SouthernWorldwide.com – Stocks experienced a mixed performance on Tuesday as investors appeared to overlook renewed fighting in Iran, while still holding onto hopes for a de-escalation agreement between the U.S. and Iran to end the ongoing conflict.
The U.S. military conducted overnight strikes targeting Iranian missile launch sites and other objectives. Iran’s Foreign Ministry characterized these actions as a “grave violation” of the existing ceasefire between the two nations. This development follows President Trump’s statement on Saturday, indicating that a peace agreement had been “largely negotiated.”
The S&P 500 saw an increase of 46 points, or 0.6%, reaching 7,519 by Tuesday. Conversely, the Dow Jones Industrial Average experienced a slight decline of 118 points, or 0.25%, settling at 50,462. The Nasdaq, which is heavily weighted towards technology stocks, registered a more significant jump of 1.2%.
In commodity markets, benchmark U.S. crude oil prices fell by $2.92, or 3%, to $93.68 per barrel. Meanwhile, Brent crude, the international benchmark for oil prices, saw an increase of $3.50, or 3.6%, closing at $99.67 per barrel.
Stock markets have previously reached new record highs despite the surge in oil prices since the commencement of the Iran war in late February. This resilience has been attributed to optimism that the conflict would be brief. However, elevated oil prices have consequently driven up the cost of gasoline and other energy products, pushing inflation to its highest point in nearly three years and placing a strain on household budgets.
“At this point in time, formally ending hostilities and reopening Hormuz is nothing but positive,” stated Adam Crisafulli, an analyst at Vital Knowledge, in a research note released on Tuesday. He further elaborated that while the anticipation of an Iran détente has certainly contributed to the market’s upward trend over the past few weeks, there remained a considerable level of apprehension regarding the possibility of the U.S. and Israel resuming air strikes. Such an escalation, he warned, could have initiated a catastrophic spiral of violence that would have severely worsened existing strains on energy and supply chains.
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The average price of gasoline has shown a decline in recent days, also influenced by the optimism surrounding a potential accord between the two nations. Kevin Hassett, Director of the National Economic Council, expressed to Fox Business his belief that “energy prices are going to plummet” once the Strait of Hormuz is reopened 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, noted in a research note on Tuesday. This sentiment was echoed by the data, as the average price for a gallon of gasoline on Tuesday stood at $4.49, a decrease from $4.53 recorded a week prior, according to AAA.
U.S. financial markets were closed on Monday in observance of the Memorial Day holiday. On the preceding Friday, the S&P 500 had gained 0.4%, and the Dow industrials climbed 0.6%. The Nasdaq composite also saw a modest increase of 0.2%.
Global markets advanced on Monday following reports from regional officials in the Middle East suggesting that the United States was nearing an agreement with Iran. This potential deal would aim to end the war, reopen the Strait of Hormuz, and involve Iran relinquishing its stockpile of highly enriched uranium. However, the specifics of when and how this agreement might be finalized, and the timeline for the implementation of its various components, remain unclear.
An cessation of hostilities would alleviate widespread concerns across a region that has witnessed significant impacts, including strikes by Iranian missiles and drones on Gulf havens and travel hubs such as the United Arab Emirates. Such a resolution would enable the resumption of global shipping through the Strait of Hormuz, a vital waterway through which an estimated 20% of the world’s oil passes. Furthermore, it would facilitate the rebuilding of energy and other critical infrastructure within the region.
“Markets increasingly believe economic pressure will force diplomacy to move faster than military escalation,” commented Nigel Green, CEO of the investment firm deVere Group, via email. He added, “Washington can project strength militarily, but sustained triple-digit oil creates economic consequences the US simply cannot ignore.”
