The S&P 500 edged lower on Monday as investors assessed rising tensions between the United States and Iran. Higher oil prices pressured market sentiment, while gains across chip and data storage stocks limited the broader decline.

Wall Street also prepared for major retail earnings and minutes from the Federal Reserve’s July meeting. These updates could offer more details about consumer demand and the central bank’s next interest rate decision.

S&P 500 Falls as Iran Tensions Rise

The S&P 500 fell 0.14% to 7,775 by 9:40 a.m. ET. The Dow Jones Industrial Average dropped 164 points, or 0.31%, to 53,567. Meanwhile, the NASDAQ Composite slipped 0.01% to 26,726.

Renewed tension in the Middle East weighed on US stocks. A senior Iranian official told Reuters that Tehran could take an offensive position if diplomatic talks with Washington fail. The official also warned about possible escalation around the Strait of Hormuz and the wider region.

Oil prices moved higher following the comments. Brent crude futures rose about 0.4% and traded near $88 per barrel. West Texas Intermediate crude moved above $82 per barrel. The S&P 500 energy sector gained about 0.2%.

David Morrison, senior market analyst at Trade Nation, questioned earlier assumptions that the conflict would end quickly. “I don’t think anyone was pricing in the fact that this could still be going as we approach the end of the summer,” he said.

AI Optimism Supports Technology Stocks

Technology shares traded slightly higher as investors reviewed fresh reports about Anthropic’s financial outlook. Reuters reported that the AI company expects revenue of roughly $190 billion to $200 billion in 2028.

Moreover, Anthropic’s second-quarter revenue reportedly surged above $11.5 billion. The figures supported demand expectations for processors, memory chips, data storage equipment and other infrastructure used to build AI systems.

Meanwhile, Micron Technology shares rose about 4.5%, while Sandisk gained 6.7%. Nvidia added 0.2%, and Broadcom also moved higher. These advances helped the S&P 500 technology sector rise 0.1% and kept the NASDAQ near the flatline.

Investors will watch Nvidia’s quarterly report next week for more information about AI spending. Recent concerns have focused on how quickly companies can earn returns from their costly infrastructure projects. Strong earnings and revenue forecasts have reduced some of those concerns.

Fed Rate Expectations Shift After Data

Recent US economic data has lowered expectations for an interest rate increase in September. July retail sales fell 0.6%, while softer inflation figures gave the Federal Reserve more room to hold rates unchanged.

Traders now assign about a 31% probability to a 25-basis-point rate increase at the September meeting, according to CME FedWatch data. One week earlier, markets saw nearly equal chances of an increase or no change.

The S&P 500 reached a record closing level on Thursday after investors reviewed the inflation data. The index also completed its third consecutive weekly increase, supported by corporate earnings and lower expectations for tighter monetary policy.

Nevertheless, Wells Fargo Investment Institute revised its Federal Reserve forecast. The firm now expects one 25-basis-point rate increase during 2026 after previously forecasting no change. Investors will examine the Fed’s July meeting minutes on Wednesday for further policy details.

Retail Earnings Put Consumers in Focus

Walmart, Target, Home Depot and Lowe’s will release quarterly earnings this week. Their results will provide fresh information about household spending during the back-to-school shopping period.

Home Depot reports on Tuesday, followed by Lowe’s on Wednesday and Walmart on Thursday. Investors will focus on store traffic, pricing, profit margins and management forecasts. These figures could show how inflation and borrowing costs affect consumer purchases.

Several individual stocks also recorded notable moves on Monday. US-listed shares of Vista Energy climbed 5.3% after Peter Thiel acquired a 1% stake in the Latin American oil producer.

Boeing fell nearly 2% after the US Army suspended Apache helicopter training flights. The decision followed a fatal crash in Salado, Texas, that killed two soldiers. UnitedHealth and McDonald’s also declined, placing added pressure on the Dow.

Declining stocks outnumbered advancing stocks by 1.55 to one on the New York Stock Exchange. The NASDAQ recorded 29 new 52-week highs and 34 new lows, while the S&P 500 posted eight new highs and no new lows.

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