Last Friday, US equity indices finished with solid gains. The S&P 500 rose by 0.42%, and the Nasdaq 100 gained 0.29%. The Dow Jones Industrial Average strengthened by 0.29%.

Today, the sell-off was particularly painful for Asia. The MSCI Asia Pacific index fell by about 1.6%, and South Korea's KOSPI plunged by roughly 7%. The technology sector was again in focus: SK Hynix shares collapsed by about 12%. Nasdaq 100 futures were down 1.1%, and European stocks look set to open roughly 1% lower.

Markets are entering a crucial week, coinciding with a renewed escalation in the Middle East, and investors must digest three major storylines simultaneously: the start of earnings season, US inflation data, and the first testimony by Fed Chair Kevin Warsh to Congress. Nomura International Wealth Management expects July to be a volatile month for equities, driven primarily by inflation and rate-hike concerns. The resumption of hostilities with Iran only compounds the risk.

It was the renewed fighting that triggered today's sell-off. On Sunday, US forces conducted another strike on Iran aimed at degrading the country's ability to attack commercial vessels in the Strait of Hormuz, US Central Command reported. This was the fourth round of strikes, following Iranian drone and rocket attacks on US allies, including Kuwait, Jordan, and Qatar. In retaliation, the IRGC burned several large missile and fuel depots at Prince Hassan air base in Jordan. The scale of the reciprocal strikes is noticeably larger than in previous exchanges.

The key market uncertainty remains the status of the strait, and the parties are giving contrary accounts. Iran says the waterway is closed, while US military and maritime authorities insist shipping continues on a southern route.

Commodity and FX markets reacted sharply and decisively. Brent jumped by 4% to exceed $79/bbl amid conflicting reports on the strait's status and fresh speculation about supply disruptions. The dollar, the traditional safe haven in the Middle East crises, strengthened across the G10 as higher oil pushed up rate-hike bets for the Fed to contain inflation. That dynamic hit non-yielding precious metals: gold fell by 1.4% to roughly $4,060/oz, and silver plunged by nearly 3% to about $58.10.

Treasuries fell across the curve, with the rate-sensitive two-year yield rising to its highest level since February 2025.

Technically, the daily chart suggests that the immediate task for buyers is to overcome the resistance level of $7,544. Doing so would confirm upside and open the path to $7,574. Maintaining control above $7,600 would further cement buyers' positions. On the downside, buyers need to defend $7,518. A break below that level would likely push the index back to $7,494 and open the way to $7,474.