U.S. stocks finished lower on Monday as investors reacted to higher oil prices and escalating geopolitical tensions following the latest military exchanges between the United States and Iran.
The S&P 500 slipped 0.19% to close at 7,443.28, while the Nasdaq Composite edged down 0.05% to 25,508.07. The Dow Jones Industrial Average declined 307.16 points, or 0.59%, ending the session at 51,839.26. A drop of more than 2% in Apple shares weighed heavily on the Dow.
The U.S. carried out its ninth consecutive day of strikes on Iran overnight. However, market sentiment briefly improved after Iranian Foreign Ministry spokesperson Esmail Baghaei indicated that communication through intermediaries was continuing and suggested that negotiations could still move forward if aligned with Iran's national interests.
Despite the diplomatic optimism, oil prices extended their gains after President Donald Trump stated that Iran would pay for the deaths of three U.S. service members "many times over." As a result, WTI crude settled 0.9% higher at $83.23 per barrel, while Brent crude rose 1.3% to $89.22 per barrel.
Adding to supply concerns, the Houthis in Yemen announced a maritime embargo on Saudi Arabia, further supporting oil prices.
Meanwhile, semiconductor stocks attempted to recover after last week's sharp sell-off. Micron Technology gained nearly 2%, Astera Labs advanced 1.9%, Teradyne climbed 3.5%, and Advanced Micro Devices (AMD) added 1.6%. The VanEck Semiconductor ETF (SMH) also posted a modest gain.
Despite Monday's rebound in chip stocks, the semiconductor sector remains under pressure after the SMH ETF recorded its third weekly decline in the past four weeks, contributing to last week's losses across all three major U.S. stock indexes.
Frequently Asked Questions
Why did the S&P 500 fall despite hopes for diplomacy?
Although diplomatic comments from Iran briefly improved sentiment, rising oil prices and continued geopolitical tensions outweighed the positive news, leading investors to remain cautious.
How do higher oil prices affect the stock market?
Higher oil prices can increase inflation and business costs, which may reduce corporate profits and raise expectations that central banks will keep interest rates higher for longer.
Why are U.S.-Iran tensions important for investors?
Any escalation in the Middle East can disrupt global energy supplies, push oil prices higher, increase market volatility, and trigger a shift toward safe-haven assets like gold and the U.S. dollar.
Why did semiconductor stocks recover after last week's losses?
Investors bought beaten-down chip stocks following recent declines. However, the sector remains under pressure, and its longer-term direction will depend on earnings, AI demand, and broader market sentiment.
