Iran Closes Strait of Hormuz: How Markets Are Reacting? Chip Sector and Fed Policy Clash

U.S. stocks fell after Iran announced the Strait of Hormuz would remain closed until its demands were met. The S&P 500 dropped 0.3%, while the Nasdaq 100 declined 0.4%. Energy, utilities, and industrial stocks advanced, but large-cap tech shares were the biggest drag on the index. Brent crude surged above $88 per barrel. The threat of disrupted global trade is tightening the chip supply chain. TSMC and ASML's production capacities are under pressure. The ongoing China-U.S. rare earth conflict is further risking tech stocks like Nvidia and AMD. Concerns over the Federal Reserve's potential September rate hikes are weighing on markets. CPI data is expected to show a 0.1% rise, supporting the narrative of cooling inflation. However, rising energy prices and sticky core services—especially rents and medical care—could push markets to reconsider recent optimism. Small business optimism rose in July, while existing home sales hit a three-month low. Post-market earnings reports from Coreweave and Super Micro could be influenced by TSMC's performance.

Markets are showing relative tolerance to the situation, but Iran's compliance and the stability of the chip supply chain remain critical. China's demand surge for ASML machines could exacerbate the chip crisis further.