NEW YORK (AP) — On Tuesday, U.S. stocks surged as the rise in oil prices due to the war with Iran eased.
The S&P 500 jumped 1.6%, heading towards its strongest day since the conflict began. This follows a recent decline of more than 9% below its all-time high set earlier this year. Meanwhile, the Dow Jones Industrial Average rose by 555 points, or 1.2%, at 10:30 a.m. Eastern time, and the Nasdaq composite increased by 2.1%.
As oil prices stabilized, Wall Street felt some relief. The price of Brent crude oil, the global benchmark, decreased by 0.3% to $107.10 per barrel, while U.S. crude also fell by 0.3%.
Since the war began, oil prices have been a major factor in the sharp movements of the U.S. stock market, with Brent crude rising from around $70 per barrel to highs of $119 at times. The concern is that prolonged conflict could keep oil and natural gas from the Persian Gulf out of global markets, leading to significant inflation.
According to analysts, optimism in the markets emerged overnight after The Wall Street Journal reported that President Donald Trump expressed willingness to end the U.S. military involvement in Iran, even if the Strait of Hormuz remains mostly closed. This crucial waterway connects the Persian Gulf to the open ocean, and about a fifth of the world’s oil passes through it daily.
To reopen the strait, Trump might pursue diplomatic discussions with Iran and encourage European and Gulf allies to lead the efforts, as suggested in the report.
On his social media platform, Trump on Tuesday urged the United Kingdom and other nations to “build up some delayed courage, go to the Strait, and just TAKE IT.”
Bloomberg via Getty Images
Trump’s statements have become less impactful on financial markets after he praised what he described as productive discussions over the past week, only to later threaten the “obliteration” of Iranian power plants.
However, the recent dip in oil prices might quickly reverse if tankers carrying crude oil face difficulties passing through the strait. Iran attacked a fully loaded Kuwaiti oil tanker in the Persian Gulf, signaling that the conflict shows little sign of de-escalation.
Furthermore, oil prices have risen enough to push inflation in Europe up to 2.5% in March, compared to 1.9% in February.
In the U.S., gasoline prices exceeded $4 per gallon for the first time since 2022. This is straining U.S. household budgets and curbing spending on other goods. Concerns about this, along with pressure on corporate profit margins, have put the S&P 500 on track to close Tuesday with its worst quarterly loss in nearly four years.
The quarterly performance would have been even worse if not for Tuesday’s decline in oil prices, which provided relief to companies with significant fuel expenses. Norwegian Cruise Line Holding rose 4%, and Delta Air Lines increased by 2.1%, reducing their losses for the year.
Tech stocks were the primary drivers of Tuesday’s market rally, with nearly 80% of S&P 500 stocks seeing gains.
Marvell Technology surged 8.5% following a $2 billion investment by Nvidia, which also announced a partnership with Marvell. Nvidia’s stock rose by 3.4%, making it the biggest contributor to the S&P 500’s rise.
These gains helped counteract a 3.5% decline in McCormick’s stock. The spice company is acquiring most of Unilever’s food business, including brands like Hellmann’s, in a cash and stock deal valued at $44.8 billion.
In the bond market, Treasury yields continued to ease. The 10-year Treasury yield dropped to 4.31% from 4.35% late Monday and 4.44% at the end of last week, marking a notable movement in the bond market.
Lower yields are expected to reduce mortgage and loan rates for U.S. households and businesses, which have been climbing since the war commenced. In late February, the 10-year Treasury yield was at 3.97%, before concerns about high oil prices led traders to abandon expectations for a potential interest rate cut by the Federal Reserve this year.
Yields stayed lower following two U.S. economic reports on Tuesday that exceeded economists’ expectations. One report indicated that U.S. consumer confidence unexpectedly rose. Another showed U.S. employers advertised more job openings at the end of February than anticipated, though fewer than the previous month.
In overseas stock markets, indexes rose in Europe following a challenging close in Asia. South Korea’s Kospi fell 4.3%, and Japan’s Nikkei 225 decreased by 1.6%, representing two of the larger shifts.
AP Business Writers Chan Ho-him and Matt Ott contributed.
