US stock markets pulled back sharply on Wednesday, ending a record-setting rally that had driven major indices to fresh all-time highs over the previous week. Investors adopted a more cautious stance as escalating geopolitical tensions in the Middle East pushed oil prices higher, while rising Treasury yields added pressure to growth and technology stocks.

The Dow Jones Industrial Average led the declines, falling more than 600 points, or 1.2%. The Nasdaq Composite lost 0.9%, while the S&P 500 slipped 0.7%, bringing an end to its nine-session winning streak. The retreat reflected growing concerns that higher energy prices and increased geopolitical uncertainty could complicate the inflation outlook and delay any potential easing in monetary policy.

Technology and artificial intelligence stocks, which have been the primary drivers of recent market gains, came under pressure. IBM and Salesforce posted notable losses, while AI heavyweights Microsoft and NVIDIA fell between 3% and 7%. Given their large weightings in major indices, the declines had an outsized impact on broader market performance.

Investor sentiment was further shaken by developments in the Middle East. Reports of Iranian attempts to target US forces in the region were followed by US strikes against Iranian sites. Additional comments from Israeli Prime Minister Benjamin Netanyahu indicating that further military action against Iran remained possible heightened concerns that the conflict could broaden and disrupt global energy markets.

Those fears translated directly into higher oil prices. West Texas Intermediate crude climbed approximately 2.3% to trade near $96 per barrel, while Brent crude rose 1.9% to settle at $97.81 per barrel. The move renewed concerns that energy-driven inflation could re-emerge just as investors had begun to anticipate a more stable inflation environment.

Despite the broader market weakness, some AI-related companies continued to attract investor interest. Marvell Technology extended the momentum from its previous session's 33% surge, gaining a further 5% as enthusiasm surrounding AI infrastructure spending remained strong. However, other semiconductor and cybersecurity names experienced profit-taking ahead of earnings announcements. Broadcom edged lower ahead of its results, while CrowdStrike declined roughly 3% as investors positioned cautiously ahead of its earnings release.

Corporate earnings reactions remained mixed. Palo Alto Networks fell approximately 6% despite reporting results that exceeded analyst expectations, suggesting investors were locking in profits following the stock's strong performance this year. Meanwhile, Ulta Beauty and GitLab also moved lower, while GameStop and Medtronic recorded gains following their latest financial updates.

In currency markets, the US Dollar Index rose to 99.52 as investors sought the relative safety of the US currency amid heightened geopolitical uncertainty. At the same time, the yield on the benchmark 10-year US Treasury note climbed above 4.49%, increasing pressure on growth-oriented sectors that are particularly sensitive to higher financing costs.

Traditional safe-haven assets delivered a mixed performance. Gold slipped approximately 1%, while Bitcoin fell to around $65,600 after briefly approaching $67,800 earlier in the day. The weakness in both assets reflected a broader shift toward cash and US dollar exposure as market volatility increased.

Investors also digested fresh trade policy developments after the Trump administration proposed new tariffs ranging from 10% to 12.5% on imports from 60 countries. While the proposal included numerous exemptions designed to reduce disruption to supply chains, it nonetheless added another layer of uncertainty for global trade and economic growth.

Meanwhile, the OECD warned that a prolonged conflict in the Middle East could weigh on global economic growth over the next two years through higher energy costs and renewed inflationary pressures, reinforcing concerns already evident across financial markets.

Market Outlook

Markets enter today's session focused on two key drivers: geopolitical developments in the Middle East and the outlook for artificial intelligence-related earnings growth.

Oil prices remain the critical variable. If crude continues to trade near or above the $100 per barrel level, investors may increasingly worry about the impact on inflation expectations and interest-rate policy. Such a scenario could place further pressure on technology and growth stocks, which have been the market's strongest performers this year.

Attention will also turn to Broadcom's earnings results, which are expected to provide another important indicator of demand across the AI and semiconductor ecosystem. Strong results could help restore confidence in the sector and support a broader market recovery.

For now, investor sentiment remains cautious. While the long-term AI growth story remains intact, short-term market direction will likely depend on whether geopolitical tensions ease and whether economic data continues to support the case for resilient growth without reigniting inflation concerns.