U.S. equities declined for a second consecutive day on Tuesday, with all three major indices closing lower as investors braced for the Federal Reserve's upcoming interest rate decision. Market pricing has almost fully factored in a 25-basis-point rate hike. The benchmark 10-year Treasury yield climbed to its highest level since 2007, touching 5.041%.

At the closing bell, the Dow Jones Industrial Average fell 328.09 points, or 0.63%, to 52,093.10. The S&P 500 dropped 34.25 points, or 0.45%, to 7,585.73, while the Nasdaq Composite lost 204.84 points, or 0.78%, to 25,981.57. Among individual movers, Qualcomm (QCOM.US) advanced 4%, Oracle (ORCL.US) slipped 3%, and SK Hynix declined 0.4%. The Nasdaq Golden Dragon China Index retreated 1.1%, with XPeng (XPEV.US) tumbling 4.5%.

European markets were mixed, as the German DAX 30 was essentially flat, adding a mere 0.78 points to 25,415.84. The UK FTSE 100 fell 44.01 points, or 0.41%, to 10,653.56, and France's CAC 40 declined 27.50 points, or 0.34%, to 8,090.28. The Euro Stoxx 50 index dropped 22.73 points, or 0.36%, to 6,237.65, while Spain's IBEX 35 edged down 6.46 points to 19,557.44. Italy's FTSE MIB closed lower by 102.27 points, or 0.20%, at 51,526.50.

In Asian markets, Japan's Nikkei 225 slipped marginally, while South Korea's KOSPI composite index declined 0.85%.

The U.S. dollar index, which measures the greenback against a basket of six major currencies, rose 0.23% to settle at 99.616 in late trading. In the currency market, the euro traded at $1.1543, down from the prior session's $1.1557. The British pound fell to $1.3481 from $1.3511. Meanwhile, the dollar strengthened to 155.09 Japanese yen from 154.05 yen, rose to 0.8185 Swiss francs from 0.8163 francs, increased to 1.3917 Canadian dollars from 1.3902, and climbed to 9.7773 Swedish kronor from 9.7412.

In the cryptocurrency space, Bitcoin slid over 4% to $75,346 at the time of writing, while Ethereum dropped more than 5.7% to $2,386.

Oil prices surged higher, with West Texas Intermediate crude for October delivery jumping $4.44, or 4.38%, to settle at $105.83 per barrel on the New York Mercantile Exchange. Brent crude for November delivery rose $3.07, or 2.9%, to close at $108.75 per barrel.

In precious metals, spot gold slid to $4,293.55 per ounce, while spot silver traded at $63.672 per ounce.

Shipping Costs for U.S. Oil to Asia Hits Record $44.8 Million

Transportation costs for American crude heading to Asia have soared to an all-time high amid concerns over Middle East supply disruptions. Baltic Exchange data shows that, as of Tuesday, chartering a Very Large Crude Carrier (VLCC) to move 2 million barrels of U.S. Gulf of Mexico oil to Asia costs approximately $44.8 million—a historic record, up from $39 million the previous day. Before the outbreak of the Iran war, the same route cost roughly $17.8 million. With Middle East turmoil disrupting energy supplies, U.S. crude has become a vital source to fill the supply gap. Saudi Arabia's recent closure of its East-West pipeline has intensified worries about supply risks through the Strait of Hormuz. Despite the surging freight rates, Asian buyers remain willing to absorb the higher shipping costs because U.S. WTI crude still offers a price advantage over competing grades upon arrival in Asia. Research firm Kpler data indicates that six VLCCs are already scheduled to load crude from the U.S. Gulf for Asia in October.

Vance Predicts Iran War Will Enter a 'Completely Different Phase' in Months

U.S. Vice President Vance stated that the Iran war will enter "a completely different phase" in a few months. He agreed with President Trump's assessment that the conflict could conclude after the midterm elections. Vance noted that shipping through the Strait of Hormuz is recovering, as Iran's control over the waterway weakens, with traffic currently restored to more than 50% of normal levels. He emphasized that the U.S. is not conducting offensive operations but is responding to Iranian attacks on commercial vessels. Vance described the conflict with Iran as having two phases: the first aimed at destroying Iran's nuclear program, weakening its conventional military capabilities, and reducing its regional projection power; the second focused on ensuring Iran cannot regain those capabilities and maintaining regional stability. He added that the future trajectory depends on whether Trump expands operations after the midterms or whether Iran becomes more willing to reach a deal.

CBO: Iran War Cost U.S. Taxpayers $38 Billion in Five Months with Inflation Expectations Rising

The Congressional Budget Office (CBO) reported that the Trump administration's war with Iran has generated approximately $38 billion in direct costs to U.S. taxpayers over its first five months. These expenditures stem primarily from ammunition and equipment replenishment, increased flight operations, other military activities, and fuel costs. The report projects that each additional month of conflict will add at least $2 billion to $3 billion in costs, with figures potentially rising further if the conflict escalates. The CBO also indicated that disruptions to oil and gas shipments through the Strait of Hormuz will push inflation higher, expecting the Fed's preferred inflation gauge to be 0.5 percentage points above previous forecasts by early 2027, with core PCE inflation also 0.3 percentage points higher. Additionally, the CBO noted that the war has depleted U.S. ammunition stockpiles, some of which may take over five years to replenish, potentially weakening America's ability to respond to other major conflicts. The report warned that if a future major conflict requiring substantial missile and ammunition reserves occurs, U.S. defense production capacity and inventory replenishment speed could face significant strain.

Bessent Backs Trump's $5,000 Check Plan, Claims No Deficit Impact

Treasury Secretary Bessent expressed support on Tuesday during congressional questioning for Trump's proposal to distribute $5,000 checks to American adults if Republicans retain control of both chambers of Congress, downplaying concerns about the plan's cost. "I think there are ways to do this without affecting the fiscal deficit," Bessent stated. As financial markets grow increasingly wary of the government's expanding debt burden, Bessent did not disclose how the plan's costs would be offset but indicated that the Treasury has been working on the proposal for "quite some time." He also did not address whether such payments would require congressional authorization. If necessary, Bessent said he would collaborate with House Speaker Johnson to advance the initiative. His remarks came less than a week after Trump promised the $5,000 "dividend," a plan estimated to cost over $1 trillion.

Huang: AI Industry Needs No New Safety Regulations

Nvidia (NVDA.US) CEO Jensen Huang stated Tuesday at a Salesforce-hosted event that the AI industry "doesn't need any new laws or regulations," reiterating his view that the perceived trade-off between AI safety and speed is a "false dichotomy." Huang argued that both objectives can be achieved simultaneously. "Companies can proceed at their own pace until they're confident the products they release will be accepted by the market. Market forces already exist. Companies have the ability to decide not to release technology or products that could cause harm." Earlier this week, Huang participated in a live phone call with President Trump at an event, where both pushed back against recent calls to slow AI development.

Amazon Reports Data Recovery Challenges at Some AWS Facilities in Bahrain and UAE

Amazon's (AMZN.US) cloud division, AWS, has stated that certain data centers in the Persian Gulf region are still unable to restore data access due to damage sustained during the U.S.-Iran war. In its latest status update, AWS noted it currently cannot access data stored exclusively in Bahrain data centers and certain network regions in the UAE. Two AWS data centers in Bahrain were attacked and damaged early in the conflict, with the destruction exceeding the facilities' design resilience. AWS indicated that most customers have resumed operations through backups or migration to data centers in other countries, but data in one UAE availability zone remains inaccessible. Engineering teams are working to repair resources in two additional availability zones. The company expects to provide further updates on Bahrain facility recovery by early next year.

Meta Plans First-Half 2025 Deployment of New ARKE Chip, Showcasing Cost Advantages of In-House Silicon

Meta Platforms (META.US) plans to begin deploying its new in-house ARKE chip in data centers during the first half of next year, a move the company says will generate cost and energy savings when running AI models. The company initially announced its custom AI chip initiative in 2023 and is currently testing the third generation of the series, codenamed MTIA 450, or Arke. The next-generation product—codenamed 500, or Astrid—is expected to complete its design work within about a month and enter data centers by the end of 2027. Meta anticipates broader adoption of this product in the future. Jiun Song, Meta's vice president of engineering, said in an interview: "Each generation carries higher technical risk, but performance has improved significantly." Reports indicate that Meta's Superintelligence Labs has assisted in fine-tuning the chips by providing insights into future AI models and their operational requirements, particularly around the inference stage. Song stated that the end result is that these chips will operate AI models more efficiently than "anything Nvidia currently offers, simply because we've done a significant amount of the engineering work ourselves."