Oil near $100 drags Dow down 628 points

US stocks fell again on Tuesday as crude oil climbed toward $100 a barrel. The Dow Jones Industrial Average took the worst of it, dropping 628.18 points, or 1.18%, to close at 52,786.07. The S&P 500 lost 0.58% to finish at 7,673.52, and the Nasdaq Composite slipped just 0.32% to 26,421.41, held up by strength in chipmakers.

The move started in the oil market, not the stock market. Energy facilities in southern Saudi Arabia were attacked overnight and operations at several of them were halted, which sent Brent crude, the global benchmark price for oil, toward $99 a barrel. US crude settled around $93.70, up about 2.4% on the day.

Oil matters far beyond the gas pump because it is an input into almost everything else. It moves diesel, which moves trucks, which moves groceries, packaging, and building materials. When crude jumps because supply was knocked offline rather than because the world suddenly wants more of it, economists call that a supply shock, meaning prices rise even though demand has not improved. That is the uncomfortable kind, because it raises costs without raising anyone's income.

That is where the stock market comes in. The Federal Reserve, the US central bank that sets short term interest rates, currently has its policy rate at 3.50% to 3.75%, and its job is to keep inflation near 2%. An oil driven price surge makes that harder, so traders have spent recent weeks moving from expecting rate cuts to expecting a rate increase, with roughly 60% odds priced in for this month. Higher interest rates hurt stocks through two channels. Safe bonds start paying enough that investors do not need to take risk in stocks to earn a decent return, and higher rates make the profits a company expects to earn years in the future worth less in today's dollars. The 10 year Treasury yield sat near 4.8%, close to multi year highs, which is the market's way of saying it expects money to stay expensive for a while.

The split between the indexes tells you who gets hurt by which force. The Dow holds 30 large, established companies, many of them industrials, airlines, retailers, and banks that burn fuel or depend on borrowing, so an oil and rates story hits them directly. The Nasdaq is heavier in technology, and it had its own good news, because Qualcomm announced a multi generation deal to design custom AI chips and high speed optical connections for Amazon's cloud division. Qualcomm shares rose about 7% on the news and other semiconductor names followed, which offset a good part of the day's decline.