Wall Street started September with broad declines on Tuesday as rising crude oil prices and climbing bond yields weighed heavily on investor sentiment.

According to preliminary data cited by Reuters, all three major U.S. benchmarks closed in negative territory:

• S&P 500: Fell 0.71% to close at 7,631.95
• Nasdaq Composite: Dropped 1.01% to finish at 26,099.77
• Dow Jones Industrial Average: Declined 0.78% to end at 52,772.49

Market pressure mounted after renewed U.S. airstrikes on Iranian targets around the Strait of Hormuz drove oil prices higher, reigniting inflation worries. At the same time, a global bond selloff pushed sovereign yields to multiyear highs, with the benchmark U.S. Treasury yield edging upward after hitting a 19-month high on Monday.

"Following Kevin Warsh's hawkish comments on Friday, we have strikes in Iran and oil is higher," said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. "It is the perfect cocktail for a risk-off day in a market that is trading near all-time highs."

The downturn aligns with historical trends. Citing data from Finaeon, Fisher Investments noted that September is the only month with a negative average return since 1926. Mayfield added that midterm election years often see political anxiety weigh on equity markets during this period.

Geopolitical tensions further escalated following remarks from Treasury Secretary Scott Bessent regarding potential bank sanctions against Iran to "economically asphyxiate" its leadership. In response, Iran warned it would prevent Gulf oil exports.

These developments altered Federal Reserve rate expectations. According to CME's FedWatch tool, markets are pricing in a 68.2% chance of a 25-basis-point interest rate hike at the September Fed meeting, up from 39.6% a week earlier.

U.S. economic data offered little support during the session:

• The Labor Department's JOLTS report showed a slowing jobs market churn.
• Purchasing Managers' Index (PMI) data indicated weaker factory activity.
• Residential construction spending declined.

Sector-wise, energy stocks gained on the back of rising crude prices, while the Dow Jones Transportation Average was among the session's primary laggards. The Philadelphia SE Semiconductor Index also fell, with all constituent stocks posting losses.