Oil futures experienced a significant rally on Monday, with Brent crude climbing 9.6% to settle at $83.30 a barrel and US crude rising 9.4% to $78.14 a barrel. This surge was triggered by the re-ignition of conflict between the United States and Iran, specifically concerning the Strait of Hormuz. Iran announced the closure of the strait over the weekend, a crucial global conduit for oil and gas shipping. President Donald Trump responded by reinstating a blockade of Iranian shipping and proposing a 20% fee for all cargo transiting the strait to cover protection costs. This renewed geopolitical tension has fueled concerns about inflation and its potential impact on Federal Reserve monetary policy.
The escalating hostilities and rising oil prices led to an increase in US Treasury yields. The yield on the benchmark US 10-year note rose 5.06 basis points to 4.62%, while the 30-year bond yield increased 3.31 basis points to 5.104%. The two-year note's yield, sensitive to Fed interest-rate expectations, climbed 6.71 basis points to 4.275%, reaching its highest point since February 2025. Precious metals, however, saw declines, with spot gold falling 3% to $3,998.52 an ounce and spot silver dropping 3.8% to $57.56 an ounce, largely due to anxieties about higher-for-longer US interest rates.
Stock markets globally and on Wall Street experienced declines. MSCI's gauge of global stocks fell 0.9% to 1,116.28. In the US, the Dow Jones Industrial Average dropped 0.3% ($138.37 points) to 52,498.64, the S&P 500 fell 0.8% ($60.05 points) to 7,515.34, and the Nasdaq Composite sank 1.6% ($408.43 points) to 25,873.18. Technology shares were particularly hit, with investors selling off artificial intelligence and semiconductor stocks. US-listed shares of SK Hynix fell 9%, following an initial rally on its Nasdaq debut, and Micron Technology saw a 4.4% decline. Nvidia, the largest stock on Wall Street by value due to AI euphoria, also fell 3.5%, significantly weighing on the S&P 500.
