Market Indexes Tumble on Geopolitical Tensions and Chip Stock Selloff

U.S. equities sold off Wednesday as Middle East tensions and a semiconductor rout weighed on risk appetite ahead of the Federal Reserve's policy decision. The Dow dropped 1.7%, the S&P 500 fell 1.0%, and the Nasdaq declined 1.3%.

Semiconductor stocks drove the tech weakness, extending losses to 10% for the week. The selloff comes as investors reassess valuations in the chip sector following the recent rally. Oil prices surged more than 6% on escalating Iran-related tensions, adding pressure to energy-dependent companies across multiple sectors.

The timing compounds uncertainty, with the Fed decision looming and traders forced to juggle geopolitical risk, sector rotation out of momentum tech names, and potential hawkish signals from the central bank. The oil spike threatens to complicate the Fed's inflation calculus, even as rate-cut expectations had been building in recent weeks.