Investing.com -- The Dow closed higher Monday, as investors bought the early-day weakness after weighing up a more cautious tone rate hike from Federal Reserve officials and rising geopolitical tensions amid fears the Israel-Hamas conflict.  

Federal Reserve officials signal caution on further rate hikes

Federal Reserve officials including Fed Vice Chair Philip Jefferson and Dallas Fed president Lorie Logan struck a caution tone on the need for further rate hikes, indicating that the recent climb in Treasury yields, which has tightened financial conditions, would help the Fed in its battle against inflation. 

"We are in a sensitive period of risk management, where we have to balance the risk of not having tightened enough, against the risk of policy being too restrictive," Jefferson said, wary that tightening too much risks a larger than intended slowdown in the economy. 

Logan, meanwhile, said "there may be less need to raise the fed funds rate" following a rise in long-term interest rates. 

Escalating Israel-Hamas conflict fuels jitters; Defense stocks jump

Following the surprise Hamas’ attack on Israel, and subsequent declaration of war by Israel, geopolitical tensions in the Middle-East dominated investor attention and briefly kept a lid on their appetite for risk.

The escalating conflict comes just as optimism was building that the U.S. was inching closer to brokering a deal that would normalize ties between Saudi Arabia and Israel, potentially paving the way to the end of the Arab-Israeli conflict.    

“The Saudi leadership has insisted on Israel making significant concessions to the Palestinians as part of any normalization agreement and given what has transpired, it is very difficult to envision a government that is now on war footing to agreeing to such terms,” RBC said in a note.

Chevron leads energy stocks higher as Israel orders shutdown of energy field

The move higher in energy stocks was also supported by rising oil prices on fears of disruptions in the oil-rich Middle East amid rising geopolitical tensions.

U.S. airlines down after halting Israel flights

“It is not prudent or appropriate to knowingly put our flight crews and passengers in harm’s way by maintaining flights into a war zone,” American Airlines Union President Ed Sicher said.

Intel slips as plans as Israel-Gaza war threatens plan for chip making factory in Israel; Nvidia slips after scrapping AI summit

Earlier this year, Intel agreed to investment about $25 billion to build a a new chop factor factory in Israel, expected to open by 2027.

Tesla slips on sales slump in China as rival BYD shines

"We expect Arm to not only expand on its presence in the smartphone market primarily through higher royalty rates, but to also extend its reach across applications to which it is under-indexed today including Data Center, Automotive, and IoT," Goldman Sachs said.