US stocks ended Monday in the red as a sharp escalation in the US–Iran conflict sent oil prices surging and reignited inflation fears. The S&P 500 slipped 0.3% to 7,685, the Nasdaq Composite shed 0.1% to 26,371, and the Dow Jones Industrial Average fell 0.7% to 53,186. Nine of the eleven S&P 500 sectors closed lower, with energy the standout gainer on the back of surging crude prices. Utilities bore the brunt of the selling — PG&E plunged 20.1% and Edison International dropped 23% after a California bill failed to shield utilities from wildfire insurance liabilities.

Despite the late sell-off, all three major US indexes posted gains for August, snapping a two-month losing streak. The Nasdaq led with a 3.9% advance as the AI trade stabilised after July’s spectacular crash in chip stocks. The Dow notched its fifth consecutive monthly gain. A strong earnings season drove much of the sentiment, though the advance was capped by the Middle East conflict and rate uncertainty. Market participants head into September — historically the worst month for equities — with caution, as LPL Financial’s Adam Turnquist noted the S&P 500 has declined by an average of 0.6% in September since 1950.

Global Stock Indices — Daily & 5-Day Performance. Source: MPC Markets

The Middle East conflict escalated sharply over the weekend when US Central Command launched “limited, precise action” against Iranian Revolutionary Guard Corps rocket launchers on Larak Island, located at the mouth of the Strait of Hormuz. The strikes — the first known American military action against Iran since late July — came after IRGC forces were reportedly observed preparing to launch rockets carrying sea mines into the strategic waterway. Iran’s foreign ministry confirmed the US had attacked parts of Larak Island and said Tehran had retaliated with strikes against US military bases in Jordan, though Jordanian state media reported all eight incoming missiles had been intercepted.

Brent crude futures surged as much as 5% to $90.43, headed for their best day since August 10. WTI gained 3.1% to $85.95. “The key is whether this ignites further rounds of strikes from both sides, and whether it leaves shippers hesitant to navigate the Strait of Hormuz,” ING analysts said. President Trump warned of further action, posting a video on Truth Social raising the prospect of strikes against Iran’s vital Kharg Island oil export terminal. Separately, the US is stepping up financial pressure: Treasury Secretary Bessent warned new secondary sanctions could be announced every week, with initial focus on banks facilitating Iranian trade.

WTI Crude Oil — 2026 YTD. Source: Nymex via Bloomberg

VIX vs WTI Crude — 12 Months. Source: LSEG Datastream / Reuters

The bond market remained under heavy pressure on Monday as investors digested Fed Chair Kevin Warsh’s hawkish keynote at Jackson Hole alongside the oil-price spike. Warsh said underlying US inflation trends had not “meaningfully improved” and reiterated that the central bank’s focus should be on delivering price stability. Markets reacted by sharply repricing rate expectations: Fed funds futures now imply a 64% probability of a 25-basis-point hike at the September meeting, up from 57% a day earlier and around 35% before his speech.

The benchmark 10-year Treasury yield spiked above 4.75% for the first time since January 2025, up 3.5 basis points on the day. The selloff was global: France’s 10- and 30-year yields hit their highest since 2008, Germany’s 30-year reached 2011 levels, and Japan’s 2- and 10-year yields rose to mid-1990s highs. As Pathstone’s Michael McGowan noted: “We should take Warsh at his word that no forward guidance means no preconceived policy path, and thus the August CPI print and this Friday’s payrolls could be swing factors.” Fed officials Michael Barr and Christopher Waller are also scheduled to speak this week, offering further clues on whether the hawkish stance has broad FOMC support.

US 10-Year Treasury Yield — above 4.75%, highest since Jan 2025. Source: TradingView

In single-stock action, Apple slipped 0.9% on Tim Cook’s final day as CEO. Cook’s 15-year tenure quadrupled annual revenue to $416 billion and oversaw the launch of Apple Watch and AirPods; John Ternus now faces the challenge of matching Apple’s hardware dominance with its AI and software ambitions. Elsewhere, GameStop rose 2.9% after saying it would pay 27% of a $1.4 billion debt exchange in cash, avoiding further share dilution. CrowdStrike, Tesla, and SanDisk all advanced more than 5%. Nvidia is investing $3.5 billion in MediaTek to deepen its data centre chip ecosystem, while the FTC and 22 states sued Amazon over alleged systematic advertiser overcharging.

In commodities, gold slipped to a two-week low as rate-hike expectations weighed on the non-yielding metal, while copper and iron ore posted small gains reflecting industrial demand resilience. The dollar edged lower by 0.2% against the DXY, while the Australian dollar held steady at 0.7167. Bitcoin rose 0.5% to $78,958. The VIX dropped 2.17% to 14.89, suggesting options markets are not yet pricing a sustained risk-off move despite the geopolitical flare-up.

Commodities, Energy & FX — Daily & 5-Day. Source: MPC Markets