US stocks fell Monday morning as oil surged past $100 a barrel after President Trump announced a new blockade of the Strait of Hormuz during the precarious ceasefire with Iran.
The Dow Jones Industrial Average plummeted 168 points, or 0.4%, as of 10:45 a.m. ET, while the S&P 500 and Nasdaq rose 0.1% and 0.3%, respectively.
Brent crude oil futures surged 5.6% to $100.54 a barrel. West Texas Intermediate soared 5.2% to $94.19. National average gasoline prices hit $4.13 a gallon, according to AAA.
After US-Iran talks failed to yield a deal over the weekend, Trump on Sunday announced that the US would launch its own blockade of the strait, a vital maritime route in the Persian Gulf for 20% of the world’s oil.
“Effective immediately, the United States Navy, the Finest in the World, will begin the process of BLOCKADING any and all Ships trying to enter, or leave, the Strait of Hormuz,” he wrote in a Truth Social post.
He also lobbed fresh threats at Tehran, writing that any Iranian forces who fire at vessels “will be BLOWN TO HELL” and that the US is “fully ‘LOCKED AND LOADED,’ and our military will finish up the little that is left of Iran,” if necessary.
Investors had been hoping for signs of a deal to end the war in the Middle East, which has already caused the worst-ever energy supply disruption in history and driven US inflation to its highest level in two years.
US Central Command announced it will start blocking traffic through Iran’s ports starting at 10 a.m. ET Monday. It said it will not block vessels using the waterway to travel to non-Iranian ports.
“Investors are now back to the drawing board trying to reassess the fair value of stocks now that it’s clear that there is no end in sight to the conflict in the Middle East. Anytime there is a repricing in markets, we see volatility,” Clark Bellin, president and chief investment officer at Bellwether Wealth, said in a note Monday.
“It’s clear that there will be more saber-rattling over this waterway between the US and Iran this week, and that could rattle markets and extend this stock market correction.”
Vice President JD Vance left Islamabad, Pakistan, without a deal after leading the US delegation in 21 hours of talks with their Iranian counterparts.
The veep said Iran refused to commit that it wouldn’t seek a nuclear weapon, and the Middle Eastern country demanded control of the Strait of Hormuz, war reparations and the release of frozen assets.
Trump is now weighing whether to resume limited strikes on Iran, according to the Wall Street Journal – concerning investors who had hoped a double-sided two-week ceasefire would hold.
In an interview with Fox News host Maria Bartiromo on Sunday, the commander-in-chief also appeared unwilling to commit to lower oil prices anytime soon – even saying they could possibly jump higher by the midterm elections.
“Well, it’s eventually going to be lower,” he said. “No, it might not happen initially, but it’s gonna go down when this is all over.”
Asked whether prices will drop by this fall, Trump said: “I hope so. I mean, I think so. It could be. Or the same. Or maybe a little bit higher. But it should be around the same. I think this won’t be that much longer.”
Meanwhile, shares in Goldman Sachs fell 3.7% Monday despite a strong earnings report as traders zeroed in on disappointing trading results in its fixed income unit.
Major banks, including Citigroup, Wells Fargo, JPMorgan Chase, Morgan Stanley and Bank of America, are all slated to report earnings this week.
“The big question for stocks going forward is if this upcoming earnings season can be enough of a catalyst to dismantle the close link between stocks and oil, as corporate earnings are what traditionally drive stock prices,” Bellin said in his note.
All three major US stock indexes last week saw their best gains since November after Trump announced a two-week pause on strikes with Iran and traders grew optimistic for a more permanent end to the war.
