Oil jumps more than 6% on Iran war worries as US stocks erase losses

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U.S. stocks swung sharply on Monday after the U.S. and Israel’s attacks on Iran stoked worries about a wider Middle East conflict and the effect on energy prices and inflation. Oil prices rose more than 6%, and investors also reacted to higher natural gas prices and movements in Treasury yields as markets reassessed how much room the Federal Reserve may have to cut interest rates.

The S&P 500, which had fallen as much as 1.2% early in trading, recovered and finished with a gain of less than 0.1%. The Dow Jones Industrial Average ended down 73.14 points, or 0.1%, and the Nasdaq composite rose 80.65 points to close at 22,748.86 as it also came back from steep losses at the open.

Oil climbed on fears that fighting could clog the global flow of crude. Benchmark U.S. crude rose 6.3% to settle at $71.23 a barrel, while Brent crude gained 6.7% to finish at $77.74. Market watchers tied the jump to the prospect of higher gasoline prices and broader pressure on household spending and companies with large fuel bills.

Natural gas prices stayed elevated, which could raise heating costs for the remainder of winter after a major supplier of liquefied natural gas to Europe said it would stop production because of the war. Gold rose 1.2% as some investors moved toward safer assets, even as U.S. officials argued publicly that the conflict would not last indefinitely.

The swings in rates added another layer of pressure on stocks. The 10-year Treasury yield rose to 4.04% from 3.97% late Friday, with the article citing higher oil prices as a factor that can push inflation expectations upward—potentially limiting how quickly the Federal Reserve can cut rates. Investors also noted a report showing U.S. manufacturing growth came in better than economists expected last month.

The stock-market moves also tracked sector-specific exposures to the energy shock and shifting rate expectations. Airlines and cruise-related companies fell sharply; American Airlines dropped 4.2%, United Airlines fell 2.9%, and Delta Air Lines declined 2.2%, while Norwegian Cruise Line Holdings fell 10.6% as investors weighed fuel costs and travel disruptions.

Housing-related stocks struggled as higher Treasury yields can feed through into mortgage rates. D.R. Horton fell 3.7%, and Builder FirstSource sank 4.7%, even as the market’s early downturn eased overall.

Oil and defense-linked companies helped counterbalance the broader slide. Exxon Mobil climbed 1.1% and Marathon Petroleum rose 5.9%, while Northrop Grumman gained 5.9% and RTX rallied 4.7%. Palantir Technologies jumped 5.8% for one of the biggest S&P 500 moves, and Nvidia rose 2.9%, identified as the strongest single force pushing the index higher.

International markets reflected the same risk mood, with many indexes in Europe and Asia down. Germany’s DAX fell 2.6%, France’s CAC 40 dropped 2.2%, and Hong Kong’s Hang Seng fell 2.1%, while Shanghai posted an outlier rise of 0.5%.

Despite the rebound in U.S. equities, the article described lingering fear in markets tied to the oil price jump and its implications for inflation and policy. It also cited Morgan Stanley strategists, including Michael Wilson, saying that for geopolitical risk events in history, the S&P 500 has tended to recover on average in the months after such episodes—while noting that for this war to cause a significant, sustained decline for U.S. stocks, oil would perhaps need to climb above $100 a barrel. This is not Iraq, Defense Secretary Pete Hegseth said Monday, adding, “This is not endless.”