The U.S. stock market demonstrated its characteristic resilience on Monday, recording its strongest gains since the start of hostilities in Iran. The Nasdaq rose 1.2% and the Dow gained 0.8% as oil prices backed off from their recent highs. This recovery aligns with the historical tendency of markets to rebound from Middle Eastern conflicts, provided they do not lead to a permanent energy crisis.
The situation in the Strait of Hormuz remains the “wild card” for the global economy. Iran’s move to block a passage that carries 20% of the world’s oil has led to production cuts and significant price volatility. While U.S. crude fell to $93.50 on Monday, it had reached as high as $102 earlier in the day, illustrating the extreme sensitivity of the market to every new development.
Strategic shifts in the corporate world are helping to distract from the geopolitical gloom. Companies like Nvidia and Nebius Group are benefiting from a massive influx of capital into artificial intelligence. Nvidia’s CEO recently projected that the demand for AI chips could reach $1 trillion, a figure that has kept the tech sector energized even as other industries struggle with rising fuel costs.
Market participants are also keeping a close eye on the bond market, where the 10-year Treasury yield recently settled at 4.22%. While this is a slight decrease, it highlights the fact that the “cost of money” is higher now than it was before the war. The Federal Reserve is facing intense pressure to lower rates, but the risk of exacerbating inflation remains a primary concern for the central bank.
As the trading week continues, the focus will remain on the balance between geopolitical risk and economic growth. The S&P 500’s current position—just 4% shy of its all-time high—suggests that investors are looking through the current conflict toward a period of renewed stability. Whether that optimism is justified will depend largely on the duration of the energy disruptions in the Persian Gulf.