Wall Street Slips Early as Israel-Iran Conflict Lingers, Fed Decision in Focus
U.S. stocks are lower early Tuesday as traders keep a close eye on rising tensions between Israel and Iran while awaiting the Federal Reserve’s policy announcement. As of 15:00 GMT, the Dow Jones Industrial Average is down 0.19% to 42,432.22, the S&P 500 slips 0.36% to 6,011.38, and the Nasdaq Composite falls 0.45% to 19,612.38. Market action reflects caution, not panic, with geopolitical risks driving defensive positioning.
Could Israel-Iran Tensions Keep Oil and Energy Stocks Elevated?
The conflict, now in its fifth day, follows Israel’s strike on Iranian nuclear facilities and raises concerns about oil export disruptions from the Middle East. Oil prices remain elevated, helping energy stocks outperform early in the session. The S&P 500 energy sector is up 1.6%, with Chevron gaining 1.8% and ExxonMobil rising 1.7% as investors lean into oil-sensitive names.
Is the Fed Policy Decision the Next Big Catalyst for Traders?
Traders broadly expect the Fed to hold rates steady on Wednesday, but attention is on Chair Powell’s commentary and any clues about potential cuts. Fed funds futures indicate 46 basis points of cuts priced in by year-end, with a 57% chance of a 25-basis-point reduction in September. U.S. Treasury yields are edging lower, with the 10-year down 2 basis points to 4.43%, suggesting a modest risk-off tone.
Which Sectors and Stocks Are Leading Early Market Moves?
Ten of eleven major S&P sectors are in the red, led by a 0.8% drop in healthcare. Solar names are under heavy pressure after the Senate’s version of the tax bill outlines a phase-out of solar, wind, and energy tax credits by 2028.
Enphase Energy is down 23.3%, Sunrun plunges 39.4%, and the Invesco Solar ETF is off 8.8%. Meanwhile, nuclear stocks are gaining after the Senate extended nuclear credits to 2036—Oklo is up 3.3%, and Nano Nuclear Energy climbs 4.3%.
What Are Traders Watching in Economic Data and Corporate Moves?
Retail sales fell more than expected in May, and factory output showed minimal growth—raising concerns about the strength of consumer demand. Corporate headlines include a 3.9% drop in T-Mobile after SoftBank sold $4.8 billion in shares. Eli Lilly is down 1.1% after announcing it will acquire Verve Therapeutics for up to $1.3 billion. Verve shares surge 73.7% on the news.
Market Outlook: Will Fed Cues or Middle East Risks Guide the Next Move?
With Fed guidance on tap and oil prices holding up due to geopolitical risks, traders appear to be hedging early-week gains. A hawkish Fed tone or deepening conflict in the Middle East could reinforce defensive flows. For now, risk appetite looks tentative with energy in the lead and most sectors under pressure.
More Information in our Economic Calendar.
