This article first appeared on GuruFocus.
U.S. stocks moved lower Monday as renewed tensions between Washington and Tehran pushed oil prices higher, revived inflation concerns and sent Treasury yields climbing.
The Dow Jones Industrial Average fell about 0.7%, while the S&P 500 lost roughly 0.8% and the Nasdaq Composite dropped about 1% in late-morning trading. Communication services led sector declines, while energy stocks benefited from higher crude prices.
The selloff followed President Donald Trump’s rejection of an Iranian proposal for a seven-day truce. Iran had presented the proposal through Qatari mediators, while Trump said negotiations were expected to continue this week. The Wall Street Journal separately reported that Trump expects renewed strikes against Iran after the November midterm elections.
For investors, the immediate concern is energy.
Crude prices jumped roughly 3% during Monday trading, rekindling fears that persistent energy inflation could keep the Federal Reserve in a more restrictive position.
Bond markets reacted sharply.
The U.S. 10-year Treasury yield climbed to around 5.27%, while the 30-year yield approached 5.57%, levels that put additional pressure on long-duration growth stocks.
That rate pressure comes as markets are already debating whether the Fed could tighten policy again in October. Traders were pricing roughly a 70% probability of another quarter-point increase, according to CME data cited by Reuters.
There were still notable exceptions to the selloff.
Nvidia (NASDAQ:NVDA) gained more than 2% after announcing a $150 billion increase to its share-repurchase authorization. Arm Holdings (NASDAQ:ARM), meanwhile, dropped more than 8%.
Investor takeaway
The key market risk is no longer geopolitical tension in isolation.
Investors are watching whether the conflict keeps oil elevated long enough to feed inflation, push Treasury yields higher and force the Fed to remain hawkish.
That creates a difficult setup for richly valued technology stocks.
The next signals to watch are crude prices, Treasury yields and any progress in U.S.-Iran negotiations. If energy pressure eases, the market could regain some footing. If oil keeps climbing, however, the inflation and rates problem becomes harder for equities to ignore.