On Monday, markets took a hit while oil prices edged closer to $80 a barrel following President Trump’s announcement of a new closure and toll in the Strait of Hormuz. Investors appeared uneasy, particularly concerning tech stocks, hinting at possible turbulent trading ahead.
By around 12:50 p.m. ET, the Dow Jones Industrial Average dropped 152 points, translating to a 0.3% decline. The S&P 500 and Nasdaq didn’t fare much better, slipping 0.6% and 1.3% respectively. These downturns were significantly influenced by steep losses in semiconductor companies and AI-related stocks.
In a post on Truth Social, Trump stated that the Straits were open but also claimed, “We will restore the Straits.” This was connected to discussions around the Iranian blockade, which effectively disrupts the movement of Iranian ships and their goods.
He declared, “From now on, the United States will be known as the ‘Guardian of the Strait of Hormuz,’ and consequently, 20% of all shipments will be reimbursed.”
This announcement came on the heels of renewed tensions between the U.S. and Iran, stirring fears that the ongoing lack of a permanent peace agreement could lead to severe energy supply disruptions. Such disruptions might last for weeks or even months, potentially driving prices even higher.
Brent crude saw an increase of 5.5%, reaching $80.15 per barrel, while West Texas Intermediate climbed 5.1% to hit $75.08.
The national average gas price stood at $3.87 a gallon on Monday, a drop from this spring’s peak of $4.56, although the decrease has stalled recently amid the escalating tensions regarding the Strait.
Challenging times were evident for chipmakers as well. Notably, SpaceX and SK Hynix faced declines following their record IPOs. Investors voiced concerns about potential overspending on emerging technologies, which may lead to an “AI bubble.”
Scott Martin from Kingsview Wealth Management remarked that he anticipates even more volatility in AI and semiconductor stocks in the weeks to come. He pointed to the dual pressures from the Iran situation and the surging interest in AI trading.
However, he urged investors not to interpret the current economic downturn as an indication of the end for AI investment.
“Markets that hit all-time highs rarely travel in a straight path,” Martin noted, suggesting that taking profits after such a rally is a healthy pattern, rather than something concerning. He doesn’t believe this is the start of a major market collapse but warns investors to brace for additional volatility as earnings reports begin to roll in.
One significant pondering for investors is whether the current revenue being generated justifies the levels of spending on AI and how rapidly that spending is occurring.
Shares of SK Hynix listed in the U.S. fell 6.8% after a 13% surge following its Nasdaq debut. Its shares in Korea also dropped sharply.
SpaceX shares, having previously set records with the largest IPO ever, fell for two consecutive trading days, dropping 4.3% to $139.02, which is near its opening price of $135.
Chipmakers, including Micron, SanDisk, AMD, Intel, and Samsung, saw declines of 5.2%, 12.2%, 3.7%, 5.9%, and 10.7%, respectively.
As the earnings week approached, major U.S. banks such as JPMorgan, Goldman Sachs, Morgan Stanley, Bank of America, Citigroup, and Wells Fargo declined by 0.7%, 1%, 1.2%, 0.7%, 1.7%, and 0.2%, respectively.
