US stock markets experienced significant volatility on Monday as renewed tensions in the Middle East soured investor sentiment. The NASDAQ Composite dropped 408.83 points, or 1.56%, to 25,872.77, while the S&P 500 fell 60.21 points, or 0.79%, to close at 7,515.18. The Dow Jones Industrial Average declined 129.16 points, or 0.25%, to 52,507.85. According to The Economic Times, tech shares pulled Wall Street lower after President Donald Trump announced that he would reinstate a blockade on Iranian ports, marking the latest escalation in US-Iran hostilities. The move sent oil prices sharply higher and dampened overall risk appetite. Over the weekend, the US and Iran exchanged heavy airstrikes, significantly escalating tensions and prompting Trump to revive the blockade on Iranian ports.
Energy stocks rose significantly as oil prices surged following Trump's escalated rhetoric and the renewed blockade on Iranian ports. International Brent crude futures settled up 5.43% at $78.19 per barrel, while West Texas Intermediate futures popped 4.37% to close at $73.52. ConocoPhillips shares added 2%, Chevron gained 1%, and Marathon Petroleum advanced 5%. However, consumer stocks that may be affected by higher energy prices fell, with Home Depot sliding 2%, McDonald's pulling back by more than 1%, and Booking Holdings shedding 4%. As per Capital.com senior market analyst Daniela Hathorn, renewed tensions in the Middle East have interrupted what had become an increasingly complacent market narrative, prompting investors to reassess geopolitical risks after several weeks of pricing in a smooth path toward de-escalation.
The Nasdaq's outperformance was primarily driven by a recovery in semiconductor stocks, which had declined in three of the previous four trading sessions. Nvidia rallied by 3.65%, leading the tech-heavy index's surge, while Broadcom gained 4.83% following reports that China is planning to allow its top AI companies to purchase a limited amount of the company's H200 chips. As reported by The Information, Chinese officials have informed companies like Alibaba, ByteDance and DeepSeek that they can buy processors used in developing AI models, though neither Nvidia nor the Chinese Administration have issued official remarks on this matter. Samsung zoomed by 2.70%, while Apple gained 1%, and memory chip makers participated strongly with Sandisk skyrocketing by 7%, Micron advancing 1.1%, and DELL rising 3.52% during Wednesday's session. The VanEck Semiconductor ETF (SMH) rose about 2%, though the fund is still almost 12% below its recent high, indicating continued volatility in the chip sector. However, the Philadelphia Semiconductor index underperformed sharply, with SanDisk, Marvell Technology and Western Digital posting steep losses, while US-listed shares of South Korean chipmaker SK Hynix also declined after rising more than 12% during their Nasdaq debut on Friday.
Renewed tensions led to an increase in demand for the US dollar as the dollar index rose +0.1% to 101.100 level, slightly below the one-year high level of 101.851. The Treasury yields also spiked, extending Friday's gains with 10-year yields rising to 4.59%. According to Upstox, Iran declared the Strait of Hormuz closed until further notice, though US naval forces maintained that the Strait remains open. Meanwhile, Iran continued to target the US allies across the region, like Kuwait. The development raised concerns over stalled peace negotiations and pushed crude prices up 9.4%, fuelling fears that supply disruptions could translate into persistent inflationary pressures. Investors are also awaiting the US CPI and PPI numbers to further gauge the Federal Reserve's policy stance.
Among the megacap names, Apple Inc. shares hit a fresh record high at $323 per share during Monday's session. Other megacap companies like Amazon, Meta Platforms, Microsoft and Alphabet Inc traded mixed, hovering around gains and losses in the opening hours. The SK Hynix ADR plunged on Monday, after a bumper opening on Friday, by soaring 13%. The company raised over $28 billion in its maiden public issue, though it declined significantly from its peak performance. According to The Economic Times, analysts currently expect aggregate second-quarter earnings growth for the S&P 500 at 23.7% year-on-year, up from 19.2% estimated at the start of April. Major US banks including Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase and Wells Fargo are set to report quarterly earnings on Tuesday, marking the unofficial start of the second-quarter earnings season. Markets are currently pricing in at least one 25 basis point rate hike by the end of the year, according to LSEG data, while Fed Chair Kevin Warsh is scheduled to deliver his first semiannual testimony before Congress on Tuesday and Wednesday.
