Medora Lee, USA TODAY
5 min read
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U.S. stocks closed higher, rebounding from a midday dip after a strike by Iran on U.S. military bases caused no casualties or disruptions to oil suppliies.
The blue-chip Dow closed up 0.89%, or 374.96 points, to 42,581.78; the broad S&P 500 added 0.96%, or 57.33 points, to 6025.17 and the tech-heavy Nasdaq gained 0.94%, or 183.57 points, to 19630.98. The benchmark 10-year Treasury yield slipped to 4.34%.
U.S. oil prices initially rose on the news of explosions over Qatar but settled back to trade down about 7.94% to below $70 per barrel to $67.98. Qatar said it intercepted Iran's missile.
“Investors appear to be clinging onto hopes of a de-escalation, and are perhaps just thankful that Iran’s military response has been limited and that the U.S, attack on Iran seems likely to be a one off, rather than the start of a full-blown war," said Matthew Ryan, head of market strategy at global financial services firm Ebury.
Iran's strike came after a surprise U.S. attack at three nuclear sites in Iran over the weekend. President Donald Trump called the attack "a spectacular military success" in a televised address to the nation and said Iran's nuclear enrichment facilities had been "obliterated" though other officials' statements were more measured. Trump said the U.S. military could go after other targets in Iran if the country did not agree to peace.
Investors are worried if tensions escalate, how they could affect the economy, oil prices and inflation and interest rates. Oil prices intially rose to a five-month high but moved lower again as travel through the Strait of Hormuz remained open.
Whether oil prices climb higher will depend on next actions by the U.S. and Iran. Higher oil prices could ignite inflation. National average gasoline prices have already risen by over 2%, noted Natasha Kaneva, JP Morgan's head of global commodities research.
"The immediate-term focus is on whether Iran will close the Strait of Hormuz, through which 20% of the world’s oil supply travels," said Mike O'Rourke, chief market strategist at JonesTrading.
A member of the Iranian parliament’s National Security commission said “for now, [parliament has] come to the conclusion we should close the Strait of Hormuz, but the final decision in this regard is the responsibility of the Supreme National Security Council," according to Reuters.
U.S. Secretary of State Marco Rubio called on China to prevent Iran from blocking the Strait of Hormuz in retaliation for U.S. airstrike. China is the biggest buyer of Iranian oil and the two countries are friendly.
