Dow falls 380 pts as Iran conflict lifts oil prices and rate hike concerns

• WTI crude rose nearly 3% to $85.76 per barrel and Brent gained 3% to $90.49 following the first direct US strike on Iranian positions since late July, targeting rocket launchers on Iran's Larak Island
• Markets are pricing in more than 65% probability of a 25-basis-point rate hike in September, up from earlier expectations, following Fed Chair Warsh's Jackson Hole comments on persistent inflation
• Major indexes still posted August gains despite Monday's sell-off: Dow up 1% (fifth consecutive monthly advance), S&P 500 up 2%, and Nasdaq up 3%, with technology stocks leading monthly gains at nearly 6%

Summary

Market Performance:

US stocks declined Monday, with the Dow falling 380.22 points (-0.71%) to 53,179.77, the S&P 500 down 0.36% to 7,684.37, and the Nasdaq dropping 0.16% to 26,360.91. Despite the selloff, all three indexes remained on track for monthly gains in August, with the Dow up over 1%, the S&P 500 up 2%, and Nasdaq up 3%.

Key Catalyst:

Renewed US-Iran military tensions triggered the decline. The US struck two rocket launchers on Iran's Larak Island—the first acknowledged attack since late July—with Iran responding by targeting US bases in Jordan. Concerns about oil supply disruptions through the Strait of Hormuz pushed West Texas Intermediate crude up nearly 3% to $85.76/barrel and Brent crude up 3% to $90.49.

Sector Impact:

Energy stocks benefited from rising oil prices, with Halliburton and Valero Energy advancing. Technology stocks led monthly gains, with the sector up nearly 6% in August. Nvidia rose over 9% for the month, while Microsoft and Micron gained 10% and 15%, respectively.

Fed Policy Outlook:

Markets increased rate hike expectations following Fed Chair Kevin Warsh's hawkish Jackson Hole comments on persistent inflation. The CME FedWatch tool showed over 65% probability of a 25-basis-point September rate hike. Higher oil prices and rising long-dated Treasury yields intensified inflation concerns.

Upcoming Catalysts:

Investors await Friday's August employment report and additional manufacturing/services data to assess economic conditions and Fed policy direction. The combination of elevated oil prices and hawkish Fed rhetoric poses headwinds for growth stocks while supporting energy sector valuations.