Wall Street moved lower on Monday as a sharp rise in oil prices and renewed U.S.-Iran tensions pressured investor sentiment.
The decline came after major U.S. indexes posted weekly gains, although stocks had already weakened on Friday following hawkish comments from Federal Reserve Chair Kevin Warsh at the Jackson Hole symposium.
S&P 500, Nasdaq and Dow Move Lower
At 11:13 ET, the S&P 500 fell 0.5% to 7,673.21 points.
The Nasdaq Composite declined 0.4% to 26,293.86, while the Dow Jones Industrial Average dropped 0.7% to 53,210.95.
The early-week weakness followed a volatile Friday session, when U.S. stocks gave up initial gains as Treasury yields moved sharply higher.
U.S.-Iran Escalation Drives Oil Prices Higher
The main catalyst behind Monday’s risk-off sentiment was a sudden increase in military tensions between the United States and Iran.
U.S. forces carried out targeted strikes against two Iranian missile launchers on Larak Island in the Strait of Hormuz.
The operation marked the first direct U.S. military action against Iranian territory since July.
Iran responded with retaliatory strikes targeting U.S. military positions in Jordan.
Strait of Hormuz Returns to Market Focus
The renewed confrontation raised concerns about shipping through the Strait of Hormuz, one of the world’s most important energy routes.
Geopolitical uncertainty increased further after U.S. President Donald Trump raised the possibility of additional action involving Iran’s Kharg Island oil export hub.
U.S. Treasury Secretary Scott Bessent also signaled that Washington could introduce additional economic measures against Tehran.
Brent Crude Surges Above $90
Oil prices jumped sharply following the escalation.
Brent crude futures rose about 4.9% to $90.31 per barrel as investors reassessed the risk of disruptions to global energy supplies.
The rally weakened hopes that diplomatic progress could quickly restore normal commercial shipping through the Strait of Hormuz.
Higher energy prices also revived concerns about cost-driven inflation, adding another layer of uncertainty for global markets.
Warsh’s Hawkish Fed Message Pressures Stocks
Wall Street is also facing pressure from changing expectations for U.S. monetary policy.
During his first keynote speech at Jackson Hole, Federal Reserve Chair Kevin Warsh emphasized the central bank’s commitment to returning inflation to its 2% target.
Warsh did not provide direct guidance on the Fed’s next move.
However, investors interpreted his comments as a signal that further interest rate increases remain possible if inflation stays elevated.
September Fed Rate Hike Odds Rise
Markets are now pricing in nearly a 60% probability of a 25-basis-point rate increase at the Fed’s Sept. 16 meeting.
That compares with roughly 35% before Warsh’s Jackson Hole speech, according to CME FedWatch data.
U.S. Treasury yields also moved higher across the curve.
Higher yields can create pressure on expensive growth stocks because they reduce the relative appeal of future corporate earnings.
Technology and semiconductor shares were among the sectors most exposed to the shift in rate expectations.
U.S. Payroll Data Comes Into Focus
Investors are now preparing for a busy week of U.S. economic data.
July JOLTS job openings figures are due on Tuesday, followed by August ADP private payroll data on Wednesday.
The main event will be Friday’s U.S. nonfarm payrolls report.
Markets will use the employment data to assess whether the labor market remains strong enough to support further monetary tightening.
Fed Officials Could Offer More Rate Clues
Investors will also monitor comments from Federal Reserve officials throughout the week.
Fed Governor Michael Barr is scheduled to speak on Tuesday, while Christopher Waller is due to speak on Thursday.
Their comments could provide more clarity on whether Warsh’s hawkish position is broadly supported by other FOMC members.
With oil prices rising, Treasury yields elevated and key economic data approaching, volatility could remain high across Wall Street as investors reassess both geopolitical and monetary policy risks.
