Finance. The Dow Jones Industrial Average fell 419.01 points, or 0.79%, to 52,766.87; the S&P 500 dropped 54.67 points, or 0.71%, to 7,631.47; and the Nasdaq lost 271.11 points, or 1.03%, to 26,099.77. Among the megacap "Magnificent Seven," Tesla fell more than 3%, while Google, Amazon, Nvidia and Microsoft each dropped more than 1%. Meta rose more than 1% and Apple gained more than 2%. Optical communications and cryptocurrency stocks broadly declined, with Circle down more than 6% and Strategy down more than 6%. Lumentum fell more than 5% and AAOI dropped nearly 4%. Pharmaceutical stocks led gains, with Moderna up nearly 10%, Novartis up more than 6% and Novavax up 8%. US Central Command said American forces were striking Islamic Revolutionary Guard Corps targets inside Iran, sending oil prices up. US crude rose 5.2% to settle at $90.22 a barrel, while Brent crude futures climbed 4.6% to $94.65 a barrel. Oil had already risen earlier in the week after US-Iran military action resumed on Monday, when a tanker passing through the Strait of Hormuz was hit by three unidentified projectiles. President Donald Trump on Monday threatened on Fox News to respond to Iran's recent attacks on US military bases in the Middle East, saying "we will hit them hard." Global bond yields continued to climb on Tuesday. The US 10-year Treasury yield rose to a level not seen since January 2025. Japan's 10-year yield reached its highest since August 1996, while the German benchmark yield climbed to a 2011 high. Yields have risen recently as traders worry that persistently high oil prices could push up inflation and affect the Fed's rate path. The Fed is scheduled to meet in two weeks. September has also historically been a poor month for stocks. "The stock market will always struggle to digest large and volatile moves in the bond market," said Baird investment strategist Ross Mayfield. Despite inflation concerns, Mayfield said economic data has not changed enough to support a September hike. According to the CME FedWatch tool, federal funds futures currently price a 68% probability that the central bank will raise rates at its next meeting. "I still think they hold in September, but likely hike at least once before year-end," he said, warning that "a lot can change" before the meeting, especially Friday's August nonfarm payrolls report.