Dow edges higher while S&P 500 and Nasdaq slip as oil climbs on renewed U.S.-Iran tensions

U.S. stocks were mixed Monday as investors responded to a fresh rise in geopolitical tensions between the United States and Iran, a jump in oil prices and renewed weakness in semiconductor shares.

The Dow Jones Industrial Average managed a modest gain, supported in part by strength in energy-related names as crude prices advanced. The S&P 500 and the Nasdaq Composite, however, slipped as losses in technology and chip stocks weighed on broader sentiment.

Oil moved higher after reports of direct military exchanges involving the U.S. and Iran raised concerns about potential supply disruptions and a wider conflict in the Middle East. Higher crude prices often lift energy producers, but they can also revive worries about inflation and increase pressure on sectors that are more sensitive to interest rates and input costs.

That dynamic appeared to shape Monday’s trading. Investors rotated into more defensive and commodity-linked areas of the market while pulling back from parts of the technology sector that had recently driven much of Wall Street’s rally.

Chip stocks lead market pressure

Semiconductor shares were among the biggest drags on the market after weakness in Asian chipmakers spilled into U.S. trading. The decline added to concerns that the sector may be vulnerable after a strong run-up earlier this year.

Chipmakers have played an outsized role in lifting the Nasdaq and the S&P 500 in recent months, meaning even a moderate pullback can have a broad effect on major indexes. Investors have been closely watching whether momentum in artificial intelligence-related spending and demand can continue to justify elevated valuations across the sector.

Monday’s move suggested some traders were taking a more cautious stance, especially as geopolitical uncertainty added another layer of risk to an already expensive corner of the market.

Oil, rates and risk sentiment in focus

The rise in oil prices was central to the market reaction. A sustained increase in energy costs could complicate the outlook for inflation just as investors look for clearer signals on when the Federal Reserve may begin cutting interest rates.

If energy prices remain elevated, that could delay progress on inflation and keep borrowing costs higher for longer, a scenario that tends to challenge growth stocks and other rate-sensitive assets. At the same time, stronger oil prices can improve earnings expectations for energy companies, helping the Dow and other value-oriented segments hold up better.

Market participants are now balancing two competing forces: continued resilience in parts of the U.S. economy and corporate earnings, against the risk that geopolitical shocks and commodity volatility could unsettle the path forward.

For now, the market’s mixed performance reflects a familiar pattern on Wall Street. When uncertainty rises, investors often seek safety in sectors tied to hard assets or steady cash flows, while trimming exposure to higher-growth areas. Whether that rotation deepens may depend on the trajectory of Middle East tensions, oil prices and the next signals from the Fed.