Nasdaq Falls 1.45% as Oil Surge From Iran Attack and Chip Selloff Rattle Markets Before Fed Decision

The Nasdaq Composite fell 1.45%, or 360.37 points, to 24,516.54 in midday trading Wednesday, as surging oil prices tied to renewed fighting between the United States and Iran combined with another sharp selloff in chipmaker stocks to weigh on technology shares ahead of the Federal Reserve's latest interest rate decision.

A resurgence in Middle East violence drove Brent crude oil prices above $90 a barrel, stoking fresh concerns about inflation and pushing bond yields higher, a combination that dimmed investor appetite for riskier assets across markets. The broader S&P 500 also declined, while the Nasdaq 100 index, which tracks the largest non-financial companies on the exchange, lost 1.2% during the session.

Wednesday's losses extended a chip-sector selloff that has now stretched across multiple trading sessions. The rout began after reports emerged Monday of a breakthrough in Chinese chipmaking technology, sending semiconductor stocks tumbling and dragging the Nasdaq toward correction territory even before Wednesday's additional pressure from rising oil prices. The selling intensified further following disappointing earnings from South Korean chipmaker SK Hynix, whose second-quarter profit rose sixfold from a year earlier but still fell short of analyst expectations, a shortfall that reinforced investor concerns about whether the artificial intelligence spending boom driving much of the past year's chip-sector profits may be beginning to moderate.

The chip selloff has hit Asian markets especially hard in recent sessions. South Korea's SK Hynix plunged more than 14% at one point this week, while Samsung Electronics fell more than 13% during the same stretch, contributing to the KOSPI index's worst two-day decline on record. That selling pressure spread to U.S. premarket trading, with Micron Technology down more than 4%, Nvidia off roughly 1.2%, and Intel and Advanced Micro Devices each falling more than 3% at various points during the week's trading.

Tuesday's session had shown a notably different pattern from Wednesday's broader decline, with the Dow Jones Industrial Average climbing 0.93% even as the Nasdaq slipped 0.63%, reflecting a rotation into more defensive, less technology-heavy sectors. Health care and financial stocks reached fresh intraday all-time highs Tuesday, with the State Street Health Care Select Sector SPDR ETF gaining 2.7% and the State Street Financial Select Sector SPDR ETF adding 0.5%, as investors continued shifting away from the technology trade that has dominated market gains for much of the past year.

Even amid the broader tech-sector weakness, some individual stories stood out. Apple briefly became only the second publicly traded company in history to reach a $5 trillion market capitalization on Tuesday, achieving the milestone less than a year after first surpassing $4 trillion, with the achievement coming just a day before the company was scheduled to report its own quarterly earnings.

Not all of Wednesday's market pressure traced back to chips and oil. Target shares fell more than 7% after the retailer forecast a larger-than-expected decline in full-year sales, while Estee Lauder dropped more than 5% following weaker-than-expected 2026 earnings-per-share guidance, adding company-specific disappointments to the broader macroeconomic headwinds weighing on stocks.

Wednesday's trading also comes as investors brace for a heavy stretch of corporate earnings from some of the technology sector's largest AI infrastructure spenders. Results from Microsoft and Meta Platforms, due later this week, are expected to offer additional clarity on whether massive capital expenditure commitments tied to artificial intelligence are translating into revenue growth substantial enough to justify current spending levels, a question that has increasingly weighed on sentiment toward mega-cap technology stocks in recent weeks.

The market's attention is also fixed on the Federal Reserve's policy announcement due later Wednesday. JPMorgan's base case scenario calls for a hawkish hold from the central bank, which the bank has said could leave the S&P 500 roughly flat to slightly lower depending on the specific language used in the accompanying statement. Analysts have said that if Fed Chair Kevin Warsh signals openness to a rate cut at the central bank's September meeting, markets could respond positively, whereas a more cautious tone emphasizing persistent inflation risks, particularly given this week's spike in oil prices, could extend the current bout of selling pressure.

Despite Wednesday's decline, market breadth data from earlier in the week showed a more complicated picture than the headline index moves alone suggest. During Tuesday's session, 382 individual holdings within a broader market index advanced even as chip stocks were "getting hammered," according to market commentary, illustrating how narrowly concentrated the technology-sector selling has been relative to the performance of the broader market.

Not every chip-related stock has suffered equally during the recent downturn. Sandisk has remained the best-performing stock in the S&P 500 for the year despite the recent sector-wide selloff, still up more than 360% year to date, according to market data, underscoring the significant divergence in performance even among companies operating within the same beleaguered sector.

With the Fed decision, Middle East tensions and a wave of major technology earnings all converging within the same trading week, investors are broadly expecting continued volatility across the Nasdaq and broader U.S. equity markets in the sessions immediately ahead, as the market works to reconcile competing signals about interest rate policy, geopolitical risk and the durability of the artificial intelligence investment cycle that has driven much of the past year's technology-sector gains.