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Stocks opened sharply lower Monday in market participants’ initial reaction to U.S. airstrikes on Iran over the weekend. However, the main indexes quickly reversed course to end the day mostly higher.
At the close, the blue-chip Dow Jones Industrial Average was down 0.2% at 48,904, while the broader S&P 500 was up 0.04% at 6,881 and the tech-heavy Nasdaq Composite was 0.4% higher at 22,748.
While a mixed start to the week and month, it was a notable improvement over the 1%-plus losses the three were facing when the stock market opened this morning.
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The early drop was in reaction to news that the U.S., in a coordinated effort with Israel, initiated military operations against Iran overnight on Saturday, killing Supreme Leader Ayatollah Ali Khamenei.
Iran retaliated by striking several Middle East nations that house U.S. and Israeli military bases, including Kuwait, Qatar and Jordan.
“Events like these are unsettling, and it is natural to feel concern about what they mean for your financial well-being,” says Adrian Helfert, chief investment officer of multi-asset strategies at Westwood. But history shows that “it pays to stay invested,” considering comparable geopolitical events show a pattern of initial market shock “followed by recovery over the subsequent three to six months.”
The most important thing for investors to monitor for this specific event, notes Helfert, is what happens with the energy supply. If the Strait of Hormuz, which sees roughly a fifth of global oil pass through it on a daily basis, remains open, the impact will be limited. If it does not, “the impact becomes more meaningful and more sustained.”
Oil prices spike on Iran conflict
Oil prices jumped Monday in reaction to the conflict between the U.S., Israel and Iran. Western Texas Intermediate (WTI) crude futures rose 8.4% to $72.74 per barrel, their highest settlement since June.
Unsurprisingly, energy was the top-performing S&P 500 sector on Wall Street today, with Marathon Petroleum (MPC, +5.9%) and ONEOK (OKE, +4.1%) among the energy stocks seeing notable upside.
Tech stocks outperform, Apple launches new iPhone
Tech stocks were also strong performers to start the week. Indeed, Nvidia (NVDA, +2.9%) and Microsoft (MSFT, +1.5%) generated impressive returns amid expectations that the mega-cap blue chip stocks are resilient to geopolitical risk.
Apple (AAPL), meanwhile, rose 0.2% after the tech giant unveiled several new products, including the iPhone 17e and the iPad Air M4, at its March product event, which runs for three days this year instead of one.
AeroVironment sinks 17% on double downgrade
Most defense stocks gained ground today thanks to rising geopolitical risks. AeroVironment (AVAV), which makes unmanned aircraft systems and drone technologies, was nearly 20% higher in early trading, but ended the day 17.4% lower after Raymond James analyst Brian Gesuale downgraded it to Underperform (Sell) from Strong Buy.
The double downgrade comes after the U.S. Space Force said it is reopening its $1.4 billion Satellite Communications Augmentation Resource program that was initially awarded to defense contractor BlueHalo, which AVAV bought in late 2024.
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“This was the company’s largest program of record at approximately $1.4B of value,” writes Gesuale. AVAV “had $2.8B of total backlog and this may erase $1.0-$1.4B. Backlog is the precursor to revenue and adds uncertainty to our forward estimates.”
Applied Optoelectronics extends massive rally
Applied Optoelectronics (AAOI) was one of the biggest gainers on Wall Street today, surging 21.7%. Shares have now nearly doubled since last Thursday’s close, when the artificial intelligence (AI) infrastructure specialist reported better-than-expected fourth-quarter results.
The company also said it expects to hit $1 billion in revenue this fiscal year, more than double its 2025 revenue.
“We see AAOI as a direct beneficiary of soaring optical transceiver demand, driven by AI/Cloud capex, and share shifts away from China-based vendors,” says Needham analyst Ryan Koontz. “While we continue to see execution risk, we believe these tailwinds, along with the company’s raised capex investments, as likely transformative to results.”