U.S. Strike on Iran Sends Wall Street Tumbling: Fed Rate‑Hike Odds Surge

The United States’ first air strike on Iran in weeks jolted Wall Street into an immediate sell‑off and pushed investors to lift the probability of a 62% chance that the Fed will raise rates by 25 basis points at its September meeting.

Shockwave from the Iran Strike

■Dow Jones slid 0.5% below 28,900.

■S&P 500 fell 0.3% to around 4,460.

■Nasdaq Composite slipped 0.2%, closing near 13,900.

■Brent crude surged past $90 a barrel.

Fed’s Hawkish Signal and Market Expectations

■Fed Chair Kevin Warsh warned at Jackson Hole that “inflation is running too hot,” signaling a tighter monetary stance.

■The odds of a Fed rate hike rose from 40% a week ago to 62% today.

■Traders now eye the jobs report and CPI data due later this week for further clues.

Sector Highlights: GameStop and Apple

■GameStop (GME) shares jumped 3% in early trade after the retailer disclosed a $238 million gain from converting its eBay derivative position into eBay stock, now holding 43.4 million shares worth roughly $4.9 billion.

■Apple (AAPL) announced Tim Cook will hand over the CEO role to John Ternus; Cook will remain as Executive Chair, focusing on policy engagement.

Near‑Term Data Calendar and Risk Factors

■Dallas Fed manufacturing index came in at 1.3 (forecast 1.6).

■The VIX fell to 14.13, its lowest level of 2026; the historical median for late August sits near 16.5.

■Ongoing Middle‑East tensions could reignite energy‑price volatility, reviving inflationary pressures.

Markets are pricing the short‑term geopolitical risk from the U.S.–Iran flare‑up while digesting the Fed’s tightening cues, creating a delicate balance. A breach of the $100/barrel oil threshold could trigger a broad re‑pricing across equities and bonds. For Asia‑Pacific investors, large‑cap companies with strong cash flows and defense‑sector stocks outside the energy corridor may offer a more resilient profile. Risk managers should consider option‑based hedges as the VIX begins its seasonal climb.