Dow falls 138 points as Iran tensions lift oil, hit chip stocks

The Dow Jones Industrial Average fell 138 points on Monday, closing at 52,498.64. The S&P 500 slipped 0.79% to 7,515.34 and the Nasdaq Composite declined 1.55% to 25,873.18, with technology names leading losses.

President Donald Trump announced the United States would reinstate a blockade on Iranian shipping through the Strait of Hormuz and seek a 20% fee on cargo transiting the route after renewed military exchanges over the weekend. Markets reacted to the announcement during Monday trading.

Oil prices rose sharply. US West Texas Intermediate crude gained about 9.4% to trade above $78 a barrel and Brent crude increased roughly 9.6% to more than $83 a barrel.

The jump in energy costs affected interest-rate expectations. LSEG data showed markets were pricing at least one 25-basis-point rate increase before year-end. Investors are awaiting June consumer price index, producer price index and retail sales reports this week. Federal Reserve Chair Kevin Warsh is scheduled to testify before Congress, where lawmakers plan to question him on inflationary effects from the US-Iran tensions and the Fed’s policy path.

Semiconductor stocks were among the biggest decliners. US-listed SK Hynix shares fell about 8% after gaining more than 12% in their first trading day on Nasdaq. Micron Technology dropped about 5%, SanDisk fell roughly 13%, Seagate Technology slipped 6%, Advanced Micro Devices declined 4% and Intel fell 7%. The Philadelphia Semiconductor Index underperformed the broader market.

Earnings season also shaped market activity. Major US banks including JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America, Citigroup and Wells Fargo were scheduled to report this week, along with Netflix, Johnson & Johnson and UnitedHealth. LSEG data shows analysts expect S&P 500 companies to report second-quarter earnings growth of 23.7% year over year.

Traders and portfolio managers adjusted positions ahead of the economic and corporate calendar, and the spike in oil prices prompted market participants to consider the effects of higher input costs on companies and consumers.