Oil prices surged and Wall Street steadied on Monday after Israel and Iran exchanged strikes over the weekend, reigniting fears for energy supplies running through the Strait of Hormuz. Brent crude briefly topped $98 a barrel overnight before retreating, while U.S. benchmark crude traded sharply higher, as roughly a fifth of the world's oil and liquefied natural gas continues to pass near the contested waterway.
Stocks proved more resilient than the geopolitical headlines suggested. The S&P 500 rose 21.99 points, or about 0.3%, to 7,405.73, and the Nasdaq composite gained 220.23 points, or 0.9%, to 25,929.66, recovering much of a steep selloff from Friday. The Dow Jones Industrial Average bucked the trend, slipping 80.77 points, or 0.2%, to 50,786.01.
The rebound was led by chipmakers and other artificial-intelligence-linked shares that had been hammered the previous session. Micron Technology jumped 9.9% after tumbling 13.3% on Friday, and Marvell Technology rose 9.6% on news it would be added to the S&P 500. The broader semiconductor index has soared roughly 85% so far this year through last Thursday, leaving valuations stretched.
Analysts framed Friday's plunge as a healthy pause in an otherwise powerful run. "A correction was inevitable and ultimately healthy if this bull market is going to extend into year-end," Morgan Stanley strategist Michael Wilson wrote, reaffirming a target of 8,000 on the S&P 500.
The crosscurrents left traders weighing two competing forces: an AI-driven rally that has powered indexes to records, and a Middle East conflict that keeps threatening oil flows. The yield on the 10-year Treasury note edged up to 4.56%, reflecting expectations that higher energy prices could keep inflation sticky and limit room for interest-rate cuts.
For now, the market's wager is that Israel and Iran will stop short of a full-blown war that shutters the Strait of Hormuz for good. But each escalation revives the risk premium in oil, and a sustained spike in crude would ripple through everything from airline costs to consumer prices, complicating the outlook for central banks already navigating a fragile balance between growth and inflation.