Conflict Ripples Through Markets, Oil Prices Rise

“The Middle East conflict rippled through markets from Tokyo to New York on Monday, with investors saying the consequences of the disruption to oil and capital flows depend on one key factor: how long it goes on.

 

Stocks initially fell and oil prices surged in the first trading day since the U.S.-led strikes in the Middle East began. Airline shares sank. Gold and defense contractors jumped. The dollar climbed. But a rally in energy and tech helped the S&P 500 notch its biggest intraday recovery since November, bouncing back from an early 1.2% drop to finish up less than 0.1%. Brent crude moderated an early double-digit surge to a 6.7% climb.

 

Over time, war hurts growth and spurs inflation, a combination corrosive to stocks and bonds, analysts and investors said. However, a brief conflict is unlikely to outweigh other market dynamics. Stocks remain near records, even after a recent slump fueled by worries about the impact of artificial-intelligence technology on jobs and the economy.

 

"It's hard to get a good market down," said David Wagner, head of equities and portfolio manager at Aptus Capital Advisors.

 

The Dow Jones Industrial Average fell 0.1%, or around 73 points. The Nasdaq composite added 0.4%.

 

One reason for the relative calm: An oil shock poses the greatest risk to U.S. stocks, and Monday's crude-price surge was well within the boundaries of recent history, helping reassure those worried that crude's climb would bleed into the economy.

 

A momentary price spike Sunday night gave oil companies the opportunity to lock in future deliveries at higher rates. But so far, at least, fuel consumers ranging from marine fleets to home-improvement stores to steel companies have shrugged at the recent price bump, said Charlie Macnamara, head of U.S. Bank's commodities team.

 

Should prices blow past $90 a barrel and start hitting companies' bottom lines, he said, "The phones will start to ring."

 

Even after a runup in prices in recent weeks, benchmark U.S. crude futures settled Monday around $71 a barrel. That is far below their inflation-adjusted average over the past two decades of $96.

 

Previous shocks pushed up prices much higher. Following events in Ukraine in 2022, U.S. futures neared $140 a barrel in inflation-adjusted terms. A surge in Chinese demand helped propel futures in 2008 above $200 a barrel in real terms.

 

Energy analysts said oil prices would have to veer far above their current levels for a sustained period to inflict economic pain on the U.S. After Gulf nations including Iran boosted exports in recent weeks, analysts believe the global market is well stocked for at least several days. "If the war goes beyond that, I think [the market] gets a lot tighter a lot faster," said Scott Shelton, an energy analyst for interdealer broker TP ICAP.

 

Energy stocks in the S&P 500 rose 2%. Shares of Marathon Petroleum, Valero Energy, Oneok and ConocoPhillips were all up more than 4%.

 

Some analysts said the geopolitical uncertainty has investors gauging the market's fundamentals -- and those look mostly solid. Companies in the S&P 500 have reported a 14% growth in fourth-quarter earnings, according to FactSet.

 

Worries about the effects of higher prices still fueled a selloff in government bonds, however, pushing the yield on the 10-year U.S. Treasury note back above 4% in its biggest single-day gain since June.

 

Treasury yields, which rise when bond prices fall, initially fell in overnight trading, reflecting a flight to safer assets sparked by the Middle East conflict. But that move quickly reversed, with investors fearing a prolonged fight could push up inflation. Higher inflation tends to lead to higher short-term interest rates set by central banks, which can push up government bond yields.

 

Yields also rose in Europe, where energy supplies are especially vulnerable to disruption in the Middle East. The yield on France's 10-year government bond climbed to 3.290%, according to Tradeweb, from 3.223% Friday.

 

Investors piled into perceived beneficiaries of the conflict. Defense companies' stocks jumped. Palantir Technologies shares climbed 5.8%, Northrop Grumman gained 6%, Lockheed Martin rose 3.4% and Axon Enterprise added 5.5%.

 

Big tech also provided some shelter, with the information-technology sector rising 0.9% to support the S&P 500. Shares of Nvidia rose 3% and Microsoft gained 1.5%. Gold futures, a haven during times of geopolitical uncertainty, rose 1.2% to $5,294.40 a troy ounce.

 

But in the options market, traders turned bearish. The cost of bearish options relative to bullish options, a measure called skew, jumped to its highest level since November, Cboe Global Markets data show. A higher skew typically signals that prices for put options, which confer the right to sell a stock at a set price, are becoming more expensive relative to call options, which offer the right to buy.

 

Stocks fell in Japan and Hong Kong. The Stoxx Europe 600 lost 1.6% in its worst day since November.

 

Christian Chan, chief investment officer at AssetMark, says his firm has been adding to its positions in defensive corners of the market such as industrials and materials over the past few months, in part on worries about the potential for rising geopolitical tensions this year.

 

"I would anticipate a bit more volatility as this plays out," Chan said.” [1]

 

1. Conflict Ripples Through Markets, Oil Prices Rise. Hur, Krystal; Uberti, David.  Wall Street Journal, Eastern edition; New York, N.Y.. 03 Mar 2026: A1.