US stocks rebound as oil retreats from $120 spike amid Iran war concerns

The tech-heavy gauge was little changed at 12:37 p.m. in New York, paring a drop of as much as 1.4%.

• Wall Street rebounded as oil prices retreated from earlier highs
• S&P 500, Dow, and Nasdaq all closed higher after volatile trading
• Oil prices rise amid Middle East tensions, key market concerns

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Wall Street ended higher after a volatile session Monday, staging a sharp turnaround as crude oil prices pulled back from earlier spikes that had rattled financial markets. The rebound came after US President Donald Trump suggested the conflict with Iran might soon wind down.

The S&P 500 recovered from earlier declines to close up 0.83 percent at 6,795.95. The Dow Jones Industrial Average rose 239.25 points, or about 0.5 percent, finishing at 47,740.80, while the Nasdaq Composite gained 1.38 percent to settle at 22,695.95. The Dow’s move higher followed its steepest weekly drop in nearly a year.

Energy markets had earlier shaken investor confidence. Oil surged close to $120 per barrel as escalating tensions in the Middle East raised fears over disruptions to production and shipping routes. Brent crude briefly climbed to $119.50 a barrel before retreating to around $105 later in the session. West Texas Intermediate also jumped to roughly $119.48 before easing back to near $102.

The Nasdaq 100 also managed to steady after an early slump, with dip-buying emerging as investors assessed the potential impact of a prolonged conflict and higher fuel costs. By early afternoon trading in New York, the index had erased a drop of as much as 1.4 percent. The S&P 500 was still slightly lower intraday at that point, down about 0.2 percent, after pulling back from deeper losses.

Rising oil prices remain a major concern for markets because they can fuel inflation and complicate expectations around interest-rate cuts. The Cboe Volatility Index, often called Wall Street’s “fear gauge,” jumped above 30, marking its highest level since April.

“It’s another day of the push/pull between the real world issues causing higher oil prices, inflation concerns and growth fears and the undercurrent of FOMO that keeps the losses from being catastrophic by keeping a bid alive in stocks,” said Steve Sosnick, chief strategist at Interactive Brokers. “Notice that with the exception of Friday, when we closed near the lows, every day last week and now today we saw a substantial bounce after the early selling.”

Analysts say the market’s resilience may depend on whether geopolitical tensions begin to ease. SpotGamma’s Brent Kochuba noted that US equities have weathered the turmoil so far but warned the situation could change if oil remains elevated without visible diplomatic progress.

“If some of the recent uncertainty eases, investors could see volatility decline as well, potentially paving the way for a relief rally,” Kochuba said.

Still, some strategists are becoming more cautious. JPMorgan Chase & Co.’s trading desk warned the war could push the S&P 500 toward correction territory. Andrew Tyler, the bank’s head of global market intelligence, said he had turned “tactically bearish” on equities.

Veteran strategist Ed Yardeni also raised the probability of a severe selloff this year to 35 percent, up from 20 percent previously.

“At $90 and above, oil is likely to shock an already precarious consumer, and this is a new phase for the investor,” said Aoifinn Devitt, managing director for global wealth at Moneta Group Investment Advisors.

Investors are also watching key inflation readings due later this week, including the consumer price index and the personal consumption expenditures price index. According to Scope Markets chief analyst Joshua Mahony, traders already recognize the direction prices could take as energy markets surge.

“While the Federal Reserve are typically encouraged to look through one-off, short-term price shocks, the prospect of an extended period of higher costs for businesses does highlight the risk that they pass that on to the consumer who already faces up to higher prices at the pump,” Mahony said.

Some market participants still see opportunity in volatility. Sameer Samana of Wells Fargo Investment Institute said “any significant equity market weakness should be viewed as an opportunity for investors to dollar-cost-average into high quality US large- and mid-cap equities, and the financials, industrials, and utilities sectors.”