Wall Street falls as Trump signals Hormuz toll, oil surges 10%

Wall Street closed lower across the board Monday as President Donald Trump announced plans to impose transit fees in the Strait of Hormuz, sending oil prices sharply higher and compounding hawkish signals from the Federal Reserve. A broad selloff in technology stocks — led by AI chipmakers — pushed the Nasdaq Composite down more than 1 percent.

The Dow Jones Industrial Average fell 138.37 points, or 0.26 percent, to close at 52,498.64 on the New York Stock Exchange on Monday (local time).

The S&P 500 dropped 60.05 points, or 0.79 percent, to 7,515.34, while the Nasdaq Composite shed 408.43 points, or 1.55 percent, to finish at 25,873.18.

Middle East risk weighed heavily on investor sentiment. Trump said the United States would resume its blockade of vessels traveling between Iranian ports and coastal waters through the Strait of Hormuz, amid a renewed military confrontation between the US and Iran. He also announced plans to charge a "security transit fee" equivalent to 20 percent of a ship's cargo in exchange for US military protection of civilian vessels passing through the strait.

Oil prices surged on growing fears of supply disruptions. Brent crude futures for September delivery settled at $83.30 a barrel, up 9.6 percent from the previous session, while West Texas Intermediate for September rose 9.4 percent to $78.14 a barrel.

Concerns about Federal Reserve tightening added to market pressure. Fed Governor Christopher Waller said in a public speech Monday that a short-term interest rate hike may be necessary if core inflation continues to rise.

Markets are now focused on the June consumer price index data due Tuesday, as well as Fed Chair Kevin Warsh's scheduled testimony before the House Committee on Financial Services.

Bond yields climbed as rate-hike expectations grew. The yield on the 10-year US Treasury note rose to 4.62 percent near the close, its highest level since May. CME Group's FedWatch tool showed fed funds futures markets pricing in a 90 percent probability of at least one rate hike by December.

AI chip stocks also fell broadly. SK hynix's American depositary receipts, in their second day of trading on the NYSE, plunged 9.32 percent, giving back most of the 13.1 percent gain recorded on their debut. Other memory chip stocks also dropped sharply, with Micron falling 4.32 percent, SanDisk losing 12.63 percent and Seagate declining 5.46 percent.

"The volatility seen in the Kospi's sharp drop on Monday is now spreading to the Nasdaq," said Nick Percklin, an analyst at Coinbureau. "The SK hynix plunge is no longer just a Korean market problem."

Major bank stocks also weakened ahead of second-quarter earnings releases, with JPMorgan Chase falling 0.58 percent and Goldman Sachs declining 0.88 percent. Markets are closely watching corporate earnings and forward guidance as the earnings season gets underway this week. FactSet projected that S&P 500 companies' net profit for the second quarter would rise more than 23 percent year on year.