US stocks drifted lower on Monday after a chaotic weekend in the Middle East revived fears of a wider US-Iran confrontation and sent oil prices higher. The S&P 500 shed 0.1%, the Nasdaq Composite lost 0.2% and the Dow Jones Industrial Average hovered just below the flat line.
President Donald Trump said the US Navy seized an Iranian ship and blew a hole in its engine room, after Iran fired at vessels and abruptly stopped traffic in the Strait of Hormuz on Saturday. Iran said the United States had broken a ceasefire deal. Traders responded by buying oil and trimming risk, with West Texas Intermediate crude futures last up 4.8% at around $86.50 per barrel and Brent up 4.2% to near $94.
The move matters because the Strait of Hormuz is a critical waterway for global oil supply, and any threat to traffic there tends to feed worries about inflation and the path of interest rates. The Hormuz standoff is also one of several sticking points in US-Iran negotiations, leaving markets with little room to dismiss the weekend escalation as a one-off flare-up.
Investors were also looking ahead to a busy stretch of earnings reports, including results from Tesla, Intel and United Airlines. On the corporate front, Eli Lilly said Monday it will acquire Kelonia Therapeutics for up to $7 billion. Kelonia shareholders will receive an up-front cash payment of $3.25 billion, with additional payouts tied to clinical and commercial milestones.
The market’s response on Monday was restrained, but the price action showed where the immediate pressure is building: not in stocks alone, but in the possibility that a confrontation over one shipping lane could ripple into fuel costs, inflation expectations and the next round of corporate earnings.
