US equities closed lower on Monday as escalating worries over AI safety introduced fresh uncertainty into a key growth trade, while higher oil prices further dampened investor sentiment. The Dow Jones Industrial Average slipped 0.29%, the S&P 500 lost 0.48%, and the Nasdaq Composite fell 0.56%.

Among the so-called "Magnificent Seven" tech heavyweights, Meta Platforms, Inc. (META) climbed 2.71%, Alphabet (GOOGL) advanced 3.06%, Microsoft (MSFT) gained 1.97%, and Apple (AAPL) added 0.24%. On the downside, Tesla Motors (TSLA) dropped 1.77%, Amazon.com (AMZN) declined 1.26%, and NVIDIA (NVDA) tumbled 3.36%.

European benchmarks finished mixed. The Europe Stoxx 600 index fell 0.48%, the Euro Stoxx index shed 1.33%, and the eurozone blue-chip index dropped 1.08%. Regional moves varied, with UK's FTSE 100 up 0.4%, Germany's DAX down 0.6%, France's CAC 40 off 0.78%, and Spain's IBEX losing 1.38%.

Asian markets closed on a subdued note as well. Japan's Nikkei 225 slid 0.81%, South Korea's KOSPI plunged 3.26%, Australia's S&P/ASX 200 edged up 0.10%, and mainland China's CSI 300 lost 0.67% to settle at 4,480.08.

What to make of AI-related risks

A rare call from high-profile tech leaders for a slower pace of AI development is fueling short-term uncertainty around the tens of billions of dollars underpinning the sector's capital spending boom. Adding to the tension, reports indicate that OpenAI will not move toward an initial public offering this year due to safety considerations, a development first highlighted by figures including Sam Altman.

Kathleen Brooks, research director at XTB, suggested that a consensus statement from multiple chief executives within the tech industry is unusual and is weighing on AI-related trading in morning sessions. "Should these warnings around artificial intelligence signal the beginning of the end for hyperscale computing and infrastructure expansion, the ramifications for financial markets could be significant, potentially triggering heavy selling in semiconductor stocks and broader AI-linked assets as the new trading week opens," she said.

Chris Armstrong at Berenberg observed that "the speculative frenzy seen mid-summer is now being gradually squeezed out, which seems like another phase of recalibrating expectations lower."

Elsewhere, oil prices gained momentum after Saudi Arabia announced it would close a crucial pipeline that offered an alternative route around the Strait of Hormuz. US West Texas Intermediate crude surged 4% to exceed $104 per barrel, while Brent crude also climbed 4% to break above $109. These moves follow last week's breach of the $100 threshold for US crude amid heightened Middle East tensions.

The jump in energy costs has dragged on major indices. The Dow fell 1.6% over the week, its worst weekly decline since March, while the S&P 500 and Nasdaq each dropped roughly 0.8% and 0.7%, respectively.

The Federal Reserve will hold its September policy meeting this week. According to the CME FedWatch tool, futures traders now price in approximately an 88%–90% likelihood of an interest rate hike on Wednesday, following higher-than-expected US consumer inflation data released on Friday. Should that occur, it would mark the first rate increase since mid-2023.

The European Central Bank has already raised rates last week and signaled that further tightening could follow if price pressures persist. Meanwhile, government bond yields moved slightly higher, with global fixed-income markets posting their worst week since mid-May. The benchmark 10-year US Treasury yield is approaching 5%, a level not seen since 2023, while Germany's 10-year yield has surpassed 3.53%, its highest since 2009.