U.S. Stock Market Early Session: Hormuz Strait Tensions Boost Oil Prices and Treasury Yields, Major Indices Flat

U.S. stock indices opened with little change on Monday (10th), with the S&P 500 hovering near flat after hitting a record high. Hopes for a lasting U.S.-Iran agreement have dimmed, and with no progress on restoring navigation through the Strait of Hormuz, Brent crude surged to $85 per barrel.

Rising energy costs have heightened inflation concerns, leading markets to worry that the Federal Reserve (Fed) may still raise interest rates this year despite recent cooling in the labor market. This has driven U.S. Treasury yields and the dollar higher. Investors are turning cautious ahead of several key inflation data releases and corporate earnings reports this week. On the individual stock front, Intel (INTC-US) declined after announcing a stock offering to raise capital.

At press time, the Dow Jones Industrial Average was down over 70 points or nearly 0.1%, the Nasdaq Composite Index was down nearly 80 points or about 0.3%, the S&P 500 Index was down nearly 0.1%, and the Philadelphia Semiconductor Index was down nearly 1.0%. TSMC ADR fell 0.7%.

U.S. stock futures fluctuated near record highs on Monday as investors awaited the U.S. Consumer Price Index (CPI) report this week and continued to monitor progress on negotiations to restore navigation through the Strait of Hormuz. With Iran and Oman yet to reach an agreement, international oil prices remained above $84 per barrel.

After the S&P 500 closed at a record high last Friday, stock futures suggest limited volatility at Monday’s open. The yield on the 10-year U.S. Treasury note rose 2 basis points to 4.66%, and the dollar edged higher against most G10 currencies.

With the corporate earnings season largely concluded, market focus has shifted back to geopolitics and inflation. Fabio Caldato, portfolio manager at AcomeA Sgr, said the Iran situation’s impact on oil prices and inflation expectations could once again become a market driver. The U.S. CPI report due Wednesday will be a key test of whether inflation is cooling.

Oil prices rose 1.7% as Iran and Oman failed to agree on a shipping route through the Strait of Hormuz. Meanwhile, Yemen’s Houthi rebels claimed an attack on a Saudi oil refinery near the Red Sea, further fueling energy supply concerns.

Iranian Foreign Minister Abbas Araghchi said over the weekend that Iran and Oman were “very close” to reaching an agreement on establishing a shipping route through the Strait of Hormuz. However, he ruled out direct talks with the U.S. at this stage, citing American violations of a temporary peace deal reached in June.

In currency markets, the recent intervention’s boost to the yen has gradually faded. The yen depreciated 0.7% against the dollar on Monday, trading at 158.84, as traders watch for possible official action by Japan and the U.S. Bloomberg strategists noted the yen is the only G10 currency to weaken against the dollar since August, and as investors rebuild short yen positions, the risk of renewed currency intervention rises.

Despite high macro uncertainty, Wall Street remains optimistic about U.S. equities. JPMorgan raised its year-end target for the S&P 500 from 7,800 to 8,000, citing strong corporate earnings and faster-than-expected AI monetization by major cloud service providers, which has lifted profit forecasts.

JPMorgan noted that cloud businesses at Alphabet (GOOGL-US), Amazon (AMZN-US), and Microsoft (MSFT-US) are accelerating growth, with backlogs continuing to rise, helping to ease market concerns about returns on AI capital spending. As backlogs gradually convert into revenue, cloud growth will be supported and will help justify tech giants’ expanding AI investments.

Citigroup, Deutsche Bank, and Goldman Sachs are also among the most bullish Wall Street firms this year. The market’s average forecast now expects the S&P 500 to rise to 7,845 by year-end, about 1% above current levels.

As of around 9:00 PM Taipei time on Monday (10th):

Dow Jones Industrial Average: Down 70.16 points or 0.13%, temporarily at 53,966.77

Nasdaq Composite Index: Down 57.69 points or 0.22%, temporarily at 26,632.92

S&P 500 Index: Down 7.18 points or 0.09%, temporarily at 7,750.46

Philadelphia Semiconductor Index: Down 88.09 points or 0.71%, temporarily at 12,268.70

TSMC ADR: Down 0.89% to $416.17 per share

10-year Treasury yield: Up to 4.67%

New York light crude: Up 1.68% to $79.49 per barrel

Brent crude: Up 1.83% to $85.08 per barrel

Gold: Down 0.24% to $4,389.10 per ounce

Dollar index: Up to 99.74

Key stocks:

Hewlett Packard Enterprise (HPE-US): Up 3.55% in early trading to $55.11 per share

Morgan Stanley upgraded HPE’s investment rating from “Neutral” to “Overweight,” citing an attractive risk-reward profile and market underestimation of the asymmetry between earnings power and valuation.

Apple (AAPL-US): Down 2.08% in early trading to $306.56 per share

Jefferies downgraded Apple’s rating from “Hold” to “Underperform,” citing supply chain checks indicating Apple has canceled its unannounced all-glass iPhone plan. With rising memory costs, Apple had hoped to offset cost pressures with higher-priced devices, and the cancellation may pose greater challenges.

GameStop (GME-US): Up 0.91% in early trading to $19.34 per share

Bloomberg reported GameStop is considering abandoning its $56 billion plan to acquire eBay (EBAY-US). GameStop’s unsolicited acquisition proposal in May was rejected by eBay, which criticized the offer as “neither credible nor attractive.”

Today’s key economic data:

None

Wall Street analysis:

Bank of America said in its latest report that the July jobs report was slightly “dovish” but insufficient to change the Fed’s policy path. The upcoming July CPI report will be a more important policy signal. The bank maintains its forecast for the Fed to hike rates by a cumulative 75 basis points starting in September.