Oil prices tumbled and stocks rose on Monday, as investors appeared optimistic that the economic fallout from the U.S. strikes on three Iranian nuclear facilities over the weekend would remain contained.
That view was intact even after Iran launched an attack on a U.S. military base in Qatar. Iranian officials told The New York Times that Iran had warned of the attack ahead of time, in order to minimize casualties, and the Defense Department said there were no reports of U.S. casualties at the base, Al Udeid.
Hope that this could signify a de-escalation in the conflict was most evident in the energy market, where oil prices slid. The price of West Texas Intermediate, the benchmark for U.S. crude oil, dropped more than 7 percent after the Iranian strike on Qatar, to around $68. Brent crude, the international benchmark, also fell over 7 percent, its steepest single-day drop since the middle of 2022.
Falling oil prices helped lift the stock market, as did further signs that the Federal Reserve could cut interest rate sooner than previously expected. Michelle W. Bowman, the Fed’s vice chair for supervision, said Monday that it was possible the central bank could cut interest rates in July, becoming the second Fed official to suggest as much in recent days.
“Funny how we would have expected this to be a risk off day,” said Andrew Brenner, head of international fixed income at NatAlliance Securities. “But that trade happened in the overnight session.”
The S&P 500 index rose about 0.7 percent in early afternoon trading. European markets had ended trading lower.
Traders have been seeking clearer indications of whether there would be an escalation in the conflict in the Middle East — particularly any moves Iran might make that would disrupt oil shipments through the Strait of Hormuz.
The Strait of Hormuz is a critical transit point for global oil supplies. Last year, about 20 million barrels of oil were shipped through the waterway each day, representing about 20 percent of the world’s total supply. Most of that oil was bound for Asia.
Places like Japan and Taiwan rely on the Middle East for almost all of their crude oil imports, meaning that any disruption to traffic through the passageway could inflict a large economic blow. China is the largest buyer of Iranian oil.
Other analysts expect fallout from the conflict to be relatively short-lived. Iran’s missile attack on the American base was intercepted, leaving open a path to de-escalation.
“Stocks have a long history of eventually looking through Middle East violence (sometimes quickly), even when the U.S. gets involved,” Anthony Saglimbene, chief market strategist at Ameriprise, wrote earlier on Monday.
The oil market is also better equipped to respond to shocks than it has been in the past because of spare capacity held by exporters, according to Daniel Hynes, a senior commodity strategist at ANZ Research. Geopolitical events involving producers can have a big impact on oil markets, but in recent years prices have tended to quickly retreat as risks ease, Mr. Hynes said.
Daniel Ives, an analyst at Wedbush Securities, said there could be more volatility in stock movements this week. But, he added, the market may view the Iran threat as “now gone.” In that case, he said, “the worst is now in the rearview mirror.”
Joe Rennison writes about financial markets, a beat that ranges from chronicling the vagaries of the stock market to explaining the often-inscrutable trading decisions of Wall Street insiders.
River Akira Davis covers Japan for The Times, including its economy and businesses, and is based in Tokyo.
Eshe Nelson is a Times reporter based in London, covering economics and business news.
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