AI Shooting Star Dims as Oil Prices Return to Pre-War Levels: Why Did the U.S. Stock Market Pause?

On June 26 (local time), U.S. stocks closed largely flat: the S&P 500 dipped less than 0.1% to 7,354.02, the Dow Jones Industrial Average fell 0.1% to 51,876.11, and the Nasdaq Composite slid 0.2% to 25,297.62. Weakness in major AI-related tech names offset tailwinds from lower oil prices and stable bond yields.

May’s personal consumption expenditures (PCE) inflation data—showing headline inflation up 4.1% year-on-year and core inflation at 3.4%, both three-year highs—prompted Minneapolis Fed President Neel Kashkari to reaffirm a hawkish Fed outlook, projecting one more rate hike in 2026. However, U.S. consumer inflation expectations eased from 4.8% to 4.6%, and the 10-year Treasury yield dipped from 4.40% to 4.37%, partially cushioning the sell-off in growth stocks.

Among individual names, AI beneficiaries saw notable pullbacks. Micron Technology, whose shares have nearly quadrupled this year on surging memory demand, plunged 6.7%, marking the steepest drop in the S&P 500. Onsemi tumbled 23.7% after unveiling an approximately $7 billion share-swap deal to acquire Synaptics. Conversely, airlines and travel‐related stocks gained ground amid the oil price retreat: American Airlines rose 1.7%. Pharmaceutical giant Eli Lilly jumped 7.1% after a European Medicines Agency committee recommended approval of a new drug and label expansion.

On the global front, shipping through the Strait of Hormuz resumed following a U.S.-Iran peace agreement, driving Brent crude back into the low $70s per barrel—near pre-conflict levels. While easing energy‐supply concerns could reduce medium- to long-term inflationary pressures, Japanese and Korean markets plunged 4% to 6%, dragged down by steep declines in AI-linked shares such as SoftBank, SK Hynix and Samsung Electronics, which in turn weighed on U.S. investor sentiment.

Meanwhile, all 32 major U.S. banks passed the Federal Reserve’s stress tests, bolstering confidence in the financial system’s stability. Next week’s rebalancing of the Dow—adding Alphabet and removing Verizon—further underscores the market’s ongoing realignment around AI leaders.