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NEW YORK (AP) — Oil prices jumped on Monday following a weekend of attacks in the Middle East, while losses for computer chip companies and other beneficiaries of the artificial-intelligence boom dragged stock markets lower.
President Donald Trump Reinstates Strait of Hormuz Blockade
The price for a barrel of Brent crude oil, the international standard, climbed 9.6% to $83.30. This increase occurred after both the United States and Iran declared that the Strait of Hormuz is under their respective control. Fighting in the region has prevented oil tankers from utilizing the strait to deliver crude oil to customers from the Persian Gulf, a disruption that is driving up fuel prices globally. The upward pressure on oil prices accelerated immediately after President Donald Trump announced he is reinstating a blockade to prevent tankers carrying Iranian oil from using the strait. President Trump also called for 20% payments on all cargo shipped through the area to reimburse the United States for providing protection. Despite this jump, the price of Brent crude remains well below its wartime peak of nearly $120 per barrel for its most actively traded contract.
S&P 500 and Nasdaq Composite Decline Amid Tech Selloff
On Wall Street, the S&P 500 fell 60.06 points to 7,515.34, a decline of 0.8%, ending a streak where the index had seen four winning weeks out of the last five. The Dow Jones Industrial Average dropped 138.37 points, or 0.3%, to 52,498.64, while the Nasdaq composite sank 408.43 points, or 1.6%, to 25,873.18.
Chip stocks helped lead the market lower. Micron Technology fell 4.4%, impacting what had been a stellar rise of 243.1% for the year so far. While the AI rush has created surging demand for computer memory and other computing building blocks, concerns are mounting that stock prices have risen too high and that demand may not be sustainable if AI does not deliver the expected levels of profit and productivity. Nvidia, the largest stock on Wall Street by value, fell 3.5%, making it the single heaviest weight on the S&P 500.
SK Hynix Shares Plunge Following Seoul Market Downturn
The day’s losses originated in Asia, where South Korea’s Kospi index dropped 8.9%. This included a 15.4% plunge for the stock of SK Hynix in Seoul, marking its worst performance since the company began trading in 1997. The South Korean tech giant had launched shares for trading in the United States on Friday, raising roughly $26.5 billion. While those shares jumped 13.1% during their first day of trading, they fell 9.3% on Monday.
Other segments of the AI industry fared better. Shares of Taiwan Semiconductor Manufacturing Co. (TSMC) rose 1% in Taiwan. The chipmaker reported that its revenue in June soared nearly 68% from a year earlier, bringing its total revenue growth for the first half of the year to 35.6% compared to the same period a year earlier. However, TSMC’s stock that trades in the United States fell 2.9% later in the day.
JPMorgan Chase and Goldman Sachs Prepare Quarterly Earnings Reports
Wall Street’s attention is now shifting toward upcoming profit reports from companies detailing their earnings from the spring. On Tuesday, Bank of America, Citigroup, JPMorgan Chase, Goldman Sachs, and Wells Fargo are all scheduled to release their latest quarterly results. According to FactSet, analysts are forecasting that companies in the S&P 500 index will deliver overall growth of 23.6% from a year earlier. If this forecast is accurate, it would mark the second straight quarter of growth exceeding 20%. Companies across various industries will need to demonstrate strong growth to justify the significant moves their stock prices have made, as indexes currently sit near record levels despite recent sharp swings.
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