U.S. stock markets opened on uncertain footing Monday, as investors reacted to heightened geopolitical tensions following the U.S. military’s weekend airstrikes on Iranian nuclear sites.
While early losses were modest, the market’s tone remained cautious throughout the morning session, with energy stocks outperforming and defensive assets attracting renewed interest.
The Dow Jones Industrial Average slipped 0.3% in early trading, while the S&P 500 and Nasdaq Composite both shed around 0.2% to 0.35%.
The SPDR Dow Jones ETF (DIA) traded near $421.76, down 0.25%, according to real-time data from U.S. markets.
Meanwhile, Brent crude spiked to a five-month high, briefly topping $79 per barrel before retreating slightly to trade around $77.20.
Analysts say the surge in oil prices reflects mounting concerns that Iranian retaliation could disrupt shipping through the strategically critical Strait of Hormuz, which handles nearly 20% of the world’s oil supply.
U.S. Strikes on Iran Spark Market Reaction
The market volatility follows confirmation that U.S. forces conducted precision strikes on three Iranian nuclear facilities over the weekend. The Pentagon stated the mission was “limited and proportional,” but concerns linger over Iran’s potential response.
President Trump described the operation as a “necessary deterrent,” saying in a White House briefing, “We acted decisively to neutralize a growing threat. We are not seeking war, but we will protect American interests.”
Despite the show of military force, markets appear to be pricing in a limited escalation, at least for now.
“There is tension but not trauma as investors monitor developments,” said Richard Hunter, Head of Markets at Interactive Investor. “Oil and defense sectors are seeing support, while broader markets remain in a holding pattern.”
Energy, Defense Stocks Lead Gains
Unsurprisingly, energy and defense stocks led the pack on Monday. Chevron (CVX) and ExxonMobil (XOM) saw gains of 0.8% and 1.1%, respectively, supported by higher crude prices.
Meanwhile, defense contractors surged as investors anticipated greater military spending. Lockheed Martin (LMT) rose 1.3%, Northrop Grumman (NOC) climbed 1.1%, and RTX Corporation (RTX) gained 0.9%.
“If you get a disruption to supply of oil product, that is not yet reflected in today’s prices—and that’s where things can get negative quickly,” warned Art Hogan, Chief Market Strategist at B. Riley Wealth.
Safe-Haven Flows and the Fed Outlook
The U.S. dollar gained ground as traders moved into safer assets. Treasury yields fell slightly, reflecting a mild risk-off tone, while gold rose 0.4% to hover around $2,030 an ounce.
Analysts are also watching how higher oil prices may affect the Federal Reserve’s interest rate plans. With inflation still hovering above target, a prolonged spike in energy prices could delay expected rate cuts later in the year.
“The risk is that oil-driven inflation reignites just as the Fed is preparing to ease policy,” said Charu Chanana, a strategist at Saxo Markets. “That could derail market expectations for two rate cuts in 2025.”
Global Markets Reflect Tension
Markets overseas mirrored U.S. caution. Japan’s Nikkei 225 closed down 0.5%, while Europe’s Stoxx 600 shed 0.3% in midday trading. Futures across major international indices hinted at continued nervousness ahead of any potential Iranian retaliation.
According to Oxford Economics, should oil prices surge past $100 and remain elevated, U.S. inflation could jump to 6% by year-end, forcing the Fed to reconsider its policy stance and potentially tightening rather than easing monetary policy.
What Investors Are Watching
Investors are now focused on three primary catalysts:
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Iran’s Response: Any attack on U.S. or allied assets or disruption of oil transit could trigger sharp market selloffs.
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Oil Prices: Sustained levels above $80/barrel may drive inflation concerns and impact rate expectations.
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Federal Reserve Guidance: Remarks from Fed officials this week will be scrutinized for any shift in outlook due to rising geopolitical risks.
As of June 23, 2025, the Dow Jones and broader U.S. markets are treading carefully, reflecting both geopolitical uncertainty and the potential for longer-term economic implications.
The early modest declines show markets are not yet in panic mode—but they remain on alert.
With oil near multi-month highs and military tensions simmering, Wall Street’s next moves will hinge heavily on developments in the Middle East and the Federal Reserve’s response to evolving inflation dynamics.
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