The Dow Jones Industrial Average experienced a significant drop of 800 points, or 1.6%, as market losses accelerated ahead of the Federal Reserve's upcoming interest rate decision. The S&P 500 also fell by 0.8%, while the Nasdaq Composite decreased by 1%.

This downturn was influenced by a spike in oil prices, which surged after President Donald Trump announced that the U.S. would respond forcefully to recent attacks from Iran. West Texas Intermediate crude futures rose by 6.9%, reaching $89.88 per barrel. The increase in oil prices followed reports from U.S. Central Command that Iranian forces had launched ballistic missiles targeting U.S. forces in the Middle East, although these missiles were successfully intercepted.

Investors are closely monitoring the Federal Reserve's policy decision, with futures traders indicating a nearly 70% chance that the central bank will maintain its current interest rate target range of 3.5% to 3.75%. Jay Woods, chief market strategist at Freedom Capital Markets, noted that any unexpected moves from the Fed could further exacerbate the current sell-off.

In addition to the broader market decline, semiconductor stocks have been particularly hard hit, with the iShares Semiconductor ETF dropping over 4% and experiencing a total decline of 10% for the week. Concerns regarding the return on substantial investments in artificial intelligence and increased competition from China have fueled this sell-off. Major semiconductor companies such as Micron Technology and Advanced Micro Devices saw their shares decline by over 5%.

On a more positive note, shares of Procter & Gamble fell by more than 3% after the company missed revenue expectations, while Ford Motor's stock surged by 5% following better-than-expected earnings and an optimistic forecast for 2026.

Barclays analysts have warned that stocks may be vulnerable to a reversal, as inflation and rising interest rates continue to pose risks despite a strong earnings outlook. They highlighted that financial conditions are tightening, with expectations for Fed rate hikes increasing and real yields approaching levels that have historically pressured equities.