U.S. equities ended Monday in negative territory, with the Dow Jones Industrial Average shedding 138 points (0.26%) to close at 52,498.64, as escalating geopolitical tensions between the United States and Iran drove a sharp rally in oil prices and renewed inflation fears. The broader market also declined, with the S&P 500 falling 0.79% to 7,515.34 and the Nasdaq Composite dropping 1.55% to 25,873.18, led lower by a broad retreat in semiconductor stocks.
Oil Surge and Inflation Concerns
President Donald Trump announced over the weekend that the U.S. would reinstate a blockade on Iranian shipping through the Strait of Hormuz and impose a 20% reimbursement fee on cargo transiting the strategic waterway. This followed renewed military exchanges between Washington and Tehran, raising concerns about global energy supply disruptions. West Texas Intermediate crude jumped 9.4% to above $78 per barrel, while Brent crude climbed 9.6% to over $83 per barrel.
The sharp increase in crude prices revived worries that higher energy costs could feed into inflation, complicating the Federal Reserve's policy outlook. According to LSEG data, markets are now pricing in at least one 25-basis-point interest rate hike before year-end. Investors are bracing for key economic releases this week, including the June consumer price index (CPI), producer price index (PPI), and retail sales data, which will provide further insight into inflation trends and consumer spending. Federal Reserve Chair Kevin Warsh is also scheduled to testify before Congress, where lawmakers are expected to question him about the inflationary impact of the U.S.-Iran conflict and the central bank's policy path.
Chip Stocks Lead Market Lower
Semiconductor shares were among the biggest losers as investors rotated out of the sector following SK Hynix's Nasdaq debut. U.S.-listed shares of SK Hynix dropped about 8% after surging more than 12% in their first trading session on Friday. The weakness spread across the industry, with Micron Technology falling about 5%, Sandisk losing 13%, Seagate Technology dropping 6%, Advanced Micro Devices declining 4%, and Intel falling 7%. The Philadelphia Semiconductor Index significantly underperformed the broader market as investors reassessed valuations following the sector's strong AI-driven rally in recent months.
For more on the sector's struggles, see Chip Stocks Plunge as US-Iran Conflict Threatens Helium Supply and AI Boom. Additionally, the DRAM ETF's sharp decline is detailed in DRAM ETF Plunges 8% as SK Hynix, Samsung, Micron Stocks Tumble on Profit-Taking.
Earnings Season Takes Center Stage
Investors are also turning their attention to the unofficial start of second-quarter earnings season. Major U.S. banks, including JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America, Citigroup, and Wells Fargo, are scheduled to report results this week. Netflix, Johnson & Johnson, and UnitedHealth are also due to release quarterly earnings. According to LSEG, analysts expect S&P 500 companies to report second-quarter earnings growth of 23.7% from a year earlier, up from estimates at the beginning of April.
The combination of elevated earnings expectations, geopolitical uncertainty, and inflation risks is expected to keep markets volatile in the days ahead. For broader market context, see S&P 500 Nears Record: Earnings, CPI, Iran Tensions, AI Jitters in Focus and Nasdaq Futures Drop 290 Points as Chip Stocks Slide on Iran Oil Shock; CPI and Earnings in Focus.
This article is for informational purposes only and does not constitute financial advice.
