Dow closes sharply lower as oil surge fuels inflation fears

4:15pm: Oil spike hits stocks

US stocks closed sharply lower on Tuesday as surging oil prices revived inflation worries and pushed investors to reassess the outlook for interest rates.

The Dow Jones Industrial Average led the selloff, dropping 628 points, or 1.2%, to 52,786. The S&P 500 fell 45 points, or 0.6%, to 7,674, while the Nasdaq slipped 86 points, or 0.3%, to 26,421.

Markets came under pressure as escalating tensions in the Middle East disrupted energy supplies, sending Brent crude close to $100 a barrel. Higher oil prices raised concerns that inflation could remain stubborn, while the 10-year U.S. Treasury yield climbed to around 4.8% as investors increasingly priced in the possibility of another quarter-point Federal Reserve rate hike at the upcoming policy meeting.

The focus now shifts to Wednesday's earnings slate, with Chewy, Jersey Mike’s, Korn Ferry and Signet Jewelers set to report.

3:40pm: Small cap wrap

• Snail Inc (NASDAQ:SNAL) has launched the science-fiction survival sandbox game Honeycomb: The World Beyond globally across PC, PlayStation 5 and Xbox Series X|S.
• BioVie Inc (NASDAQ:BIVI, NASDAQ:BIVIW) is preparing to advance its bezisterim Parkinson’s disease program into Phase 3 after requesting an End-of-Phase 2 meeting with the FDA.
• Trust Stamp Inc (NASDAQ:IDAI, ISE:AIID) has integrated its AI-powered driver’s license verification technology into Jack Henry’s Banno digital banking platform.
• Medicus Pharma (NASDAQ:MDCX) is refocusing its strategy on precision oncology, with its CD228V antibody-drug conjugate becoming the company’s main development priority.
• TNR Gold Corp (TSX-V:TNR, FRA:TNW, OTC:TRRXF) is urging shareholders to support its board nominees as it battles a proxy contest with Eucalyptus Resources Opportunities Fund 1.
• Domestic Metals Corp (TSX-V:DMCU, OTCQB:DMCUF, FRA:03E0) has begun a fully funded 9,000-metre drill program at its Smart Creek Project in Montana targeting high-grade porphyry copper mineralization.
• Graphene Manufacturing Group Ltd (TSX-V:GMG, OTCQX:GMGMF) has launched a dedicated Asia-Pacific sales team to expand business development across India, South Korea, Japan and Singapore.
• Alvopetro Energy Ltd (TSX-V:ALV, OTC:ALVOF, FRA:A6Y0) has agreed to expand its heavy oil land position in Alberta’s Mannville fairway and plans to drill five earning wells beginning in the fourth quarter of 2026.
• Arizona Gold & Silver Inc (TSX-V:AZS, OTCQB:AZASF, FRA:A9J0) reported additional drill results from its Philadelphia project in Arizona, including broad gold mineralization with higher-grade intervals at the Perry Zone.
• Custom Health Holdings Inc (TSX:CHLT) has completed its acquisition of Spencer Health Solutions, bringing the maker of the spencer smart medication dispenser fully into its in-home medication management business.
• Power Metallic Mines Inc (TSX-V:PNPN, FRA:IVV1, OTCQB:PNPNF) has released an updated mineral resource estimate for its Nisk Project in Québec, including an inaugural resource for the Lion Zone and an updated estimate for the Nisk Main deposit.

2:25pm: Market movers

• Novartis AG (ADR) (NYSE:NVS) shares fell sharply after its del-desiran drug failed to meet the primary endpoint in a Phase 3 trial for myotonic dystrophy type 1.
• Qualcomm Inc (NASDAQ:QCOM, XETRA:QCI) shares jumped after the company and Amazon announced a multi-generation partnership to develop customized AI data-center chips for AWS.
• EchoStar shares rose after UBS resumed coverage with a Buy rating, viewing the company’s planned 2% SpaceX stake as significantly undervalued.
• BioVie Inc (NASDAQ:BIVI, NASDAQ:BIVIW) is preparing to advance its bezisterim Parkinson’s disease program into Phase 3 after requesting an End-of-Phase 2 meeting with the FDA.
• Trust Stamp Inc (NASDAQ:IDAI, ISE:AIID) has integrated its AI-powered driver’s license verification technology into Jack Henry’s Banno digital banking platform.
• Medicus Pharma (NASDAQ:MDCX) is refocusing its strategy on precision oncology, with its CD228V antibody-drug conjugate now the company’s main development priority.
• TNR Gold Corp (TSX-V:TNR, FRA:TNW, OTC:TRRXF) urged shareholders to vote for its board nominees as it battles a proxy campaign led by Eucalyptus Resources Opportunities Fund 1.

1:15pm: Oil price climbs higher

Global stocks are taking a hit as rising oil prices fuel inflation concerns, push Treasury yields higher and raise the risk that interest rates could stay elevated ahead of this week’s key US PPI and CPI reports.

“Oil prices have continued to climb amid ongoing strikes in the Middle East, heightening concerns over potential supply disruptions," said Axel Rudolph, chief technical analyst at IG.

"Markets are pricing in around a 58% chance of a 25-basis-point Fed rate hike next week, while Tuesday’s three-year Treasury auction marks the start of a busy period of government debt issuance," Rudolph added.

"Whereas US small business sentiment deteriorates, China's trade surplus surges as exports soar amid the AI boom and Germany's surplus widens the most since August 2024, as exports fall less sharply than imports."

11:35am: Tariffs to come at a cost

Canadian Prime Minister Mark Carney warned Canadians that reducing the country’s reliance on the United States will come at a cost, but argued that the alternative of standing still would be far more damaging as Canada’s retaliatory tariffs against the US took effect Tuesday.

Canada imposed tariffs ranging from 15% to 50% on U.S. products targeted by President Donald Trump’s latest round of duties, matching the affected trade value of $27.8 billion.

In a national video address, Carney said Canada would respond to the escalating trade war by pursuing new trade agreements and diversifying its economic relationships. While acknowledging that the country’s pivot away from the U.S. would not be painless, he said the goal was to build a stronger and more resilient Canada that could not be pressured by any single country.

Carney also reiterated that trade talks with Washington collapsed last month after the two sides failed to reach an agreement before Trump imposed 50% tariffs on nearly $28 billion worth of Canadian goods. He further repeated claims that the U.S. had sought measures that could limit Canada’s ability to trade with other countries and protect and promote French language and culture.

10:00am: Trade tensions heat up

The Dow Jones led Wall Street lower at the open on Tuesday as rising oil prices and an escalating US-Canada trade dispute added to inflation concerns at the start of the holiday-shortened week.

The Dow fell 588 points, or 1.1%, to 52,826, while the S&P 500 slipped 34 points, or 0.4%, to 7,684. The Nasdaq also moved lower, shedding 119 points, or 0.5%, to 26,388.

Energy markets remained firmly in focus after Iran said it was close to reaching a deal with Oman to manage traffic through the Strait of Hormuz. Brent crude, the global benchmark, crept toward $100 a barrel, while US benchmark WTI crude approached $93, keeping pressure on investors already concerned about the potential inflationary impact of higher energy prices.

Trade tensions also intensified after Canadian retaliatory tariffs on a broad range of US goods took effect Tuesday, escalating the ongoing trade dispute between the two countries.

Among individual stocks, Amgen shares fell following a late-stage setback involving a rival cardiovascular drug from Novartis, which also reported a separate setback involving a muscular-disease treatment.

Investors will also be watching for fresh clues on inflation and interest rates. The New York Federal Reserve is scheduled to release its latest consumer inflation expectations update Tuesday, ahead of producer price data on Thursday and the closely watched consumer price report on Friday.

Meanwhile, the Treasury market will see a $58 billion auction of three-year notes as investors continue to weigh the outlook for inflation, interest rates and economic growth.