US stocks edged lower on Tuesday as investors remained cautious amid uncertainty over how long the war with Iran may last and whether oil prices will stabilise after recent sharp swings.
The S&P 500 slipped 0.4% in morning trading, while the Dow Jones Industrial Average fell about 250 points, or 0.5%, as of 10 a.m. Eastern time. The Nasdaq Composite was down 0.1%, reflecting a largely cautious tone on Wall Street, AP reported.
Markets are closely tracking developments in the Middle East, where the conflict involving the United States, Israel and Iran has triggered extreme volatility in oil prices and raised concerns about global energy supplies.
In the oil market, which has been the focal point for financial markets in recent sessions, Brent crude — the international benchmark –was trading at $91.47 per barrel, down 7.6% from its settlement price a day earlier. Meanwhile, US benchmark crude was trading at around $87.49 per barrel.
Oil prices had surged to nearly $120 per barrel on Monday, their highest level since 2022, before retreating after US President Donald Trump said in an interview with CBS News that he believes “the war is very complete, pretty much.”
The remarks raised hopes that the conflict could end sooner rather than later, potentially allowing oil flows from the Middle East to resume normally.
However, Trump’s later comments were less definitive, while a spokesperson for Iran’s paramilitary Revolutionary Guard said that “Iran will determine when the war ends.” Iran also launched fresh attacks on Israel and Gulf Arab countries on Tuesday, keeping tensions elevated.
The developments have left investors waiting for clearer signals about the duration and potential escalation of the conflict.
Trump, however, reiterated his stance on keeping the Strait of Hormuz open — a critical shipping route off Iran’s coast through which about one-fifth of the world’s oil passes each day.
“If Iran does anything that stops the flow of Oil within the Strait of Hormuz, they will be hit by the United States of America TWENTY TIMES HARDER than they have been hit thus far,” Trump said in a post on his social media platform late Monday.
Market strategists say the outlook for oil remains highly uncertain.
“The outlook for oil right now is about as binary as it gets,” said Hakan Kaya, senior portfolio manager at Neuberger Berman.
“Either the Strait of Hormuz reopens and you see a massive unwind of the risk premium, or it stays shut and we are looking at the largest supply disruption in modern history. There is no middle ground, and that is why putting a number on it is almost irresponsible.”
Historically, US equities have recovered relatively quickly after geopolitical conflicts, provided energy prices do not remain elevated for a prolonged period.
However, if oil prices stay high, it could put pressure on household budgets already strained by inflation, while companies would face rising costs for fuel, transportation and logistics.
Global markets reacted positively to easing oil prices earlier in the day.
Stock markets in Asia and Europe rose, with South Korea’s Kospi jumping 5.3%, Hong Kong’s Hang Seng gaining 2.2% and France’s CAC 40 climbing 1.5%.
Japan’s Nikkei 225 advanced 2.9% after revised data showed the country’s economy grew faster than initially estimated in the final quarter of last year, supported by strong business investment.
In the bond market, the yield on the 10-year US Treasury remained steady at 4.12%, unchanged from late Monday.
