US stock indices closed lower on Monday as the standoff between the US and Iran fueled oil-market volatility and dragged down bonds. The S&P 500 fell 0.8%, the Dow shed 347 points, and the Nasdaq lost 1.1%. The renewed oil rally stoked concerns that rising inflationary pressures could trigger further Fed rate hikes. The bond selloff deepened after President Trump rejected Iran’s latest proposal to reopen the Strait of Hormuz. The 10-year yield reached a 19-year high. The PCE inflation report and jobs report due this week will provide further insight into the health of the US economy and the potential path for the Fed. Tight financial conditions continued to pressure AI hyperscalers and chipmakers, which are undergoing record levels of debt issuance. Microsoft lost 1.3%, Amazon fell 1.4%, and Meta shed 4.8%, while Micron retreated 2.6%, AMD dropped 3.6%, and Intel tumbled 5.7%. Nvidia was the exception, rising 1.7% after increasing its share buyback plan by a record $150 billion.

Crude oil trimmed gains to near $93 a barrel after topping $96 on Monday amid reports that Saudi Arabia is ramping up flows through its critical East-West pipeline following repairs. Saudi Arabia is reported to have restored flows to around 3.5 million barrels per day. The pipeline was shut down earlier this month after sustaining damage in a drone strike launched from Iraq. Meanwhile, US President Donald Trump is reportedly open to sanctions relief for Iran and the release of frozen funds if concrete progress is made toward a nuclear deal. Earlier, Trump rejected Iran’s conditional offer to reopen the Strait of Hormuz and told aides he expects US strikes on the country to resume after November’s midterm elections. Fading hopes for an imminent diplomatic breakthrough between the US and Iran had driven crude to session highs. Separately, Yemen’s Saudi-led coalition said on Saturday that it had intercepted projectiles launched by Iran-backed Houthi rebels.

The Dallas Fed’s general business activity index for Texas manufacturing edged down to 9.8 in September 2026 from 11.6 in August. Perceptions of broader business conditions continued to improve, albeit unevenly. The company outlook index improved at a much slower pace, falling to 8.7 from 19.2, while the outlook uncertainty index rose three points to 11.3. Employment growth picked up, with the employment index rising seven points to 15.1 from 8.0, while the hours worked index was little changed at 5.6. Price and wage pressures increased broadly, with the finished goods prices index rising five points to 27.6, the raw materials prices index advancing eight points to 52.2, well above its series average of 28.0, and the wages and benefits index increasing six points to 27.4. Expectations remained positive, with the future production index little changed at 40.3, while the future general business activity index fell to 20.8 from 37.2.

The euro weakened toward $1.135, its lowest level since June 26, amid a stronger dollar as investors weighed comments from ECB President Christine Lagarde. Lagarde said the inflation outlook for 2027 and 2028 is now higher than policymakers expected a few months ago, mainly due to higher energy prices, but noted there is no evidence yet of energy costs feeding into higher wages. She added that while the shock is too significant to ignore, a measured policy response remains appropriate to keep inflation under control. Money markets are pricing in roughly 100 basis points of ECB rate hikes by the end of 2027. Investors await key eurozone inflation data later this week for further clues on the ECB’s policy outlook. Meanwhile, the DXY gained as rising US Treasury yields and a hawkish Fed strengthened the case for US rates to remain higher for longer. Also, lack of progress in negotiations to reopen the Strait of Hormuz pushed oil prices higher and boosted safe-haven demand for the dollar.

Mexico’s trade balance posted a surplus of $605 million in August 2026, widening from $209 million a year earlier but falling well short of forecasts of $1.4 billion. Total merchandise exports reached $78.01 billion, up 40.4% year over year. Manufactured goods exports rose 42.6%, led by electrical and electronic equipment and appliances (122.3%), mining and metallurgical products (50.4%), plastic and rubber products (10.6%), food, beverages and tobacco (10%), and specialized machinery and equipment for various industries (7.2%). Agricultural and fishing exports fell 1.6%, while oil exports declined 2.8%. Merchandise imports totaled $77.40 billion, with consumer goods imports up 8.9%, intermediate goods purchases surging 41.9%, and capital goods imports rising 6.9%. In the first eight months of 2026, the trade balance recorded a $9.86 billion surplus.

India’s industrial production growth accelerated to 8.0% year-on-year in August 2026, up from an upwardly revised 7.4% in July and well above market expectations of 6.5%. Manufacturing output rose 9.0%, accelerating from 8.2% in July, led by electrical equipment (30.9%), motor vehicles (25.2%), rubber and plastics products (21.4%), computer, electronic and optical products (19.3%), fabricated metal products (16.9%), textiles (13.1%), and machinery and equipment (10.3%). Among other major industries, basic metals production increased 2.4% and food products rose 2.8%, while output contracted in coke and refined petroleum products (-0.6%) and chemicals and chemical products (-0.5%). Elsewhere, electricity and gas supply growth accelerated to 12.3% from 8.7% in July, while mining and quarrying output fell 5.6%, following a 0.9% decline in the previous month.