Wall Street’s main indexes opened lower on Monday, as renewed tensions between the US and Iran weighed on investor sentiment following a record-setting rally last week.
The Dow Jones Industrial Average gained 28 points, while the S&P 500 slipped 0.17% and the Nasdaq-100 declined about 0.13%.
The pullback comes after a strong run that pushed major indexes to all-time highs, fueled by optimism around a potential de-escalation in the Middle East.
Geopolitical tensions dent sentiment
Markets turned cautious after a fresh escalation in US-Iran tensions over the weekend. Iran moved to close the Strait of Hormuz again after the US seized an Iranian-flagged cargo ship, raising concerns about the durability of a recently announced ceasefire.
Donald Trump said the ship was under US Treasury sanctions and confirmed that American forces had taken custody. Iran, meanwhile, indicated it would not participate in a second round of negotiations with the US.
Oil surge lifts energy stocks
The renewed tensions sent oil prices sharply higher, with crude benchmarks rising around 5% to 6% amid fears of supply disruptions. West Texas Intermediate climbed above $88 per barrel, while Brent crude moved past $95.
The surge in oil prices lifted energy stocks. Exxon Mobil and Chevron each opened in the green, while Occidental Petroleum rose roughly 0.73%.
Market participants noted that equities have become increasingly sensitive to geopolitical headlines, with even minor developments driving sharp swings in risk appetite.
The CBOE Volatility Index, often referred to as Wall Street’s “fear gauge,” rose to a one-week high after eight consecutive sessions of declines, signaling a pickup in market uncertainty.
Earnings and market outlook in focus
Despite the early losses, analysts suggested that the pullback remained relatively contained given the scale of the recent rally. The S&P 500 rose 4.5% last week, while the Nasdaq Composite surged about 7%, marking its 13th consecutive day of gains — a streak not seen since 1992.
“After the Nasdaq has rallied for 13 days in a row on hopes for a deal, we ended the week very overbought on a short term basis. And now the situation with Iran is gotten even more complicated and uncertain on when this conflict will end and when the Strait will fully reopen without fear of attack,” said Peter Boockvar, chief investment officer at OnePoint BFG Wealth Partners in a CNBC report.
“The only question with Monday trade, assuming news doesn’t change again, will be the extent of the market pullback?” he added.
Investors are also turning their attention to the upcoming earnings season, which is expected to provide further insight into how geopolitical tensions are affecting corporate performance and the broader economy.
Defense companies such as Lockheed Martin and RTX, along with technology firms including IBM and ServiceNow, are set to report results later this week. Tesla is expected to kick off earnings for the “Magnificent Seven” on Wednesday.
According to LSEG I/B/E/S data, first-quarter earnings for S&P 500 companies are projected to grow 14.4%, slightly higher than the 13.7% growth recorded a year earlier, setting the stage for a closely watched reporting season.
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