US stocks plunge as Middle East tensions drive oil prices higher

U.S. stocks plunged on Tuesday as investors eye growing tensions in the Middle East and their potential effects on inflation and global trade.

The Dow Jones Industrial Average fell 1,100 points, or 2.25%, while the Nasdaq Composite and S&P 500 fell 2.27% and 2.13%, respectively.

Investors feared that the higher oil prices could fuel inflation and complicate central bank policy decisions already strained by tariff-driven price increases.

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International benchmark Brent crude was up more than 7% at $83 a barrel on Tuesday, while West Texas Intermediate crude climbed over 7.5% to $76 per barrel. WTI’s two-day gain of almost 14% is the largest in four years.

Tehran’s threat to attack any vessel attempting to transit the Strait of Hormuz, combined with production halts by several Middle Eastern oil and gas producers, has driven up global shipping rates and prices of crude and natural gas.

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The strait, a critical chokepoint, carries roughly one fifth of the world’s total oil consumption.

“Investors worry about additional inflation coming down the road. The main concern is that (oil prices) goes to over $100 a barrel and stays there,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.

The 10-year Treasury yield climbed to 4.07% on inflation angst.

Reuters contributed to this report.