Global oil prices surged on Monday, following a weekend of intensified fighting in the Middle East and renewed friction over the Strait of Hormuz. International benchmark Brent crude climbed 9.6% to $83.30, as markets reacted to conflicting claims of control over the critical maritime chokepoint.
Brent Crude Climbs as Iran and US Dispute Control of the Strait of Hormuz
Market Volatility and the Strait of Hormuz Standoff
Energy markets faced significant disruption as The Associated Press reported that both the United States and Iran have asserted control over the Strait of Hormuz. The ongoing conflict has effectively halted oil tanker traffic from the Persian Gulf, a development that is driving up fuel prices worldwide. While prices for Brent crude reached $83.30, The Associated Press observed that futures had briefly topped $90 a barrel earlier in the session before paring gains after Iran stated it was pursuing a diplomatic route and had received proposals from mediators.
The price rally remains anchored to concerns over potential supply chain blockages. President Donald Trump announced the reinstatement of a blockade aimed at preventing tankers carrying Iranian oil from utilizing the strait. Additionally, the administration has called for a 20% payment on all cargo transiting the area to offset the costs of U.S. protection efforts. Despite the sharp increase, current prices remain well below the wartime peak of nearly $120 per barrel for the most actively traded contract, according to data cited by The Associated Press.
Nasdaq and S&P 500 Sink Amid Semiconductor Selloff
Tech Sector Selloff and AI Market Sentiment
The instability in the energy sector coincided with a broad retreat in the equity markets, particularly among technology stocks that had previously benefited from the artificial intelligence boom. The Nasdaq composite sank 408.43 points, or 1.6%, to 25,873.18, while the S&P 500 fell 60.06 points to 7,515.34. The Dow Jones Industrial Average dropped 138.37 points, or 0.3%, to 52,498.64. The decline was largely driven by a downturn in semiconductor companies.
For more on this story, see Oil Prices Surge as US-Iran Conflict Escalates in Strait of Hormuz.
Micron Technology: Shares fell 4.4%, a reversal following a year-to-date gain of 243.1%. The company remains a focal point for the AI rush, which has created surging demand for computer memory and other computing building blocks.
Nvidia: The largest stock on Wall Street by value saw its shares drop 3.5%, making it the single heaviest weight on the S&P 500.
SK Hynix: The South Korean tech giant experienced a 15.4% plunge in Seoul, its worst performance since trading began in 1997. The company had launched shares in the United States on Friday, raising roughly $26.5 billion; those shares fell 9.3% on Monday after a 13.1% jump in their first day of trading.
TSMC: While shares rose 1% in Taiwan, the company’s U.S.-traded stock fell 2.9%. The chipmaker reported that its revenue in June soared nearly 68% from a year earlier, bringing total revenue growth for the first half of the year to 35.6% from a year earlier.
Market analysts are grappling with the sustainability of these valuations. As The Associated Press noted, there is growing investor anxiety that the demand for computer memory and AI-related infrastructure may not be sustainable if AI does not deliver as much profit and productivity as expected.
This follows our earlier report, Gold Prices Stabilize Near $4,000 Amid US Interest Rate Uncertainty and Oil Surge.
FactSet Forecasts 23.6% Growth for S&P 500 Companies
Earnings Season and Federal Reserve Policy
Investors are shifting focus toward second-quarter earnings reports. Major financial institutions, including Bank of America, Citigroup, JPMorgan Chase, Goldman Sachs, and Wells Fargo, are scheduled to release their results on Tuesday. According to FactSet data reported by The Associated Press, analysts are forecasting an overall growth of 23.6% for S&P 500 companies compared to the previous year. If accurate, this would mark the second straight quarter of growth exceeding 20%. Companies usually turn in results that top analysts’ expectations, doing so in 37 of the past 40 quarters, and if this trend continues, earnings growth could end up being the best since 2021.
10-Year Treasury Yield Rises to 4.61% Ahead of Federal Reserve Decision
The macroeconomic backdrop remains challenging, with Treasury yields rising alongside oil prices. The yield on the 10-year Treasury climbed to 4.61% from 4.56% on Friday and from 3.97% before the war with Iran began. This upward pressure on yields reflects broader concerns regarding high inflation and the potential for the Federal Reserve and other central banks to raise interest rates. The Associated Press noted that policymakers are currently in a blackout period ahead of an interest-rate decision scheduled for next Wednesday, leaving markets to navigate the geopolitical and inflationary pressures without immediate guidance from the central bank.
Read also: Crude Oil Prices Surge: Brent Tops $87 and US Oil Breaks $80.
The potential for de-escalation remains a point of uncertainty. While fighting persists, The Associated Press reported that Iran has indicated it is still pursuing a diplomatic route, claiming to have received proposals from mediators, stoking hopes that the conflict can be de-escalated. Market participants are monitoring these reports closely to see if they offer a genuine pathway to stabilizing the Strait of Hormuz and cooling the recent volatility in global energy costs.
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