Hormuz Strikes Lift Oil, Tech Rallies; Gold Slips on Rate-Hike Bets

Market Snapshot

S&P 500 (SPY) — 770.19 (-0.39%) [Twelve Data] · Nasdaq 100 (QQQ) — 718.96 (+0.18%) [Twelve Data] · Dow Jones (DIA) — 534.08 (-0.53%) [Twelve Data] · Gold (GLD) — 406.77 (-0.84%) [Twelve Data] · US Oil (USO) — 141.96 (-0.09%) [Twelve Data] · Bitcoin — 79,718 (-0.15%) [Binance US] · Ethereum — 2,505 (-0.08%) [Binance US]

Stock Markets

U.S. equity markets delivered a mixed session, with the Nasdaq 100 edging up 0.18% while the S&P 500 and Dow Jones slipped 0.39% and 0.53% respectively. The divergence reflected continued strength in technology shares following Friday's robust jobs report, which Asian markets interpreted as positive for global growth despite its implications for monetary policy.

According to Reuters, Asian tech shares rallied on Monday, with the MSCI Asia Pacific index climbing 1.1%. South Korean chipmakers SK Hynix and Samsung Electronics were the biggest contributors, extending the Nasdaq 100's Friday gains into the new week. The tech-heavy index's resilience suggests investors remain willing to look past near-term rate concerns in favor of AI-driven earnings momentum.

Yet broader market sentiment remained cautious. Treasury yields face a critical test at the 4.8% level on the 10-year note, according to Matt Maley, chief market strategist at Miller Tabak + Co., speaking to CNBC. A sustained move above that threshold—marking the January 2025 high—"would be particularly concerning" and could create "meaningful problems" for other asset classes as fiscal risks threaten to spill over. The jobs data has narrowed the odds on further Federal Reserve rate increases, creating a tug-of-war between growth optimism and tightening fears.

Gold & Commodities

Gold retreated as Friday's strong U.S. payrolls data reinforced expectations for higher interest rates. The precious metal fell 0.84%, with spot gold trading down 0.5% at $4,405.47 per ounce as of early Monday GMT, according to CNBC. The metal had already dropped 1% on Friday in the immediate aftermath of the jobs report.

The pullback reflects a straightforward repricing of opportunity cost: stronger-than-expected employment data has bolstered the case for the Federal Reserve to maintain or even raise rates, making non-yielding assets like gold less attractive. Market participants are now focused on key U.S. inflation prints due later this week for further clarity on the Fed's policy path, according to Reuters.

Silver followed gold lower, declining 1.21%. The monetary policy backdrop is creating headwinds for precious metals even as Middle East tensions—typically a bullish catalyst—escalate. President Trump's Friday comments that he would stop trading with deficit countries unless the Fed cuts rates added a layer of political uncertainty, though markets appear to be discounting the threat as rhetoric rather than imminent policy.

Oil

Oil prices extended gains on Monday as tit-for-tat strikes between the U.S. and Iran on vessels in the Strait of Hormuz heightened concerns of prolonged supply disruptions from the Middle East. According to Reuters and CNBC, Brent crude rose 7.8% last week while WTI gained nearly 10% after the attacks reduced oil flows through the strait, where a fifth of the world's oil passes.

The escalation marks a significant deterioration in an already tense region. Reuters reported that Hormuz traffic has dipped to its lowest level since May, with an average of only 10 commodity ships transiting the strait following the strikes. Iran said Sunday it struck a U.S. ship, while a senior Iranian official warned of a "painful response" if it comes under further attack, according to CNBC.

Despite the geopolitical premium, U.S. oil futures (USO) showed muted movement in the latest session, declining just 0.09%. The disconnect may reflect profit-taking after the prior week's sharp rally, or expectations that OPEC+ will manage supply to prevent runaway prices. According to Reuters, OPEC+ kept its oil output policy unchanged for October at a Sunday meeting, with the producer group needing to agree on new quotas before deciding its next steps. Natural gas rose 0.67%, benefiting from broader energy-complex strength.

An S&P Global Energy analyst told CNBC that even if the U.S. imposed fuel export restrictions—a possibility given the Strategic Petroleum Reserve reaching record lows—it would not significantly reduce diesel prices. Gasoline demand is near its peak and should taper off as summer ends, potentially relieving some price pressure.

Crypto Markets

Bitcoin steadied above the $80,000 level, declining just 0.15% to $79,718, while broader crypto markets showed modest weakness. Ethereum slipped 0.08%, Solana fell 0.57%, XRP dropped 0.73%, and BNB declined 1.91%. According to Reuters, Bitcoin has drawn recent support as investors view it as an alternative amid elevated geopolitical risk and currency volatility.

The relative stability came despite a significant security breach in the Bitcoin ecosystem. The Liquid Network, a Bitcoin-based payments and settlement network, disclosed Sunday that approximately $320 million was withdrawn from its federation wallet in a hack, according to Reuters. The network said "purported white-hat hackers" withdrew around 4,000 of the 4,200 bitcoin held in its Liquid Federation wallet. The incident underscores ongoing security vulnerabilities in crypto infrastructure, though Bitcoin itself showed little reaction.

The dollar struggled to gain traction on Monday despite elevated Fed rate-hike expectations, according to Reuters, with Middle East tensions raising the prospect of broader inflationary pressures that could force global central banks to tighten policy in tandem. This dynamic may be providing a floor under Bitcoin, as synchronized global tightening historically drives investors toward decentralized alternatives. JPMorgan's Arindam Sandilya told CNBC that yen strength alone is unlikely to trigger an unwind of global carry trades, as investors have diversified funding into other low-yielding currencies—a sign that risk appetite remains intact despite recent volatility.

Macro & Global Drivers

The macro backdrop is dominated by the collision of geopolitical risk and monetary policy recalibration. Friday's robust U.S. jobs report has reinforced expectations for Federal Reserve rate increases, creating a challenging environment for rate-sensitive assets even as Middle East tensions inject supply-side inflation risk into the equation.

According to Reuters, the dollar was on "shaky ground" Monday despite the ramp-up in U.S. rate-hike bets, as Middle East tensions raised the prospect of broader inflationary pressures that could force global central banks to tighten policy in tandem. The dollar index stood at 99.135, not far from recent lows, while the euro held at $1.1610. Currency moves were largely subdued with U.S. markets closed for a holiday.

The Indian rupee's direction this week will hinge on whether the Reserve Bank of India sustains its dollar-selling intervention, according to Reuters, with oil prices and U.S. interest rate expectations providing key global cues. The rupee rose 0.9% last week to 94.4850 per dollar, supported by persistent RBI intervention. Japan's August foreign reserves posted their largest-ever drop after record intervention, Reuters reported, underscoring the scale of global central bank efforts to manage currency volatility.

Political uncertainty is adding to the mix. Germany's far-right Alternative for Germany (AfD) surged into first place in Saxony-Anhalt state elections on Sunday, though it remained short of a majority, according to Reuters. The result adds to concerns about European political fragmentation at a time when coordinated policy responses may be needed to address energy security and inflation challenges stemming from the Middle East crisis.

What to Watch Next

Key U.S. inflation data due later this week will provide critical clarity on the Federal Reserve's policy trajectory and could determine whether the recent repricing of rate expectations continues. The Strait of Hormuz situation remains fluid, with any further escalation likely to drive additional risk premium into energy markets. Treasury yields testing the 4.8% threshold will be closely monitored for potential spillover effects into equities and credit.