U.S. benchmark crude oil dropped 11 cents to $73.16 per barrel. Brent crude, the international standard, fell 15 cents to $76.30 per barrel. Oil prices had risen more than 4% on Tuesday.
The recent rise in prices came after U.S. President Donald Trump left a Group of Seven summit in Canada early and urged people in Iran’s capital to evacuate immediately. Within hours, Trump shifted from saying a nuclear deal with Iran was still “achievable” to warning Tehran’s 9.5 million residents to flee for their safety.
The conflict raised concerns because Iran is a major oil exporter located near the Strait of Hormuz. This narrow waterway is a key route for much of the world’s oil. Past conflicts in this region have caused oil prices to spike, but such increases have usually been brief once the flow of oil remained uninterrupted.
In Japan, exports fell in May as the auto industry felt the impact of higher U.S. tariffs. Exports to the U.S. dropped by more than 11%. Despite this, Japan’s Nikkei 225 index rose 0.9% to 38,885.15.
In other markets, Hong Kong’s Hang Seng index dropped 1.3% to 23,668.22. China’s Shanghai Composite index gained 0.1% to 3,389.96. South Korea’s Kospi increased 0.7% to 2,972.19, while Australia’s S&P/ASX 200 lost 0.1% to 8,531.20.
On Tuesday, U.S. stocks fell due to higher oil prices and weaker retail sales in May. The S&P 500 declined 0.8% to 5,982.72. The Dow Jones Industrial Average dropped 0.7% to 42,215.80, and the Nasdaq composite fell 0.9% to 19,521.09.
Trump intensified tensions by calling for “UNCONDITIONAL SURRENDER!” in the conflict between Israel and Iran on social media. However, he also said the U.S. was “not going to” kill Iran’s leader, “at least for now.”
Higher oil prices can benefit solar energy companies by encouraging a shift to alternative energy. However, solar stocks fell sharply Tuesday amid concerns that Congress may phase out tax credits for clean energy. Enphase Energy dropped 24%, and First Solar fell 17.9%.
U.S. Treasury yields declined after a report showed that retail spending decreased in May. Strong consumer spending has helped keep the economy out of recession. Some of May’s drop may reflect a return to normal after a surge in April, when shoppers rushed to buy cars ahead of new tariffs.
In biotech news, Verve Therapeutics’ shares soared 81.5% after Eli Lilly announced it would buy the company, which develops genetic medicines for heart disease, in a deal worth up to $1.3 billion. Meanwhile, Lilly’s stock fell 2%.
This market activity occurred as the Federal Reserve began a two-day meeting on interest rates. Most economists and traders expect the Fed will keep rates unchanged.
The Fed has paused interest rate cuts this year, waiting to see the impact of tariffs on the economy and inflation. Inflation has stayed near the Fed’s 2% target.
In currency trading early Wednesday, the U.S. dollar weakened to 144.87 Japanese yen from 145.29 yen. The euro rose slightly to $1.1525 from $1.1480.
