US Stock Markets Drop as US-Iran Tensions Escalate and Oil Prices Surge

On Monday evening, the US stock markets experienced significant declines amid renewed tensions between the United States and Iran. The S&P 500 and Nasdaq indices fell as Iran announced the closure of the strategic Strait of Hormuz, a critical global energy passage, causing oil prices to spike by over 3%. This escalation threatens the recently signed interim agreement aimed at reopening the strait and ending hostilities after 60 days of negotiations.

The Nasdaq, heavily weighted with technology stocks, suffered the largest losses, led by semiconductor companies. Micron and SanDisk shares plunged 7.2% and 9.5% respectively, marking some of the biggest drops within the S&P 500. The Philadelphia Semiconductor Index fell 3.6%, extending its decline to over 14% since its late June peak. South Korean chipmaker SK Hynix, trading in the US, also dropped 7% shortly after a strong Nasdaq debut last Friday.

In contrast, the Dow Jones showed relative resilience, rising 0.35%, buoyed by gains in IBM and UnitedHealth stocks. Overall, four of the eleven S&P 500 sectors posted losses, with the information technology sector leading the downturn with a 1.3% decline. The market volatility comes ahead of a busy week of corporate earnings reports, which will test the durability of Wall Street's rally and the strength of the US business sector.

Investors are also preparing for key economic data releases, including Tuesday's US Consumer Price Index report, which could influence expectations for future interest rate hikes. The Federal Reserve is widely expected to raise rates by at least 25 basis points before year-end. Additionally, Fed Chair Jerome Powell will deliver his first monetary policy testimony to Congress on Tuesday, with Fed Governor Christopher Waller presenting his economic outlook.