US stocks fell on Tuesday as investors eye rising tensions in the Middle East and their potential effects on inflation and global trade.

The Dow Jones Industrial Average fell 500 points, or 1.07%, while the Nasdaq Composite and S&P 500 fell 1.29% and 1.17%, respectively.

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

US ‘SITTING ON SIGNIFICANT TESTED RESERVES’: ANALYST SAYS AMERICA CAN RESIST IRAN ENERGY SHOCK

Traders work on the floor of the New York Stock Exchange in New York City on March 3, 2026. (Brendan McDermid/Reuters)

International benchmark Brent crude rose more than 7% to $83 a barrel on Tuesday, while West Texas Intermediate crude rose more than 7.5% to $76 a barrel. WTI’s nearly 14% gain in two days is the biggest in four years.

The yield on the 10-year Treasury hit its highest level in more than a week and investors pushed back expectations of a 25 basis point interest rate cut by the Federal Reserve through September from July, according to data compiled by LSEG.

The threat of Tehran attacking any ship attempting to transit through the Strait of Hormuz, combined with production shutdowns at several Middle Eastern oil and gas producers, has driven up global shipping rates and prices for crude oil and natural gas.

Aerial view of the port of Fujairah, United Arab Emirates, in the Strait of Hormuz, December 10, 2023. (Reuters)

OIL MARKETS ON BOARD AS IRAN MOVES TO RESTRICT VITAL STRAIT OF HORMUZ SHIPPING LANE, REPORT SAYS

The strait, a critical choke point, carries about a fifth of the world’s total oil consumption.

“Investors worry about additional inflation down the road. The main concern is that (the price of oil) will break above $100 a barrel and stay there,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.

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Reuters contributed to this report.