Wall Street Rebounds After Turbulent Day as Oil Prices Retreat From Near $120 Surge

BY Rosemary

U.S. financial markets endured a volatile trading session Monday, swinging dramatically from steep early losses to solid gains by late afternoon as oil prices reversed a sharp surge that had rattled investors worldwide.

The S&P 500 dropped as much as 1.5% in the early hours of trading before recovering and climbing 0.8% toward the closing stretch of the day. The Dow Jones Industrial Average, which at one point had plunged nearly 900 points, staged a strong rebound and was up 261 points, or about 0.6%. Meanwhile, the Nasdaq composite climbed 1.3% as of 3:34 p.m. Eastern time, highlighting a broad recovery across the market after a tense start to the session.

The wild price swings reflected mounting anxiety among investors over the direction of global oil prices amid escalating conflict involving Iran. Energy markets opened the day in dramatic fashion, sending crude prices surging to levels not seen in years and sparking fears that a prolonged spike could place new pressure on the global economy.

Earlier Monday, Brent crude, the international benchmark for oil prices, briefly climbed to $119.50 per barrel. That marked the highest level since the summer of 2022, when energy markets were thrown into turmoil following Russia’s invasion of Ukraine.

The spike immediately sent shockwaves through financial markets. Investors worried that sustained high energy costs could undermine economic growth and intensify inflation pressures that households and businesses are already struggling to manage.

High oil prices typically ripple through the broader economy. Consumers face rising gasoline and heating costs, leaving less money for other spending. Businesses must pay more to transport goods, operate factories and power data centers. Those higher costs can eventually push up prices for a wide range of products and services.

Economists warn that if such conditions persist, they could produce one of the most challenging economic scenarios: stagflation. In that environment, economic growth slows or stalls while inflation remains stubbornly high, making it difficult for policymakers to stabilize markets without causing further economic pain.

However, the surge in oil prices did not last throughout the day. As trading progressed, crude prices retreated sharply amid speculation that the world’s largest economies might coordinate measures to stabilize energy markets.

By the end of the day, Brent crude had fallen to $98.96 per barrel and continued sliding afterward, dipping toward $95 in later trading.

A similar pattern played out in U.S. energy markets. Benchmark West Texas Intermediate crude briefly reached $119.48 per barrel during the morning rush of trading before reversing course. It ultimately settled at $94.77 and later slid below $85 per barrel late Monday.

As oil prices fell, stocks moved in the opposite direction, recovering much of their earlier losses. The pattern mirrored the dramatic market swings seen last week, when energy prices repeatedly drove sharp moves across global financial markets.

Historically, the U.S. stock market has often rebounded relatively quickly from geopolitical crises and military conflicts, particularly if disruptions to global energy supplies prove temporary. Some professional investors believe that recent market declines could create opportunities for long-term buyers seeking to acquire stocks at discounted levels.

Despite the turbulence of recent days, the S&P 500 — the benchmark index that underpins many retirement portfolios and 401(k) plans — remains within about 3% of the record high it reached in January.

Market strategists say the long-term outlook may improve if additional oil supply comes online in the months ahead.

Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute, said the current surge in energy prices could prove temporary.

He noted that the market is facing an acute supply shortage at the moment, but added that new production entering the market could eventually ease the pressure and bring oil prices down significantly.

Still, much depends on the restoration of normal oil flows in critical shipping routes, particularly in the Middle East.

One major concern centers on the Strait of Hormuz, a narrow waterway near Iran that serves as one of the world’s most important energy transit routes. Roughly one-fifth of the global oil supply typically passes through the strait each day.

Currently, tanker traffic in the region has slowed dramatically due to fears of potential attacks. If the strait were to remain effectively closed for several weeks, energy analysts warn that oil prices could surge dramatically.

Strategists at Macquarie Research estimate that crude prices could climb to $150 per barrel or higher if shipments through the strait are significantly disrupted for an extended period.

While U.S. markets eventually stabilized Monday, stocks in many overseas markets suffered steeper losses, particularly in countries that rely heavily on imported energy.

In Asia, South Korea’s Kospi index plunged 6%, while Japan’s Nikkei 225 dropped 5.2%. European markets also declined, with France’s CAC 40 falling about 1%.

Government officials around the world voiced concern about the escalating tensions and the economic uncertainty they are creating.

China’s special envoy to the Middle East, Zhai Jun, urged an end to the attacks and called for condemnation of strikes against civilian targets and infrastructure.

South Korean President Lee Jae Myung also warned businesses and consumers against hoarding fuel or engaging in panic buying, cautioning that such behavior could worsen shortages and price volatility.

Over the weekend, the conflict intensified as both sides launched new attacks, including strikes that affected civilian infrastructure.

Bahrain accused Iran of targeting a desalination facility vital for providing drinking water in Gulf countries. The country’s national oil company declared force majeure after its only oil refinery was struck.

Meanwhile, Israel reportedly carried out airstrikes against oil depots in Tehran, sending thick smoke into the sky and prompting environmental warnings in the surrounding areas.

Despite the surge in energy prices, President Donald Trump indicated that the economic impact was a temporary price worth paying if it leads to greater long-term security.

In a message posted on his social media platform late Sunday, Trump said that while oil prices are elevated now, they are likely to fall quickly once the perceived nuclear threat from Iran is eliminated.

In the U.S. bond market, yields fluctuated throughout the day as investors weighed competing economic risks.

The yield on the benchmark 10-year Treasury note slipped to 4.10% from 4.15% late Friday. Earlier in the session, the yield briefly climbed above 4.20% as concerns about rising inflation and higher energy costs pushed borrowing rates upward.

At the same time, fears that the conflict and high oil prices could slow economic growth placed downward pressure on yields, reflecting a flight to safer assets.

Economic data released late last week added to investor unease. A disappointing report on the U.S. labor market indicated that employers cut more jobs last month than they created, raising fresh concerns that the economy may already be losing momentum.

For now, markets remain highly sensitive to developments in the Middle East and the trajectory of oil prices, leaving investors bracing for continued volatility in the days ahead.