US stocks closed lower on Wednesday as escalating conflict in the Middle East drove oil prices higher, heightening inflation concerns among investors ahead of the closely watched consumer price report due later this week.

The S&P 500 fell 0.5%, marking its third consecutive daily decline. Industrial and consumer discretionary sectors led the losses, with tech heavyweights such as Nvidia, Amazon, and Alphabet dragging the market down. The Nasdaq 100 slipped 0.3%.

Brent crude surged past $101 per barrel for the first time since July, while WTI climbed roughly 4% to over $96 a barrel. "The rise in oil prices and yields is intensifying sector rotation," noted Craig Johnson, chief market technical analyst at Piper Sandler. Despite "investors still focusing on the revival of the AI trade," he maintains a preference for the "relative strength" seen in energy, financials, and healthcare sectors.

Friday's consumer price report is also weighing on traders' minds. JPMorgan's US market intelligence unit projects that if core monthly inflation exceeds 0.3%, the S&P 500 could drop by 1.5% to 2.5%.

On the individual stock front, Meta Platforms Inc. stood out with a robust gain of 6.6%. The company unveiled a new AI agent called Muse, capable of performing tasks on behalf of users, such as online shopping, purchasing movie tickets, and scheduling tennis lessons.

JPMorgan edged up 0.3%. Analyst Ebrahim Poonawala from BofA Securities noted that the bank's market capitalization is approaching the $1 trillion mark, and reaching this milestone could attract new investors, offering a "scarcity premium."

Apple dipped 0.3% after introducing its first foldable phone.