Trump’s Strait of Hormuz Blockade Sends U.S. Stocks Plunging

The S&P 500 declined 0.68%, while the tech-heavy Nasdaq Composite dropped 1.41%. The Dow Jones Industrial Average fell 0.26%, or 136.25 points, closing at 52,500.76.

Trump’s Blockade and Energy Market Impact

The announcement, made via a post on Truth Social, declared that the U.S. is reinstating what President Trump described as a blockade on Iranian shipping. Trump stated the policy is intended to stop Iranian ships or customers from entering or leaving the region. Furthermore, he designated the U.S. as the "Guardian of the Hormuz Strait," asserting that the country would be reimbursed at a rate of 20% on all cargo shipped to cover the costs of providing security in the area.

This geopolitical shift followed a weekend of exchanged airstrikes between the U.S. and Iran. The violence began after Iran targeted U.S. facilities in Gulf countries and attacked a commercial vessel in the strait, prompting retaliatory airstrikes ordered by Trump on Saturday.

The resulting uncertainty sent energy prices surging. U.S. West Texas Intermediate (WTI) futures climbed more than 8%, topping $77 per barrel, while Brent crude futures advanced 9% to exceed $82 per barrel. Energy stocks were among the few sectors to see gains, helping to cushion the Dow’s losses.

For more on this story, see US and Iran Reach Peace Deal; Trump Lifts Strait of Hormuz Blockade.

Semiconductor Sector Under Pressure

Technology shares faced the most significant declines, with the semiconductor sector acting as a clear underperformer. Investors moved away from memory-chip and semiconductor names amid ongoing volatility.

U.S.-listed shares of the South Korean chipmaker SK Hynix fell 6.1% on Monday, following a 13% surge during its Nasdaq debut the previous Friday. Other notable losses in the sector included:

• Seagate Technology: Fell 6%
• Intel: Pulled back 7%
• Micron Technology: Down 5%
• Advanced Micro Devices: 4% lower
• Marvell Technology: Down between 6.5% and 12.3%

Ross Mayfield, an investment strategy analyst at Baird, noted that much of the weakness in these stocks has been ongoing for approximately six weeks, characterizing the movement as a pause in the "parabolic upswing" of memory and semiconductor names.

This follows our earlier report, From Hormuz to Nuclear: Unanswered Questions on Trump’s Iran Deal.

Earnings Season and Economic Uncertainty

The market downturn coincides with the unofficial start of the second-quarter earnings season. Major financial institutions, including JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America, and Citigroup, were all scheduled to report results this week.

Beyond corporate earnings, investors are bracing for significant economic data and policy updates. On Tuesday, the Labor Department is expected to release June consumer and producer price indexes. These reports are anticipated to provide insight into how the U.S.-Iran hostilities have influenced inflation.

Read also: U.S. Strikes 90 Iranian Targets in New Airstrikes.

Federal Reserve Chair Kevin Warsh is also scheduled to deliver his first semi-annual monetary policy testimony before the House Financial Services Committee. Market participants are looking to this testimony for guidance on how the central bank will respond to the inflationary pressures caused by the conflict. Current data indicates that markets are pricing in at least one 25-basis-point interest rate hike by the end of the year.

"The market’s first impulse is to look through geopolitics and wait and see," said Mayfield. Meanwhile, Ben Fulton, CEO of WEBs Investments, noted that the market remains "range-bound" until a definitive solution to the Middle East conflict is reached.

Find more reporting in our Business section.