U.S. stocks climb to their best day since the Iran war began after oil prices ease

Traders work on the floor at the New York Stock Exchange in New York. (AP Photo/Seth Wenig)

NEW YORK — NEW YORK (AP) — A drop in oil prices on Monday helped send the U.S. stock market to its best day since the war in Iran  began.

The S&P 500 climbed 1 per cent for its biggest gain in five weeks. The Dow Jones Industrial Average added 387 points, or 0.8 per cent, and the Nasdaq composite jumped 1.2 per cent.

The driver for markets once again was the price of oil. A barrel of benchmark U.S. crude fell 5.3 per cent to settle at US$93.50, easing some pressure off the economy after topping US$102 earlier in the morning. Brent crude, the international standard, fell 2.8 per cent to US$100.21 per barrel after earlier getting as high as US$106.50.

It’s a reprieve, for now at least, after oil prices spiked from roughly US$70 before the United States and Israel began their attacks on Iran. In response, Iran has nearly halted traffic through the narrow Strait of Hormuz, where a fifth of the world’s oil typically sails from the Persian Gulf to customers worldwide. That has oil producers cutting production because their crude has nowhere to go.

The worry in financial markets is that if the strait remains closed for a long time, it could keep enough oil off the market to drive inflation up to a debilitating level for the global economy.

President Donald Trump over the weekend demanded that other countries hurt by the closure of the Strait of Hormuz “take care of that passage” and said his country “will help - A LOT!”

European countries, meanwhile, want to know more about Trump’s plans  for the war on Iran and when the conflict might end as they weighed his demand.

The U.S. stock market has a track record of bouncing back  relatively quickly from military conflicts in the Middle East and elsewhere, as long as oil prices don’t stay too high for too long. Many professional investors are expecting that to be the case again, which has helped keep U.S. stock prices near their record levels.

For all its dramatic swings over the last couple weeks, including several that struck hour to hour, the S&P 500 is only 4 per cent below its all-time high.

Escalations have been mounting quickly in the war, to be sure, but that could suggest “both sides are facing growing constraints that may prevent a long conflict,” according to Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute.

On Wall Street, stocks of companies with big fuel bills helped lead the market thanks to falling oil prices. Norwegian Cruise Line Holdings steamed 5.1 per cent higher, while United Airlines climbed 4.2 per cent to trim their big losses for the year so far.

National Storage Affiliates leaped 30 per cent after Public Storage said it would buy its 69 million rentable square feet in an all-stock deal valued at US$10.5 billion. Public Storage fell 1.7 per cent.

Dollar Tree rose 6.4 per cent after reporting a stronger profit for the latest quarter than analysts expected, even as fewer shoppers visited its stores.

Nebius Group, a Dutch AI cloud company, saw its stock that trades in the United States leap 15 per cent after announcing a five-year infrastructure contract with Meta Platforms that could be worth up to US$27 billion.

Nvidia, whose chips are powering much of the world’s move into artificial-intelligence technology rose 1.6 per cent as its CEO, Jensen Huang, talked up the tech’s possibilities at an AI conference and said he foresaw US$1 trillion in demand for AI chips through 2027. It was the strongest single force lifting the S&P 500.

All told, the S&P 500 rose 67.19 points to 6,699.38. The Dow Jones Industrial Average added 387.94 to 46,946.41, and the Nasdaq composite climbed 268.82 to 22,374.18.

In stock markets abroad, indexes rose modestly in Europe, including a 0.5 per cent return for Germany’s DAX, following a mixed finish in Asia.

Stocks jumped 1.4 per cent in Hong Kong but slipped 0.3 per cent in Shanghai.

In the bond market, Treasury yields eased as falling oil prices took some pressure off inflation worries. A report showing a weakening of manufacturing activity in New York state also weighed on yields.

The yield on the 10-year Treasury fell to 4.22 per cent from 4.28 per cent late Friday.

Yields, though, are still higher than they were before the war, when the 10-year Treasury yield was at just 3.97 per cent. Traders have pushed back their expectations for when the Federal Reserve could resume its cuts to interest rates because of the spike in oil prices caused by the war.

Such cuts would give the economy and job market a boost, and they’re something Trump has angrily been calling for, but they would worsen inflation. Traders see virtually no chance of the Fed announcing a cut to rates after its next meeting concludes on Wednesday, according to data from CME Group.

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Stan Choe, The Associated Press. AP Business Writers Matt Ott and Elaine Kurtenbach contributed.