US equities declined at midday Monday as oil prices surged and the 10-year Treasury yield reached its highest level since mid-2007. The sell-off followed President Donald Trump’s rejection of Iran’s proposal to reopen the Strait of Hormuz, ending a months-long diplomatic effort to resolve the regional standoff.

West Texas Intermediate crude futures rose 4.2% to $96.31 a barrel, while Brent crude climbed 4.0% to $108.50. The geopolitical tension drove traders to price in a roughly 65% probability that the Federal Reserve will raise rates in October to contain energy-driven inflation. Consequently, the 10-year yield increased 10 bps to 5.27%, the 2-year stood at 4.95%, and the 30-year reached 5.57%.

Major indices underperform amid rate fears

The S&P 500 fell 0.8% to 7,678.57, and the Dow Jones Industrial Average dropped 0.7%, or 383 points, to 51,446. The Nasdaq 100 underperformed broader markets, falling 1.3% to 30,223. Chipmakers and AI-sensitive names led the decline after reports that OpenAI paused training on an advanced model due to security concerns.

Gold, tracked by SPDR Gold Shares (NYSE: GLD), tumbled 3.2% to $4,184.50 an ounce as rising dollar strength and higher yields pressured bullion prices.

Energy gains while tech and gold miners slide

The Energy Select Sector SPDR Fund (NYSE: XLE) led all S&P 500 sectors, rising 0.8% as crude’s surge lifted producers. Conversely, the Communication Services Select Sector SPDR Fund (NYSE: XLC) lagged, falling 1.7%. Technology Select Sector SPDR Fund (NYSE: XLK) dropped 1.2%, absorbing the brunt of the AI-safety selloff.

Among industry ETFs, VanEck Oil Services ETF (NYSE: OIH) and SPDR S&P Oil & Gas Exploration & Production ETF (NYSE: XOP) were among the few funds in positive territory, each up roughly 0.3%. In contrast, VanEck Gold Miners ETF (NYSE: GDX) fell 5.0%, Invesco WilderHill Clean Energy ETF (NYSE: PBW) dropped 2.9%, and U.S. Global Jets ETF (NYSE: JETS) declined 2.8% on higher fuel costs.

Corporate movers: MongoDB plunges, Zscaler rises

MongoDB Inc. (NASDAQ: MDB) plunged 18.5% after Chief Executive Chirantan Desai stepped down to join Meta Platforms. Former CEO Dev Ittycheria returned as interim president and CEO. Despite reaffirming third-quarter and fiscal 2027 guidance above Street estimates, investors punished the surprise leadership change.

Zscaler Inc. (NASDAQ: ZS) rose 4.1%, extending a cybersecurity rally that also lifted CrowdStrike Holdings Inc. (NASDAQ: CRWD) and Okta Inc. (NASDAQ: OKTA). Teleflex Incorporated (NYSE: TFX) climbed 3.6% following a BofA Securities upgrade to Buy. Palo Alto Networks Inc. (NASDAQ: PANW) gained 3.5% on continued momentum from its recent AI defense service launch.

Other significant decliners included Modine Manufacturing Company (NYSE: MOD), down 10.8% on margin concerns; Credo Technology Group Holding Ltd (NASDAQ: CRDO), which fell 9.4% after a price target cut and insider sales; Bloom Energy Corporation (NYSE: BE), sliding 9.3% on profit-taking; and Nu Holdings Ltd. (NYSE: NU), which dropped 8.8% amid reports of talks to acquire UK neobank Monzo for up to $13 billion.

What the numbers show

The divergence between the Nasdaq 100’s year-to-date gain of 19.70% and its month-to-date rise of only 2.60% highlights a sharp deceleration in tech momentum. While the index remains significantly higher than at the start of the year, the recent 1.26% single-day drop suggests that macroeconomic headwinds, specifically rising yields and energy costs, are beginning to erode the premium valuations assigned to growth-oriented technology stocks.

The Dow Jones Industrial Average and Nasdaq 100 have diverged in September, with the tech-heavy index nearing its all-time high while the Dow remains 5.3% below its yearly peak. Market participants are monitoring three key catalysts: US-Iran diplomatic developments, upcoming US macroeconomic data, and Micron Technology's fourth-quarter earnings.

US-Iran crisis impacts crude and equities

The ongoing US-Iran situation remains a primary driver for the Dow Jones, Nasdaq 100, and S&P 500. Iran submitted seven demands last week, including the end of the blockade and the release of frozen funds. These proposals followed talks mediated during the United Nations General Assembly. Trump stated on Saturday that he rejected Iran’s proposals but expressed hope for an agreement before or after elections. Crude oil prices retreated slightly last week amid signs of potential de-escalation, supporting equity markets. Any escalation in the region could trigger volatility.

Nonfarm payrolls and macro data release

Investors await critical US economic indicators, with the Bureau of Labor Statistics scheduled to publish nonfarm payrolls on Friday. Economists forecast the economy added over 50k jobs in September, indicating resilience. A strong jobs report may increase the probability of another interest rate hike. Additional data points include the consumer confidence report on Tuesday, Personal Consumption Expenditures (PCE), and the final reading of Q2 GDP. These metrics historically influence market direction.

Micron earnings to gauge AI sector health

Micron Technology will report fourth-quarter earnings, offering insight into the artificial intelligence industry. Estimates suggest revenue exceeded $51 billion with a gross margin of 85%. Results from major technology firms like Micron, Nvidia, and AMD often impact broader market sentiment. Other companies reporting this week include Carnival Corporation, CarMax, Nike, and Accenture.

What the numbers show

The divergence between the indices highlights a sector-specific rotation. While the broader Dow lags by 5.3%, the Nasdaq 100’s proximity to record highs suggests investor confidence remains concentrated in technology stocks. This pattern persists despite geopolitical tensions involving Iran, indicating that corporate earnings expectations, particularly in AI-related hardware like Micron, currently outweigh macroeconomic uncertainty for growth-oriented capital.