Global markets experienced significant volatility on Tuesday as Israeli airstrikes on Gaza heightened geopolitical tensions, triggering a selloff on Wall Street and driving gold prices to record highs. The escalating conflict in the Middle East coincided with the U.S. Federal Reserve’s crucial monetary policy meeting, adding to the economic uncertainty gripping investors worldwide.
According to Reuters, the latest Israeli missile attacks resulted in the deaths of over 400 people in Gaza, further inflaming tensions in the region. The conflict overshadowed a high-stakes call between U.S. President Donald Trump and Russian President Vladimir Putin, during which the two leaders discussed potential terms to end Russia’s ongoing war in Ukraine.
The geopolitical unrest sent shockwaves through financial markets, with all three major U.S. stock indexes closing in negative territory. Tech-related megacap stocks led the decline, dragging the Nasdaq Composite down by 313.10 points, or 1.76 per cent, to 17,496.33. The Dow Jones Industrial Average dropped 334.15 points, or 0.80 per cent, to 41,505.78, while the S&P 500 fell 68.53 points, or 1.21 per cent, to 5,606.59.
“There’s a lot of turmoil in the world, and things can change direction pretty quickly,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.
The Federal Reserve’s two-day meeting, expected to conclude with interest rates remaining unchanged, further contributed to market instability. Investors remain uncertain about the central bank’s approach to inflation, particularly in light of the Trump administration’s unpredictable tariff policies.
“The markets don’t know where tariffs stand—whether they’re on or off,” Tuz added. “I was more surprised by the rally of the past two days than by today’s weakness.”
Despite the downturn, some U.S. economic indicators showed resilience, offering a glimmer of hope amid the turmoil. In Europe, Germany’s parliament approved a major government spending overhaul, causing fluctuations in the euro. However, the decision provided a boost to European stocks, pushing German shares close to record highs.
As geopolitical tensions in the Middle East continue to escalate, investors are closely monitoring developments in the region and awaiting the Federal Reserve’s monetary policy decisions. Both factors are expected to play a pivotal role in shaping market direction in the weeks ahead.
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