S&P 500, Nasdaq Fall as Middle East Tensions and Tech Sell-Off Weigh on Markets

U.S. stocks started the week on the back foot, with the S&P 500 and Nasdaq Composite declining as a sell-off in technology shares and escalating geopolitical tensions in the Middle East prompted a move away from risk assets.

The market's cautious tone comes as investors prepare for a critical second-quarter earnings season, which will test whether corporate profits can justify high equity valuations.

Geopolitical Tensions Rattle Investors

A sharp risk-off response was triggered by reports of further military exchanges between the United States and Iran. U.S. Central Command (Centcom) stated it had launched more attacks over the weekend, while separate reports indicated Tehran had retaliated against U.S. bases. President Trump also said a ceasefire with Tehran was over.

Adding to market uncertainty were conflicting statements regarding the Strait of Hormuz, a critical waterway for global oil shipments. While Tehran reportedly claimed the strait was closed to commercial shipping, Centcom maintained it remained open. The developments pushed oil prices higher, stoking concerns about a potential rise in energy-driven inflation.

Tech Stocks Lead Declines

The technology sector was a notable underperformer on Monday. As of 10:24 AM ET, the tech-heavy NASDAQ Composite was down 0.9% to 26,042.49 points, while the broader S&P 500 had fallen 0.3% to 7,549.86. The Dow Jones Industrial Average traded near the flatline.

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The weakness in tech tracked an overnight sell-off in Asian semiconductor stocks. The reversal in sentiment was highlighted by South Korea’s SK hynix, which plunged in Seoul trading after a successful Nasdaq debut on Friday. This pullback reflects profit-taking and broader anxiety about high valuations in the artificial intelligence space.

Focus Shifts to Q2 Earnings

The geopolitical turbulence coincides with the start of a crucial corporate earnings season. The upcoming results are widely viewed as a fundamental test for the market, which had closed higher on Friday with the S&P 500 near a record high. Major financial institutions will kick off the reporting period on Tuesday, including:

• JPMorgan Chase
• Bank of America
• Goldman Sachs
• Wells Fargo
• Citigroup

Later in the week, investors will parse results from industry leaders such as ASML, Taiwan Semiconductor Manufacturing Co., Johnson & Johnson, and Netflix for insights into corporate health and the economic outlook.