US close: Stocks lower as Middle East conflict continues

(Sharecast News) - Major indices closed lower on Tuesday as market participants remained zeroed-in on developments in the escalating conflict between Israel and Iran.

At the close, the Dow Jones Industrial Average was down 0.70% at 42,215.80, while the S&P 500 lost 0.84% to 5,982.72 and the Nasdaq Composite saw out the session 0.91% weaker at 19,521.09.

MIDDLE EAST CONFLICT

The Dow closed 299.29 points lower on Tuesday, almost erasing gains recorded in the previous session, as investors were spooked after Donald Trump said on that "everyone should immediately evacuate Tehran", before leaving the G7 summit in Canada prematurely, reportedly to deal with the escalating situation in the Middle East.

French President Emmanuel Macron stated that Trump said his departure from the G7 meeting had "nothing to do with a ceasefire" and that it was "much bigger than that". Trump also said he could send either JD Vance or Steven Witkoff to meet with Iranian officials, but denied reports he had reached out to Iran for peace talks.

Trump later took to social media to threaten Iranian leader Ali Khamenei, demanding Iran's "UNCONDITIONAL SURRENDER!".

"We know exactly where the so-called 'Supreme Leader' is hiding," he said. "He is an easy target, but is safe there - We are not going to take him out (kill!), at least not for now. But we don't want missiles shot at civilians, or American soldiers. Our patience is wearing thin."

Trump also met with his national security team in the White House Situation Room on Tuesday and the Pentagon moved assets to the Middle East as part of an effort to strengthen America's military capabilities and expand options.

ENERGY

Oil prices were higher again on Tuesday, with benchmark Brent crude up 4.59% at $76.59 a barrel, while West Texas Intermediate was 4.60% higher at $75.07 per barrel as, in addition to the Israel/Iran conflict and the latter's threat to close the Strait of Hormuz, two tankers collided and caught fire in waters off the United Arab Emirates, further rattling both oil and shipping markets.

US DATA

On the macro front, US retail sales declined 0.9% month-on-month in May, according to the Census Bureau, following April's downwardly revised 0.1% drop and worse than expectations of a 0.7% fall. May's reading marked the biggest decrease in four months and was principally due to Donald Trump's so-called "Liberation Day" tariffs.

Elsewhere, US import prices were unchanged last month, according to the Bureau of Labor Statistics, following a 0.1% increase in April, while export prices declined 0.9% in May, after ticking up 0.1% in the prior month.

On another note, US capacity utilisation decreased to 77.4% in May, down from 77.7% in April, according to the Federal Reserve, missing market expectations for a flat reading. Industrial production, on the other hand, increased 0.60% year-on-year in May, following April's 1.5% increase and beating expectations for a 0.1% uptick.

Still on data, US business inventories data were flat month-on-month in April, according to the Census Bureau, in line with market expectations. On an annual basis, business inventories rose by 2.2%.

Finally, the National Association of Housebuilders' housing market index fell two points in June, dropping to 32 for the lowest reading since December 2022, in direct contrast with market expectations for an increase to 36.

Reporting by Iain Gilbert at Sharecast.com