Wall Street reverses lower as U.S.-Iran conflict fuels oil spike, inflation fears

Wall Street closed lower on Monday as escalating US-Iran hostilities and elevated oil prices overshadowed an early rally driven by chip-stock bargain hunting, capping a session that saw sharp intraday reversals amid worsening geopolitical tensions.

The Dow Jones Industrial Average fell roughly 0.6%, the S&P 500 slipped about 0.2%, and the Nasdaq Composite edged down less than 0.1%, according to the Associated Press. Futures had pointed to a strong open, with S&P 500 futures up 0.6% and Nasdaq futures jumping 1.1% in premarket trading, as investors sought to scoop up beaten-down semiconductor names.ksn+1

Oil Surges Past $90 as Strait of Hormuz Fears Grow

The reversal came as Brent crude briefly topped $90 a barrel during the session before pulling back, according to The Street and Times Now News. U.S. forces attacked Iran for a ninth consecutive night on Monday, with the number of confirmed American military deaths in the renewed fighting rising to three. The sustained campaign has disrupted shipping through the Strait of Hormuz, a chokepoint handling roughly 20 percent of global oil traffic.thestreet+2

The hostilities stem from a collapsed ceasefire deal that had been in place since mid-June. Iran's top negotiator declared last week that Tehran was fighting an "existential war" with the United States, voiding a memorandum of understanding that had underpinned the fragile truce. President Trump reinstated a naval blockade on Iranian shipping and launched repeated waves of strikes targeting military installations.rfi+2

Asia Hammered, India Weakens

South Korea's Kospi plunged 4.5% to 6,516.27, dragged down by Samsung Electronics and SK Hynix, which fell 4.3% and 4.2% respectively. The selloff reflected both oil-driven anxiety and continued fallout from fears that Chinese AI competition could dampen chip demand.tradingeconomics+1

India's Sensex shed 0.57% and the Nifty 50 fell 0.39%, with HDFC Bank dropping 5.1% after disappointing net interest margins compounded the geopolitical drag. The Indian rupee weakened to 96.44 against the dollar.thehindubusinessline+2

European markets were mixed, with Britain's FTSE 100 falling 0.4% while France's CAC 40 and Germany's DAX each rose 0.6%. Japan's markets were closed for a holiday.ksn

Rate Hike Expectations in Focus

The energy-driven inflation threat has reshaped monetary policy expectations. The Federal Reserve has held rates at 3.50%-3.75% since December 2025, and as of mid-July the CME FedWatch tool showed an 86.7% probability of no change at the upcoming July 29 meeting. But markets have increasingly priced in the possibility of a hike later this year, with the probability of a rate increase having surged from 25% in March to above 70% by early June.reuters+2

The week ahead brings a critical slate of technology earnings that could determine whether markets stabilize or extend losses. The Philadelphia Semiconductor Index has already entered a technical bear market, falling more than 20% from its June peak.tradingkey