U.S. stocks declined and oil prices neared $80 a barrel on Monday following President Trump's announcement of a new blockade and tolls on the Strait of Hormuz. The market also showed jitters regarding technology stocks, particularly in the artificial intelligence sector, signaling potential for continued choppy trading.
The Dow Jones Industrial Average fell approximately 0.3%, while the S&P 500 and Nasdaq experienced steeper declines of 0.6% and 1.3% respectively. These drops were led by significant losses in chipmakers and companies exposed to AI technologies.
President Trump stated in a social media post that the Strait of Hormuz would be subject to a "reinstated blockade," affecting only Iranian ships or their customers. He also declared the U.S. would be known as "THE GUARDIAN OF THE HORMUZ STRAIT" and would seek reimbursement for its role, charging "20% on all cargo shipped."
This announcement, occurring after exchanges of strikes between the U.S. and Iran over the weekend, amplified concerns about potential prolonged disruptions to global energy supplies. Such disruptions could last for weeks or months without a resolution, contributing to the rise in oil prices. Brent crude oil increased by 5.5% to $80.15 a barrel, and West Texas Intermediate crude rose 5.1% to $75.08.
The national average for gasoline stood at $3.87 a gallon on Monday, a decrease from the spring's highs but with a slowing trend in price reduction as U.S.-Iran disagreements over the strait persist.
Meanwhile, the technology sector saw continued losses, especially in chipmaking companies. Stocks like SK Hynix and SpaceX experienced declines following recent record-breaking initial public offerings. Investors expressed concerns about potential overspending on new AI technologies, fueling fears of an "AI bubble."
Scott Martin, partner at Kingsview Wealth Management, predicted more volatile trading in AI and semiconductor stocks in the coming weeks, attributing it to dual pressures from geopolitical tensions and the strong performance of AI-related trades. However, he noted that market downturns following record highs are not always indicative of a broader market collapse and can be part of healthy profit-taking.
Martin emphasized that the primary investor concern is not the long-term growth potential of AI spending, but whether current earnings justify the rapid and substantial investments being made.
U.S.-listed shares of SK Hynix fell 6.8%, a day after a 13% surge on its Nasdaq debut. South Korean shares of the company also dropped significantly. SpaceX shares declined for a second consecutive trading day, falling 4.3% to $139.02, approaching its initial offering price.
Major chipmakers including Micron, Sandisk, AMD, Intel, and Samsung saw their shares fall by 5.2%, 12.2%, 3.7%, 5.9%, and 10.7%, respectively. U.S. banks such as JPMorgan, Goldman Sachs, Morgan Stanley, Bank of America, Citigroup, and Wells Fargo experienced modest declines ahead of an anticipated busy earnings week.