The S&P 500 swung wildly before closing down 0.3%, as crashing AI shares, spiking oil prices tied to the Iran conflict, and looming Fed rate hike fears kept investors on edge.

Another sudden reversal for high-flying artificial-intelligence stocks sent Wall Street reeling on Tuesday. The S&P 500 fell 0.3% after careening between an initial gain of 1% and a midday loss of 2.3%, pulling further from its all-time high set a week ago. After similar yo-yo moves, the Dow Jones Industrial Average added 86 points (0.2%) and the Nasdaq composite dropped 1%.

Oil prices pared their losses, though, after President Donald Trump said Iran was responsible for downing an American military helicopter near the Strait of Hormuz and that the United States must respond to the attack. High oil prices caused by the war with Iran have already created a painful acceleration of inflation for U.S. shoppers.

The latest monthly updates on U.S. inflation will arrive later in the week, with one on consumer prices coming Wednesday and one on wholesale prices coming Thursday. Inflation is high enough, and the U.S. job market looks strong enough, that traders on Wall Street largely expect the Federal Reserve will have to raise its main interest rate at least once by the end of this year. Higher interest rates would keep a lid on inflation, but they would also threaten to slow the economy and undercut prices for stocks and all kinds of other investments. The average long-term U.S. mortgage rate recently hit its highest level in nine months, and high costs to borrow money could discourage the building of AI data centers that are fueling the U.S. economys growth.

AI stocks tumbled after an early rally faded, with Micron Technology swinging from a 4% gain to a 10% drop before closing down 1.4% part of a volatile stretch that has its stock up threefold this year, fueling concerns it has risen too fast. Marvell Technology fell 7.6% and AMD slid 3% as the broader AI sector continued to reel from last week’s industrywide sell-off, leaving investors debating whether a prolonged downturn or a healthy shake-out is underway. Despite the turbulence, several major AI players including OpenAI, which filed confidential IPO paperwork Monday are pressing ahead with U.S. listings at high valuations. The AI weakness overshadowed a broader market tailwind from falling oil prices, even as nearly three in four S&P 500 stocks finished in the green.

Airline stocks flew higher after the drop in oil prices hinted at less pressure on their fuel bills. American Airlines rose 3.6%, and Delta Air Lines gained 3.8%. J.M. Smucker jumped 10.4% after reporting a stronger profit for the latest quarter than analysts expected. The company behind the Folgers, Hostess and other brands benefited from higher prices charged for coffee and sweet baked goods. Nuvalent soared 39.3% after GSK agreed to buy the biotech company for $10.6 billion. The shares of U.K.-based GSK that trade in New York added 1.2%.
In stock markets abroad, indexes dipped in Europe following bigger moves in Asia. South Koreas Kospi jumped 8.2% and nearly recovered Mondays plunge of 8.3%. Its been beholden to the performance of big tech stocks like SK Hynix and Samsung Electronics.

Treasury yields eased Tuesday with the fade in oil prices, relaxing some of that pressure. The yield on the 10-year Treasury fell to 4.52% from 4.56% late Monday, though its still well above its 3.97% level from before the war with Iran.

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