Major United States benchmark averages closed lower on Monday (Tuesday AEST), with major indices retreating from recent record highs as rising oil prices and renewed geopolitical tensions in the Middle East unsettled investors.
The Dow Jones Industrial Average fell 557.4 points, or 1.1%, to 48,941.9, while the S&P 500 declined 29.4 points, or 0.4%, to finish at 7,200.8. The Nasdaq Composite also edged lower, shedding 46.6 points, or 0.2%, to close at 25,067.8.
Investor sentiment deteriorated following reports that a South Korean vessel was struck by an explosion in the Strait of Hormuz.
The developments overshadowed otherwise supportive factors, including a strong U.S. first-quarter earnings season.
Further escalating tensions, the United Arab Emirates said it had intercepted multiple missiles launched from Iran on Monday.
Energy stocks outperformed amid the turmoil, as traders priced in the risk of prolonged supply disruptions. Oil markets reacted sharply, with U.S. West Texas Intermediate crude futures rising 4.4% to settle at $106.42 per barrel. Brent crude, the international benchmark, climbed 5.8% to $114.44 per barrel.
In a Truth Social post on Sunday, U.S. President Donald Trump announced “Project Freedom”, aimed at assisting cargo ships stranded by the Strait of Hormuz closure.
The initiative, scheduled to begin Monday, would involve U.S. efforts to escort vessels from countries not involved in the conflict.
“I have told my Representatives to inform them that we will use best efforts to get their Ships and Crews safely out of the Strait,” Trump said. “In all cases, they said they will not be returning until the area becomes safe for navigation, and everything else.”
The announcement followed confirmation from Iran that it had received a U.S. response to its latest proposal for peace talks, raising tentative hopes for de-escalation.
Despite the broader market decline, recent optimism around earnings and geopolitical developments had previously driven equities to record levels. However, Monday’s session exposed pockets of weakness, particularly within logistics and transportation stocks.
Shares of GXO Logistics plunged nearly 18% after Amazon revealed plans to expand its logistics capabilities by opening its freight, distribution, fulfilment and parcel delivery network to external businesses.
United Parcel Service dropped 10.5%, while FedEx fell 9.1% on the announcement.
In the retail sector, GameStop tumbled 10% after unveiling a proposal to acquire eBay in a cash-and-stock deal valued at approximately $56 billion.
By contrast, eBay shares rose around 5% following the news.
Meanwhile, Berkshire Hathaway reported over the weekend that it had been a net seller of equities for a 14th consecutive quarter, a signal closely watched by investors for insights into valuations and broader economic conditions.
Elsewhere, Palantir gained 1.4% ahead of its quarterly earnings release, while Norwegian Cruise Line fell 8.6% after lowering its full-year outlook due to higher fuel costs linked to the Middle East tensions.
On the bond markets, U.S. Treasury yields moved higher, with the 10-year yield rising 1.4% to 4.432% and the 2-year yield climbing 1.7% to 3.946%.
