The Dow Jones Industrial Average fell 1.2 percent, the broad S&P 500 index fell 0.7 percent, and the tech-heavy Nasdaq Composite closed down 0.9 percent.
The oil price rose on Wednesday, with a barrel of North Sea Brent crude now trading close to $98.
Several major AI stocks traded lower, weighing on the broader market as well. Nvidia closed down 3.6 percent, Oracle plunged 5.8 percent, and Microsoft lost 3.1 percent.
Trade was characterized by concerns that the conflict between the US and Iran will not end any time soon.
Employment in the United States has been stable in recent weeks - at the same time, the war's impact on energy prices has caused inflation to continue to rise in large parts of the country, the Fed said in its regional economic report, the Beige Book, on Wednesday.
Trump repeated on Wednesday his claim that Iran had agreed not to have nuclear weapons, adding that "They could change their minds."
