S&P 500 Falls 0.5% After U.S. Strikes on Iranian Targets in Strait of Hormuz
Key Facts
U.S. stocks closed mixed on Monday, Nov. 2, after the United States struck Iranian targets in the Strait of Hormuz on the eve of the midterm elections, according to a U.S. official cited by the Associated Press. The S&P 500 fell 0.5% after erasing early gains of 1.1%, while the Dow Jones rose 0.4% and the Nasdaq Composite fell 1.1%. In premarket trading on Nov. 3, S&P 500 futures fell 0.3%, the agency reported. The official said the operation appeared limited, in an escalation that puts risks around the strait and the course of the confrontation with Iran at the center of investors’ attention. The index’s close refers to Monday’s session, while the futures move reflects premarket trading the following day.
Iranian media reported hearing explosions on Qeshm and Hengam islands and in Bandar Abbas. A U.S. official said the strikes targeted Iranians using surface-to-air missiles against the United States in the strait. The strikes were not publicly announced, unlike in earlier stages of the war, according to the Associated Press. The site’s importance is underscored by the fact that about one-fifth of global oil supplies passed through the Strait of Hormuz in peacetime, the agency reported. That gives any security development in the waterway weight for markets tracking the risk of supply disruptions and energy-price volatility.
The strikes came as signs of negotiating flexibility had supported stocks earlier; the Iranian side proposed a two-day framework for reopening the Strait of Hormuz, according to investingLive. Iran’s president said the supreme leader had granted the government additional authority over negotiations, a signal seen as evidence of greater flexibility. The Iranian side proposed reopening the strait in exchange for U.S. concessions, the same source reported. Meanwhile, Vice President JD Vance said the administration was optimistic about the possibility of reaching a negotiated settlement. The Associated Press quoted him as saying: "Both feel very good about the prospects of a potential negotiated settlement."
But the diplomatic track is unfolding alongside a U.S. push to maintain pressure on Tehran. Axios reported that CIA Director John Ratcliffe and Secretary of State Marco Rubio advised President Donald Trump to maintain a "no war, no deal" posture and continue economic pressure. A source told the outlet that Ratcliffe believed sustained pressure could push Iran to make concessions or cause domestic unrest. At the same time, mediators are seeking a framework under which Iranian attacks in the Strait of Hormuz would stop in exchange for the United States lifting its blockade of Iranian ports, according to the Associated Press. The agency added that further talks were planned during the week, keeping the outcome of upcoming contacts among the factors markets are watching.
On economic data, the Bureau of Labor Statistics had set Nov. 3 as the release date for September job openings data, at 10:00 a.m. Eastern time. The Census Bureau set the same day for the full report on manufacturing and September orders, while the full October report was listed on the release schedule for Dec. 3. This follows a U.S. September jobs report showing an increase of 29,000 in nonfarm payrolls and an unemployment rate of 4.2%. These data, along with the course of negotiations and developments in the strait, remain among the factors investors may track in the days after the vote. The outcome of Tuesday’s elections could reshape the final two years of the president’s term, with the two parties competing for control of Congress and state governorships, according to the Associated Press.
In Asian markets ahead of the elections, Taiwan Semiconductor Manufacturing Company shares fell 1.9% and MediaTek shares dropped 7.6%, according to the Associated Press. The agency linked market volatility to oil’s rise after the strikes, amid uncertainty over when the war with Iran would end. It quoted one trader describing the oil move as "the latest swing in prices driven by uncertainty over when the war with Iran will end." On economic activity, the agency reported that the Institute for Supply Management’s monthly reports showed continued expansion in manufacturing and services, while rising costs remained a leading pressure facing companies. That puts activity data and inflation concerns alongside geopolitical risks in the trading picture ahead of the release of September job openings and manufacturing orders data.