Dow Jones falls over 300 points as oil prices rise amid rising West Asia tensions

US stocks opened lower on Wednesday, with the Dow Jones Industrial Average falling 386 points, or 0.8%, while the S&P 500 and Nasdaq Composite each declined 0.4%.

The pullback comes as investors weigh rising oil prices, higher Treasury yields and escalating tensions between the US and Iran after Wall Street scaled fresh record highs in the previous session.

Investor concerns intensified as crude oil prices extended gains following fresh military exchanges between Washington and Tehran. West Texas Intermediate (WTI) crude rose about 1% to trade near $95 per barrel, while Brent crude advanced to around $97 per barrel, raising fears of renewed inflationary pressures.

The geopolitical backdrop remained in focus after Kuwait's military said its air defence systems intercepted hostile targets, while US Central Command said American forces had thwarted Iranian missile and drone attacks and carried out self-defence strikes on Iran's Qeshm Island. President Donald Trump said Iran had agreed not to pursue nuclear weapons, though he cautioned that its position could change.

Higher oil prices also pushed Treasury yields higher, with the benchmark 10-year yield approaching 4.5% and the 30-year yield nearing 5%. Bond yields received an additional boost after a stronger-than-expected ADP private payrolls report signalled resilience in the US labour market.

Technology stocks, particularly those linked to the artificial intelligence trade, also came under pressure. Nvidia fell more than 2%, while Dell Technologies and Oracle dropped sharply. Microsoft also traded lower, weighing on the broader market.

The declines come after a strong rally on Wall Street driven by upbeat corporate earnings and optimism around artificial intelligence spending. However, investors are increasingly balancing that enthusiasm against geopolitical risks and the potential inflationary impact of higher energy prices.

Despite the recent rally, some market strategists have cautioned that investors may face a quieter and potentially more volatile period ahead. Speaking to CNBC's Closing Bell on Tuesday, Meghan Shue, Head of Investment Strategy at Wilmington Trust, said the market's strong momentum has been driven by optimism around artificial intelligence and robust investment demand. However, she noted that with the earnings season largely over, a key catalyst for equities has faded, leaving markets vulnerable to slower summer trading activity and lingering geopolitical risks.