Wall St dips as Middle East uncertainty lifts oil price

Wall Street's main indices have dropped as uncertainty over prospects for a resolution to the Middle East conflict lifted oil prices and Treasury yields, keeping risk appetite in check ahead of a keenly watched US-China summit.

US and Iranian leaders exchanged barbs at the United Nations General Assembly this week, which sent Brent crude prices back to above $US100 a barrel.

Technology stocks led declines on the S&P 500, with chip makers such as Nvidia, Broadcom and Micron slipping more than 1.0 per cent each.

Oracle lost 5.5 per cent after a report said the company sent a "force majeure" notice to a New Mexico data centre.

A rise in Treasury yields, with that on the 30-year Treasury bond reaching its highest since 2004, pressured riskier assets as the market priced in the likelihood of a long war and higher borrowing costs.

Faith in the AI trade, which powered the Nasdaq to record highs earlier this week, has limited losses among riskier assets, analysts said.

"People were maybe less willing to chase stocks but they didn't seem particularly eager to sell them," said Steve Sosnick, chief market analyst at Interactive Brokers.

In early trading on Thursday, the Dow Jones Industrial Average was down 208.36 points, or 0.40 per cent, at 51,303.23; the S&P 500 lost 24.04 points, or 0.30 per cent, to 7,681.99 and the Nasdaq Composite fell 159.54 points, or 0.58 per cent, to 26,778.64.

Six of the 11 sectors on the benchmark index were trading lower while the energy sector gained 1.0 per cent.

The CBOE Volatility Index, sometimes referred to as Wall Street's fear gauge, climbed to a one-week top of 15.7 points.

The spotlight is expected to turn next towards the summit, with investors anticipating discussions about AI regulation, the Middle East conflict and Taiwan.

Executives from top US companies are also expected to meet Trump and Xi.

US Treasury Secretary Scott Bessent, meanwhile, said on Wednesday that the two superpowers have agreed to extend their truce until January 10.

Higher energy costs and recent data suggesting strong business activity led investors to bet on further interest rate increases by the Federal Reserve.