US stocks closed lower in Monday's trading session.
Oil prices surged following an announcement from former US President Donald Trump regarding the re-imposition of a so-called blockade on Iranian shipping through the Strait of Hormuz.
The Dow Jones Industrial Average fell 138.37 points, or 0.26%, to close at 52,498.64.
The Nasdaq Composite dropped 408.43 points, or 1.55%, finishing at 25,873.18.
The S&P 500 index declined by 60.05 points, or 0.79%, ending the session at 7,515.34.
Trump stated on social media that the US was re-imposing the "Iranian Blockade," named as such because it specifically targets Iranian vessels or their customers.
He further claimed the United States would now be called the "Guardian of the Hormuz Strait," proposing a 20% fee on all cargo to cover security costs for the volatile region.
Following these remarks, oil prices jumped significantly.
US West Texas Intermediate crude futures rose more than 5%, surpassing $75 per barrel.
Brent crude oil was up 10% intraday, trading at $83.62 per barrel.
This development follows a weekend of reciprocal attacks between Iran and the US.
Tehran targeted US facilities in several Gulf nations and announced the closure of the Strait of Hormuz, a claim Trump disputed on Sunday, asserting the key waterway remained open.
Trump had ordered airstrikes against Iran on Saturday, responding to an Iranian attack on a commercial vessel transiting the strait.
Market analysts suggest trading will remain range-bound until a more definitive resolution to Middle East tensions is reached.
The semiconductor sector faced significant pressure.
Shares of SK hynix listed in the US plunged 9.3%, following a 13% surge during its Nasdaq debut the previous Friday.
Micron Technology shares fell 4.3%, while SanDisk dropped 12.6%.
Seagate Technology declined 5.5%.
Additionally, Advanced Micro Devices was down 4.2%, and Intel fell 6.1%.
Despite the sell-off, some analysts believe the AI-related investment theme remains fundamentally strong and healthy in the long term.
Major US banking stocks also declined ahead of their earnings reports this week.
This includes JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America, Citigroup, and Wells Fargo.
Quarterly results from Netflix, Johnson & Johnson, and UnitedHealth Group are also scheduled for release.
Expectations for the current earnings season are high.
Analysts, on average, forecast S&P 500 companies to report second-quarter profit growth exceeding 23% year-over-year.
The Consumer Price Index report for June is scheduled for release Tuesday morning.
Economists anticipate the headline figure to show a 0.2% month-over-month decrease but a 3.8% increase compared to the previous year.
Federal Reserve Chair Jerome Powell is also scheduled to testify before the House Financial Services Committee on Tuesday regarding the central bank's semi-annual monetary policy report.
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