Stocks closed lower on Monday after tensions between the U.S. and Iran escalated, with both sides exchanging fire for the first time in about a month. Despite the decline, the major U.S. averages finished August higher.
The S&P 500 fell 0.33% to 7,686.14, while the Nasdaq Composite slipped 0.12% to 26,370.89. The Dow Jones Industrial Average dropped 374.09 points, or 0.7%, to 53,185.90, pressured by declines in Goldman Sachs and Alphabet.
The latest escalation came after U.S. Central Command confirmed that American forces had struck two rocket launchers on Iran’s Larak Island. The attack marked the first publicly acknowledged U.S. strike on Iranian positions since late July. Iranian state media also reported that Tehran retaliated by targeting U.S. bases in Jordan.
Oil prices surged as investors assessed the renewed hostilities and potential risks to regional energy supplies. West Texas Intermediate crude settled 2.83% higher at $85.76 a barrel, while Brent crude gained 2.71% to $90.49.
Longer-dated U.S. Treasury yields also moved higher alongside oil prices, weighing further on investor sentiment and adding pressure to equities.
Despite Monday’s losses, Wall Street ended August on a positive note. The Dow gained more than 1% for the month, marking its fifth consecutive monthly advance and its 15th positive month in the past 16. The S&P 500 rose 2.6%, while the Nasdaq gained 3.9%, with both indexes posting their first monthly gains since May.
Technology stocks led the rally, particularly companies linked to artificial intelligence. The S&P 500 technology sector climbed more than 6% during August. Nvidia gained roughly 10%, Microsoft advanced more than 9%, and Micron Technology jumped more than 16%.
However, the month remained volatile as persistent inflation concerns pushed Treasury yields to multi-year highs. The Treasury Department announced plans to increase debt buybacks in an effort to ease pressure in the bond market, although longer-term yields remain elevated.
Federal Reserve Chairman Kevin Warsh also expressed concern about inflation at Jackson Hole, saying recent inflation readings had been better than expected but did not provide enough evidence that underlying inflation trends had significantly improved.
Investors now turn to a busy week of economic data, highlighted by Friday’s August jobs report. Manufacturing and services activity data will also provide clues about the health of the U.S. economy.
Markets will additionally monitor developments from Asheville, North Carolina, where G20 finance ministers are meeting.
