Stock market today: Dow, S&P 500, Nasdaq climb, oil slides as Wall Street weighs Iran war signals

Tech is back in charge for a second straight day after Trump’s late-Monday post signaling the war may be almost over helped flip the market back into risk-on mode.

The big tell is the S&P 500 (^GSPC) reclaiming 6,800 — the old line in the sand that briefly gave way during the sell-off. Now the setup is pretty simple: If the index can string together a couple of closes back above that level, last week’s price action starts to look like a false breakdown instead of something more serious.

Under the hood, it’s the old leaders doing the lifting again. Chips are out front, and the Nasdaq Composite (^IXIC) is still holding the bottom end of its six-month range near 22,000 on a closing basis.

You can see the same message elsewhere. Bitcoin (BTC-USD) is back above $70,000 as micro-caps (IWC) and small-caps (^RUT, ^SP600) are beating the majors.

The one glaring weak spot is software, with the iShares Expanded Tech-Software ETF (IGV) down about 2%. But even that feels like a return to the usual market script, where chips and hardware lead and software trails.

As Yahoo Finance head of news Myles Udland said on this morning’s Morning Brief live show, “The stocks that have been leading were the leaders [Monday] — a return to form, some might say.”

Holding above 6,800 in the S&P 500 suggests the return to old leadership has some staying power. Lose that level again on a close, and the false-breakdown idea fades.

The Group of Seven nations has asked the International Energy Agency to prepare for potential releases from the strategic petroleum reserves (SPRs) of G7 member countries, sending oil prices tumbling further.

In comments reported by Bloomberg, French finance minister Roland Lescure said the G7 countries want to be ready to release barrels from their SPRs and that the bloc had asked the IEA to study how much in volume could be added to the market.

Oil prices fell on the news. International benchmark Brent (BZ=F) and US benchmark West Texas Intermediate (WTI) crude (CL=F) were both down roughly 29% from their highs of $119 on Sunday after the G7 news.

In a statement after the G7 meeting, IEA executive director Fatih Birol said the IEA’s member governments will “assess the current security of supply and market conditions to inform a subsequent decision on whether to make emergency stocks of IEA countries available.”

The IEA oversees the use of reserves held by the Organization for Economic Cooperation and Development, a group of nearly 40 advanced economies globally. OECD stores are commonly used as a benchmark for global reserves of oil.

In only six trading days, WTI crude futures (CL=F) surged roughly 80% at Monday’s peak, while the popular oil ETF USO jumped more than 50%. It was one of the wildest oil swings in years, with both WTI and Brent (BZ=F) nearing $120 before reversing sharply.

For the fast-money crowd baptized during the pandemic, chasing momentum has often paid. But oil is a very different market, and it is extremely unlikely to reward that kind of behavior here, whether the Middle East conflict is resolved today or drags on for months.

I feel compelled to flag that, given the recent options tape in USO, which shows days when options volume is nearly 10 times the year-to-date average.

Commodities like oil and gold can trend for long stretches, and some legendary macro traders (like Paul Tudor Jones) built careers riding those moves. But parabolic spikes usually do not last. See this chart of WTI crude oil, going back to the beginning of this century, which shows net chopiness, punctuated by flashy rallies and quick declines.

Monday’s roughly 30% surge, followed by a 20% drop within hours, was a reminder of how quickly reversals can hit.

There’s also a structural catch with USO that longer-term investors should understand. It typically tracks front-month oil futures, which means performance is shaped not just by the price of crude but by the monthly roll from one futures contract to the next. Over time, that roll can create drag when oil is merely flat or choppy.

Put simply, oil may be exciting right now, but it is not a market to chase.

US stocks diverged on Tuesday as investors weighed President Trump’s comments about the Iran war nearing an end against remarks from Defense Secretary Hegseth that the most intense barrage of strikes yet would occur on Tuesday

The Dow Jones Industrial Average (^DJI) and S&P 500 (^GSPC) lost roughly 0.1% and 0.2%, respectively, in the minutes after the opening bell. Moving in the other direction, the tech-heavy Nasdaq Composite (^IXIC) picked up roughly 0.1%.

Markets have soured on potential deescalation after reports that an oil tanker has exploded near Abu Dhabi. Oil prices fell late Monday after Trump said the US offensive in Iran was “very complete, pretty much,” remaining in the red by roughly 6%.

On the calendar, investors will get the February Consumer Price Index on Wednesday, followed by January’s Personal Consumption Expenditures index on Friday. Oracle (ORCL) is scheduled to report after the market close on Tuesday, while Adobe (ADBE) is on Thursday’s docket.

Investors are misreading how the Federal Reserve is likely to react to heightened oil prices, Bank of America economist Aditya Bhave said in a note published Tuesday morning.

The Iran war has scrambled the Fed’s rate calculus, with most observers suggesting that rising oil prices will push the Fed to be more hawkish. Rising energy costs, if sustained, put upward pressure on headline inflation. As inflation rises, the thinking goes, the Fed will be less likely to cut rates, fearing that it would risk overheating the economy.

Instead, Bhave said, “supply shocks create risks to both sides of the Fed’s dual mandate.” Instead, Bhave wrote, “Context matters. Compared to 2022, the labor market isn’t as hot, inflation isn’t as high, and fiscal support isn’t as large.”

Bhave noted that since the conflict began, the yield on two-year Treasurys — often taken as a read on expectations for the Federal Reserve’s policy rate over roughly the next two years — has largely tracked oil prices.

“This could be a mistake,” Bhave wrote, arguing that a supply shock “fattens the tails” of policy distribution and puts larger risks on both hikes and cuts.

“When Russia invaded Ukraine, the u-rate was below 4%, core PCE inflation was over 5%, payrolls were running at 500k/month and consumers were flush with Covid stimulus cash,” Bhave said. “By contrast, we now have a soft labor market, moderately elevated inflation and more modest fiscal support. This sets us up for a more dovish Fed response if the oil shock is persistent.”

Exxon (XOM) CEO Darren Woods to me (by phone)_ on the current situation in the oil industry:

“Obviously, the Middle East is a concentrated source of supply through the Strait of Hormuz, a narrow passage that much of the world supply has to travel through, and we’re seeing that play out here in real time. From a company standpoint, obviously, we’re very focused on making sure that the people that we have over there operating the JVs [joint ventures] in the different countries have been safely evacuated, and making sure that remains the case that our people are safe. And then I think more broadly, just with our operations around the world, everyone will be impacted. The markets are global. Prices are connected. Through that global marketplace, we’re making sure that we’re doing the work and have a diversified set of supply sources so that we can keep our operations up and running and continue to meet the demand of basically all the communities that we operate in.”

Oil prices remained in the red through early Tuesday morning after comments from President Trump on Monday evening suggesting that the war could soon come to an end.

Futures on international benchmark Brent (BZ=F) and US benchmark West Texas Intermediate (WTI) crude (CL=F) traded at roughly $87.90 per barrel and $89 per barrel, respectively, after the two products opened above $100 Sunday evening and popped to roughly $119, each.

In comments to CBS News, Trump said that he believes the war is “very complete, pretty much” and that the US is “very far” ahead of his estimated timeline. That said, in comments to House Republicans at a press conference Monday evening, the president said the US hasn’t “won enough” and that he “will not allow a terrorist regime to hold the world hostage and attempt to stop the globe’s oil supply.”

The president’s mixed comments underscored a conundrum for markets: Trump is signaling a near end to conflict, but his rhetoric alone won’t reopen the critical Strait of Hormuz, which remains essentially closed (though data shows very small amounts of crossings may have resumed).

Underscoring the precarity of the situation, Saudi Aramco CEO Amin Nasser said in comments on the company’s earnings call this morning that the Iran war is “the biggest crisis the region’s oil and gas industry has faced.” If the Strait is not reopened soon, he said, the consequences will be “catastrophic” for the global economy.

Two call-outs from Saudi Aramco (2222.SR) earnings out this morning.

One is from the Jefferies research team, noting this from the top oil exporter’s management: “All areas safe & operating normally, with Ras Tanura starting up following precautionary shutdown after drone interception.”

And this one from CEO Amin Nasser caught my attention on the earnings call. He was asked about how quickly the company could ramp up oil shipments once the Strait of Hormuz gets back to some form of normal:

“We can ramp up in days and not weeks, for sure.”

A new chart this morning from Goldman Sachs caught my attention with oil prices (CL=F, BZ=F) continuing to slide. It appears there is some oil making it through the Strait of Hormuz.