U.S. stocks were mixed in early trading on Monday, with the Nasdaq Composite and the S&P 500 turning positive. This follows a new round of geopolitical shocks after diplomatic talks between Washington and Tehran failed to yield an agreement, prompting the U.S. to impose a maritime blockade on Iran. Crude oil prices surged significantly.
The Dow Jones Industrial Average fell by 171.07 points, or 0.36%, to 47,745.50. The Nasdaq Composite rose by 47.27 points, or 0.21%, to 22,950.17. The S&P 500 gained 4.37 points, or 0.06%, reaching 6,821.26. The CBOE Volatility Index (VIX), a key measure of market fear, climbed back above the 20 level on Monday after declining from Wednesday through Friday. The VIX, which gauges expected S&P 500 volatility based on options prices, rose above 20 in early Monday trading, hitting a high of 21.58. This follows the index closing at its lowest level last Friday since the outbreak of the Iran conflict in late February. After the announcement of a two-week ceasefire between the U.S. and Iran on Tuesday evening, the VIX plummeted 18.4% to 21.04 last Wednesday, fell another 7.4% to 19.49 on Thursday, and declined 1.3% to 19.23 on Friday. Since the conflict began, the VIX reached a peak closing level of 31.05 on March 27, with an intraday high of 31.65 on the same day. As U.S.-Iran negotiations showed little progress, the U.S. issued an order to begin a maritime blockade on vessels entering and leaving Iranian ports. This blockade is scheduled to take effect at 10:00 AM Eastern Time on April 13, 2026. U.S. Central Command stated that the blockade will commence at 10:00 AM Eastern Time (14:00 GMT) on Monday and will be "impartially enforced on all vessels entering or leaving Iranian ports and coastal areas—including all Iranian ports in the Arabian Gulf and the Gulf of Oman." On Sunday, U.S. President Donald Trump stated that U.S. forces would also intercept any vessel in international waters that had paid transit fees to Iran. "Anyone paying illegal transit fees will not receive safe passage on the high seas," Trump wrote on social media, adding, "Any Iranian who fires upon U.S. or peaceful vessels will be blown to hell!" Following a weekend that failed to provide any clear signals of de-escalation, new geopolitical friction weighed on market sentiment. Traders appeared to reduce risk exposure ahead of the regular trading session, reflecting caution over potential disruptions to supply chains or energy markets. Oil prices surged on Monday due to concerns about crude flows through key regional chokepoints triggered by the blockade announcement. This move came after the U.S. acted to block Iranian shipping over the weekend following the collapse of peace talks. Concurrently, the U.S. dollar strengthened, while equities and bonds declined. The broader market is likely to remain sensitive to any further signals from the U.S. government regarding the scope or duration of this maritime blockade action. The U.S. maritime blockade threat is aimed at increasing pressure on Tehran. This move leaves an already fragile ceasefire in jeopardy, with no end in sight for disruptions to Middle Eastern energy exports—despite a trading floor atmosphere that leans towards hoping for a resolution. Brent crude futures rose 7% to $102 per barrel, marking an increase of over 40% since the conflict caused shipping disruptions in the Strait of Hormuz. U.S. Treasury prices declined, with the yield on the benchmark 10-year note rising 2 basis points to 4.33%. European bonds also faced mild pressure, pushing the yield on Germany's benchmark 10-year bond up 1 basis point to 3.06%. Michael Brown, a strategist at Pepperstone, commented, "As trading unfolds this week, the market is exhibiting a fairly textbook risk-off pattern, with participants once again turning to the 'escalation' playbook." "Other markets are also declining, with equity index futures on both sides of the Atlantic in negative territory, gold pulling back, and government bonds facing some resistance. However, it must be noted that, within the broader context, all these moves are relatively limited," he said. Reports indicated that Trump and his advisors are considering limited strikes against Iran, though there are no immediate reports of attacks at this time. On Sunday, Trump stated that oil and gasoline prices could remain high ahead of the U.S. midterm elections in November, a rare acknowledgment of the potential political consequences of the war. Saul Kavonic, an analyst at MST Marquee, noted, "The market has essentially returned to its pre-ceasefire state, except now the U.S. will also blockade the remaining 2 million barrels per day of Iran-related oil flow through the Strait of Hormuz." "The key remaining question is whether the U.S. will resume strikes on Iran, which would increase the risk of attacks on energy infrastructure across the region—an impact that could have further lasting effects beyond the duration of the war itself." The sharp rise in energy prices has prompted investors to prepare for the possibility that central banks, including the European Central Bank and the Bank of England, may lean towards interest rate hikes. This marks a stark reversal from pre-war market expectations of rate cuts or a prolonged pause in tightening. Last week's U.S. inflation data showed that consumer prices in March rose at their fastest pace in nearly four years, driven by a record surge in gasoline prices. Money markets indicate that traders see less than a 20% chance of a Federal Reserve rate cut this year.
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