On Tuesday, the stock market displayed a mixed performance, influenced by escalating tensions in the Persian Gulf. Despite this, investors remained optimistic about a potential agreement between the U.S. and Iran to resolve the ongoing conflict.
Overnight, the U.S. military targeted Iranian missile sites and other locations, prompting Iran’s Foreign Ministry to condemn the actions as a severe breach of the ceasefire. Just recently, President Trump mentioned that a peace deal was “largely negotiated.”
The S&P 500 experienced an increase of 46 points, or 0.6%, reaching 7,519. Meanwhile, the Dow Jones Industrial Average saw a decline of 118 points, or 0.25%, settling at 50,462. The Nasdaq, known for its tech focus, surged by 1.2%.
In the commodity markets, U.S. benchmark crude oil fell by $2.92, or 3%, to $93.68 per barrel, whereas Brent crude, the global benchmark, rose by $3.50, or 3.6%, to $99.67 per barrel.
Despite the rise in oil prices since the onset of the Iran conflict in late February, stock indices have reached new heights, fueled by expectations of a brief war. However, the increased oil prices have led to a surge in gasoline and energy costs, pushing inflation to its peak in nearly three years and putting pressure on household finances.
“At this juncture, formally ending hostilities and reopening Hormuz is undoubtedly beneficial,” commented Adam Crisafulli, an analyst at Vital Knowledge, in a research note on Tuesday. “Stocks have been on an upward trajectory for weeks, and while hopes of an Iran détente contributed, there was significant market anxiety about the possibility of the U.S. and Israel resuming air strikes, potentially triggering a catastrophic cycle of violence that could have severely worsened existing energy and supply chain issues.”
Average gasoline prices have eased in recent days, also on optimism that the two nations will reach an accord. National Economic Council Director Kevin Hassett told Fox Business that he believes “energy prices are going to plummet” once the Strait of Hormuz reopens to oil tanker traffic.
“Average gasoline prices declined in 40 states over the last week as falling oil prices helped offset earlier price cycling in many markets, bringing relief to motorists after several states had already seen sharp increases,” Patrick De Haan, head of petroleum analysis at GasBuddy, said in a Tuesday research note.
The average price for a gallon of gasoline stood at $4.49 on Tuesday, down from $4.53 a week earlier, according to AAA.
U.S. markets were closed on Monday for the Memorial Day holiday. On Friday, the S&P 500 added 0.4%, and the Dow industrials climbed 0.6%. The Nasdaq composite gained 0.2%.
Global markets advanced Monday after regional officials in the Middle East said the United States was close to reaching an agreement with Iran to end the war, reopen the Strait of Hormuz and see Iran give up its stockpile of highly enriched uranium. But it’s not clear when or how the deal might be finalized and when its various parts will take effect.
An end to the war would ease concerns throughout a region that saw Gulf havens and travel hubs like the United Arab Emirates struck by Iranian missiles and drones.
It would allow for global shipping, including an estimated 20% of the world’s oil, to resume flowing through the Strait of Hormuz. It would also allow the rebuilding of energy and other infrastructure in the region.
“Markets increasingly believe economic pressure will force diplomacy to move faster than military escalation,” said Nigel Green, CEO of the investment firm deVere Group, in an email. “Washington can project strength militarily, but sustained triple-digit oil creates economic consequences the US simply cannot ignore.”
