Government bonds also sold off, driving yields higher. The 10-year U.S. Treasury yield rose as high as nearly 4.6%, its highest level since May.
Airline stocks were some of the hardest-hit shares Wednesday. United Airlines, Delta Air Lines and Southwest Airlines fell around 1.5%. Other travel stocks, such as Booking Holdings and Carnival, fell around 4%.
With oil prices rising again and inflation fears returning to the forefront, other companies that rely on discretionary consumer spending also tumbled. DoorDash and American Express fell 4%, Home Depot fell 2.6%, and Procter & Gamble and McDonald’s dropped around 2%.
Global stocks also sold off, with flagship indexes in Spain, Germany and France closing down more than 2%. Benchmark indexes in Italy and the U.K. ended lower by around 1.5%.
On Tuesday, the U.S. said Iran struck three commercial vessels near the Strait of Hormuz. Tehran has not claimed responsibility for the attacks.
Later in the day, the U.S. Treasury revoked a sanctions waiver that allowed Iranian oil to be sold into the global market and U.S. Central Command launched “a series of powerful strikes against Iran” in retaliation for the vessel attacks.
“Renewed tensions in the Middle East have interrupted what had become an increasingly complacent market narrative, prompting investors to reassess geopolitical risks after several weeks of pricing in a smooth path toward de-escalation,” Capital.com market analyst Daniela Hathorn said in a note Wednesday morning.
“The latest attacks have lifted oil prices, weighed on equity markets and reminded investors that while a ceasefire remains in place, a lasting agreement between the US and Iran is far from guaranteed,” she added.
After the U.S. and Iran signed a memorandum of understanding in mid-June, U.S. oil prices stabilized around $69 to $70 per barrel and remained there for the better part of three weeks.
“For markets and the global economy, the prospect of a swift return to pre-conflict energy and goods flows through the waterway is fading,” said Geoff Yu, senior market strategist at BNY.
