Global markets showed signs of relief Monday as oil prices dropped and stocks climbed, even as uncertainty surrounding the war involving Iran continues to drive volatility in financial markets.
The S&P 500 rose 1.2 per cent and was on track for its strongest performance in five weeks. The Dow Jones Industrial Average gained about 484 points, or 1 per cent, while the Nasdaq Composite climbed 1.4 per cent as investors reacted to falling oil prices.
Benchmark U.S. crude oil dropped 4 per cent to about $94.75 per barrel after earlier surpassing $102 during morning trading. Meanwhile, Brent crude, the global oil benchmark, slipped 1.6 per cent to $101.52 after earlier reaching $106.50 per barrel.
Oil markets have been extremely volatile since the United States and Israel launched strikes against Iran. In response, Tehran has nearly halted shipping traffic through the strategic Strait of Hormuz, a narrow waterway that carries roughly one-fifth of the world’s oil supply from the Persian Gulf to global markets.
The disruption has raised concerns among economists and investors that prolonged closure of the strait could push energy prices higher and trigger a new wave of global inflation.
Over the weekend, U.S. President Donald Trump called on other countries affected by the disruption to help secure the shipping lane. Trump said nations relying on Middle Eastern oil should “take care of that passage,” while promising that the United States would assist in reopening the route.
Despite the geopolitical tensions, investors remain cautiously optimistic that markets will recover if oil prices stabilize. Historically, U.S. stocks have rebounded quickly from Middle East conflicts, provided energy costs do not remain elevated for long periods.
Even after recent swings triggered by the conflict, the S&P 500 remains only about 4 per cent below its all-time high.
Analysts at Wells Fargo Investment Institute noted that the rapid escalation in hostilities may also signal growing constraints on both sides, potentially limiting the duration of the conflict.
Several companies sensitive to fuel prices led gains on Wall Street as oil costs eased. Shares of Norwegian Cruise Line Holdings rose 4.8 per cent, while United Airlines climbed 4.2 per cent as investors anticipated lower operating expenses.
Storage company National Storage Affiliates surged 27.2 per cent after Public Storage announced a $10.5 billion all-stock deal to acquire the company’s 69 million rentable square feet of storage facilities.
Retailer Dollar Tree also gained 6.2 per cent after reporting stronger-than-expected quarterly profits despite a drop in store traffic.
Technology stocks continued to benefit from the artificial intelligence boom. Nebius Group jumped 13.3 per cent after announcing a five-year cloud infrastructure contract with Meta Platforms that could be worth up to $27 billion.
Meanwhile, AI chip giant Nvidia rose 2.5 per cent ahead of a speech by CEO Jensen Huang, who is expected to unveil new products tied to the rapidly expanding AI industry.
International markets also moved higher. Germany’s DAX gained about 1 per cent, while stocks in Hong Kong rose 1.4 per cent. Markets in Shanghai slipped slightly, falling 0.3 per cent.
In the bond market, yields eased as lower oil prices reduced some inflation fears. The yield on the 10-year U.S. Treasury dropped to 4.22 per cent from 4.28 per cent on Friday, though it remains higher than the 3.97 per cent level seen before the war began.
Investors also pushed back expectations for interest rate cuts by the Federal Reserve as higher energy prices complicate efforts to control inflation. According to data from CME Group, traders see almost no chance the central bank will cut interest rates at its upcoming policy meeting this week.