U.S. stocks fell sharply on Monday as fresh reports of strikes in the Strait of Hormuz and the Gulf of Oman reignited fears of wider conflict in the Middle East, outweighing upbeat earnings and stronger-than-expected economic data. The Dow Jones Industrial Average plunged about 1.1%, the S&P 500 slipped 0.4% and the Nasdaq Composite eased 0.2% after the market had closed last week on a firm note.
The selloff followed reports from Iranian media that two Iranian strikes had hit a U.S. patrol boat and forced a U.S. warship to turn back in the Strait of Hormuz. U.S. officials denied those specific claims, but the United Arab Emirates confirmed an attack on an oil carrier owned by the Abu Dhabi National Oil Company and said the Fujairah petroleum export complex had been struck. The conflicting accounts heightened uncertainty over who was responsible and how the United States might respond.
Tensions escalated further after President Donald Trump announced a plan he called “Project Freedom,” saying the U.S. would begin assisting vessels trapped in the key Gulf waterway to leave the area. Iran responded with a warning that any U.S. “interference” in the strait would be viewed as a violation of the ceasefire between Washington and Tehran and that it would take action against U.S. ships if necessary. The back-and-forth added a fresh geopolitical risk premium to markets already sensitive to oil supply disruptions.
Oil prices jumped sharply on the developments. Brent crude rallied more than 5% to trade near $114 a barrel, while U.S. West Texas Intermediate briefly topped $105, reversing recent declines that had followed signs of easing tensions earlier in April. Traders cited the strikes and the threat to Fujairah — a major bunkering and fuel-export hub outside the Gulf — as the immediate catalyst for the rally, increasing the prospect of supply interruptions through one of the world’s busiest maritime chokepoints.
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Against that backdrop of geopolitical jitters, some economic fundamentals were positive. Commerce Department data released Monday showed factory orders in March rose 1.5% month-over-month, well above economists’ forecasts of a 0.5% gain. The department said much of the increase reflected surging demand for electronic components used in artificial intelligence infrastructure, a sector that has underpinned parts of the recent corporate earnings beat.
Investors also face a heavy corporate calendar this week, with major semiconductor-related reports from Lattice Semiconductor, Advanced Micro Devices and Arm Holdings expected to draw close attention, alongside results from Palantir and Paramount Skydance. Analysts will be watching whether chipmakers can sustain the AI-driven order strength that helped lift factory shipments, and whether any further oil-driven inflationary pressure clouds profit outlooks across industry sectors.
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The move lower in equities contrasts with a risk-on rebound in mid-April, when Iranian officials said the Strait of Hormuz was “completely open,” a comment that trimmed one of the market’s main geopolitical concerns and sent oil prices lower. Monday’s developments underscore how fragile that relief has been: a few hours of conflicting reports and retaliatory rhetoric pushed energy prices higher and convinced some traders to reduce exposure to stocks until the situation in the Gulf becomes clearer. Market focus now turns to further confirmation of the attacks, any maritime escort activity under “Project Freedom,” subsequent U.S.-Iran exchanges, evolving oil flows out of Fujairah, and the slate of earnings due this week.
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