U.S. equity markets delivered a mixed performance on Monday, with the Dow Jones Industrial Average eking out a gain while the S&P 500 and Nasdaq Composite retreated. The divergence underscored growing investor unease as a confluence of geopolitical tensions and rising bond yields weighed on sentiment, particularly in the technology and AI sectors.
Crude oil prices surged after President Donald Trump announced a halt to a planned military strike on Iran, though he cautioned that a large-scale assault remains possible if diplomatic efforts fail. U.S. West Texas Intermediate crude settled at $108.66 per barrel, while global benchmark Brent crude finished at $112.10. The threat to the Strait of Hormuz, a critical chokepoint for global oil shipments, kept traders on edge. The U.S. Energy Information Administration projects that if the strait remains effectively closed through late May, global oil inventories will decline sharply, with Brent prices expected to hover near $106 through June.
The rise in oil prices added to inflation concerns, pushing the 10-year U.S. Treasury yield to 4.631%, its highest level since February 2025. This increase in borrowing costs rippled through the economy, affecting mortgages, corporate loans, and government debt. Jack McIntyre, portfolio manager at Brandywine Global Investment Management, noted that yields could continue to climb until something breaks in the market.
Technology stocks, particularly those tied to artificial intelligence, bore the brunt of the selling pressure. AI hardware names like Sandisk and Bloom Energy saw heavy losses, while software stocks fared somewhat better. Investors are closely watching Nvidia's upcoming earnings report, which is expected to provide critical insights into the sustainability of chip and data center spending that has fueled the AI rally. Semiconductor stocks also faced headwinds from geopolitical risks, with Oliver Pursche of Wealthspire Advisors highlighting that President Trump's recent trip to China left many questions unanswered regarding Taiwan, a linchpin in global chip manufacturing.
Energy stocks, by contrast, benefited from the spike in crude prices, providing a buffer for the broader market. However, the overall mood remained cautious as traders weighed the potential for further escalation in the Middle East. If diplomatic talks collapse or the ceasefire unravels, oil, gasoline, and freight costs could jump sharply, squeezing consumers and corporate margins alike.
Late in the trading session, oil prices eased from their intraday highs, with Brent briefly touching $113 before pulling back. Still, the overall advance was enough to support energy names while pressuring rate-sensitive sectors. The market is now in a state of fragile equilibrium, with investors awaiting retail sales data, Nvidia's results, and developments from Washington and Tehran before determining whether Monday's mixed close is a temporary pause or a precursor to further declines.
