US Market Outlook: Tech Weakness, Middle East Tensions and Inflation Risks Weigh on Sentiment

Index Update

US stocks ended mixed on Tuesday, with the S&P 500 down 0.25% and Nasdaq falling 1% as semiconductor stocks resumed losses after Monday’s rebound. The iShares Semiconductor ETF dropped over 3%, while Micron and Broadcom declined, reflecting continued concerns over stretched AI-chip valuations. Meanwhile, the Dow gained 0.2%, supported by J&J, Visa, and JPMorgan.

Market Movers

Among the top-performing stocks of the session Regentis Biomaterials Ltd. surged 88.28%, while Epsium Enterprise Limited. rallied 72.27%. On the losing side, Texxon Holding Limited. fell 48.08%, while SUNation Energy, Inc. declined 39.46%, making them the weakest performers during the trading day.

Commodities Update

Crude oil prices rose about 2% on Wednesday, with WTI near $90 per barrel and Brent around $92, as escalating Middle East tensions and major disruptions in the Strait of Hormuz raised supply concerns. Prices were further supported by API data showing a sharp 9.1 million-barrel drop in US crude inventories, despite comments from US Energy Secretary Wright that Gulf vessel traffic and oil exports were improving.

Gold and silver fell sharply on Wednesday as renewed US-Iran tensions pushed oil prices higher, raising inflation and interest-rate concerns. Gold dropped toward $4,200 an ounce, while silver slipped below $65, with both hitting their lowest levels since March 23 as investors awaited US inflation data and reassessed the Federal Reserve’s policy outlook.

Macro Updates

US Mortgage Applications Rebound Despite Higher Rates

US mortgage applications rose 10.8% in the week ended June 5, 2026, marking the first increase in four weeks and the strongest gain since late February, even as the average 30-year fixed mortgage rate increased slightly to 6.6% from 6.57%. Refinance applications jumped around 15%, while purchase applications rose about 7%, supported by borrower activity despite rate volatility linked to Middle East-driven market movements.

US Inflation Expected to Accelerate in May

US annual inflation is expected to rise to 4.2% in May 2026 from 3.8% in April, marking its highest level since April 2023, mainly due to higher gasoline prices linked to the Iran-driven energy shock. Monthly CPI is projected to increase 0.5%, while core inflation is expected to edge up to 2.9% year-on-year, reflecting continued price pressures despite limited broader pass-through.

Dollar Holds Near 100 Amid Middle East Tensions

The dollar index hovered around 100 on Wednesday as renewed US-Iran hostilities, higher energy prices, and inflation concerns supported expectations of further central bank tightening. Investors awaited US inflation data for clues on the Fed’s policy path, while anticipated rate hikes from the ECB and BOJ also remained in focus.

US Crude Inventories Fall Sharply

US crude inventories dropped by 9.1 million barrels in the week ended June 5, far above expectations of a 3.4 million-barrel draw, marking another sharp weekly decline. Cushing stocks also fell, crude production edged lower, gasoline inventories declined, and distillate stocks rose, while the Strategic Petroleum Reserve saw a further 7.9 million-barrel withdrawal.

Bonds Commentary

The US 10-year Treasury yield rose to around 4.54% on Wednesday as renewed Middle East tensions pushed energy prices higher and revived concerns over inflation and potential Fed rate hikes. Investors also awaited US inflation data after strong jobs figures increased expectations of another interest-rate increase before year-end.

Futures Update

US stock futures declined on Wednesday as renewed tech-sector valuation concerns, Middle East tensions, and inflation risks weighed on sentiment. S&P 500, Nasdaq 100, and Dow futures moved lower, while Nvidia, Broadcom, Micron, and Oracle fell in premarket trading as investors awaited CPI data and assessed whether higher oil prices could influence the Fed’s policy path.

U.S. stocks experienced another volatile session on Tuesday, with the major indices swinging between gains and losses before recovering in afternoon trading. Despite the recent pullback, the S&P 500 remains in a bullish short-term trend, holding above both its rising 21-period and 50-period moving averages. The recent decline appears to be a healthy consolidation following the rally toward 7,580 rather than a trend reversal. RSI has cooled from overbought levels to around 50, suggesting momentum has reset and may support another advance. As long as the index remains above key support near 7,350 and 7,250, the bullish outlook remains intact, with potential for a retest of the 7,550–7,600 highs.