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Crude oil futures continued their climb, but the oldest equity market index was up too, as the recent “oil up, stocks down” pattern got mixed on Monday. President Donald Trump, still looking for a way to reopen the Strait of Hormuz, said in another pre-opening-bell Truth Social post that “the United States of America is in serious discussions with a new, and more reasonable, regime to end our Military Operations in Iran.”
According to the president, “Great progress has been made.” The commander in chief also warned that if a deal “is not shortly reached … we will conclude our lovely ‘stay’ in Iran by blowing up and completely obliterating all of their Electric Generating Plants, Oil Wells and Kharg Island (and possibly all desalinization plants!).”
The front-month West Texas Intermediate crude futures contract was up 4.7% to $104.27 and has surged 55.6% since the U.S. and Israel went to war with Iran.
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“While we’re making some progress backfilling the oil deficit, many of these measures represent temporary stop-gaps, not a cure,” Renaissance Macro Research head of economics Neil Dutta writes. “Ultimately, traffic through the Strait of Hormuz is essentially nonexistent. So long as traffic remains near zero, the cumulative deficit of oil compounds. Call me when this changes.”
By the closing bell, the blue-chip Dow Jones Industrial Average was holding onto a 0.1% gain at 45,216. But the tech-heavy Nasdaq Composite was down 0.7% to 20,794, falling further into correction territory, and the broad-based S&P 500 had declined 0.4% to 6,343, nearing a correction of its own.
Fed Chair Powell speaks
The Federal Reserve is likely to look beyond the current energy shock and hold interest rates steady, Jerome Powell said today in one of our economic calendar major events of the week, but the central bank might have to move if rising prices result in a sustained bump for inflation expectations.
“Powell, speaking to students at Harvard University, laid out the textbook case for patience,” according to Nick Timiraos of The Wall Street Journal. “Energy disruptions tend to be short-lived, and monetary policy works too slowly to counteract them in real time.”
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The Fed chair did say that five years of elevated inflation means the public is probably more sensitive to further upside price instability.
“You can have a series of these supply shocks and that can lead the public generally – businesses, price setters, households – to start expecting higher inflation over time,” he explained. “Why wouldn’t they?”
Alcoa is up on Middle East supply pressure
Alcoa (AA, 8.2%) gapped up 9.6% at the opening bell on Monday after Iran attacked aluminum production facilities in the Middle East.
Iran’s Islamic Revolutionary Guard Corps said it targeted Emirates Global Aluminium in Abu Dhabi and Aluminium Bahrain in response to attacks on two Iranian steel plants. Aluminum Bahrain has already shut in 19% of its capacity because of supply-chain disruptions in the Strait of Hormuz.
Alcoa was part of the Dow Jones Industrial Average for 54 years, from 1959 until 2013. The materials stock was replaced by Nike (NKE, -0.1%) in the price-weighted index. Nike, a highlight on this week’s earnings calendar, is scheduled to report fiscal 2026 third-quarter results after the closing bell on Tuesday.
The overarching theme for the shoemaker will echo the one driving the aluminum outfit. Indeed, UBS analyst Jay Sole wants to know how much of Niker’s sales come from the Middle East and what impact events over there will have on costs.
CEO buys PANW stock
Palo Alto Networks (PANW, 5.0%) rallied after CEO Nikesh Arora bought 68,085 shares of his company’s stock at $146.46 to $147.48 per for a total purchase price of approximately $10 million. The cybersecurity stock was down 20.2% year to date through Friday on questions about the impact of artificial intelligence (AI) on the software industry.
Noting concern about the durability of its moat amid a number of announcements from “AI-natives” in recent weeks, Morgan Stanley analyst Meta Marshall suggests the sell-off overlooks “how much of cybersecurity is run-time based, how high the accuracy needs are, and how expensive token-based security would be.”
According to Marshall, new releases from AI-natives “are catalysts for more, not less, cybersecurity spending,” citing a combination of more AI traffic, more identities, a cloud portfolio refresh and early signs of success with its AI portfolio as positives for Palo Alto Networks.
The analyst has an Overweight (Buy) rating and a $223 12-month target price for PANW stock, upside of 44.5% from its closing price on Monday.