US stocks end higher, oil down on limited Iran retaliation. Strait of Hormuz's still open.
U.S. stocks closed higher, rebounding from a midday dip after a strike by Iran on U.S. military bases caused no casualties or disruptions to oil suppliies.
The blue-chip Dow closed up 0.89%, or 374.96 points, to 42,581.78; the broad S&P 500 added 0.96%, or 57.33 points, to 6025.17 and the tech-heavy Nasdaq gained 0.94%, or 183.57 points, to 19630.98. The benchmark 10-year Treasury yield slipped to 4.34%.
U.S. oil prices initially rose on the news of explosions over Qatar but settled back to trade down about 7.94% to below $70 per barrel to $67.98. Qatar said it intercepted Iran's missile.
“Investors appear to be clinging onto hopes of a de-escalation, and are perhaps just thankful that Iran’s military response has been limited and that the U.S, attack on Iran seems likely to be a one off, rather than the start of a full-blown war," said Matthew Ryan, head of market strategy at global financial services firm Ebury.
Iran's strike came after a surprise U.S. attack at three nuclear sites in Iran over the weekend. President Donald Trump called the attack "a spectacular military success" in a televised address to the nation and said Iran's nuclear enrichment facilities had been "obliterated" though other officials' statements were more measured. Trump said the U.S. military could go after other targets in Iran if the country did not agree to peace.
Investors are worried if tensions escalate, how they could affect the economy, oil prices and inflation and interest rates. Oil prices intially rose to a five-month high but moved lower again as travel through the Strait of Hormuz remained open.
Whether oil prices climb higher will depend on next actions by the U.S. and Iran. Higher oil prices could ignite inflation. National average gasoline prices have already risen by over 2%, noted Natasha Kaneva, JP Morgan's head of global commodities research.
"The immediate-term focus is on whether Iran will close the Strait of Hormuz, through which 20% of the world’s oil supply travels," said Mike O'Rourke, chief market strategist at JonesTrading.
A member of the Iranian parliament’s National Security commission said “for now, [parliament has] come to the conclusion we should close the Strait of Hormuz, but the final decision in this regard is the responsibility of the Supreme National Security Council," according to Reuters.
U.S. Secretary of State Marco Rubio called on China to prevent Iran from blocking the Strait of Hormuz in retaliation for U.S. airstrike. China is the biggest buyer of Iranian oil and the two countries are friendly.
China said it "strongly" condemned the U.S. attack on Iran and said it violated the UN Charter and international law. It called for a ceasefire but didn't offer Iran any substantial assistance.
So far, stock market response to the attacks has been muted because oil prices have remained in check. "The main reason for this stability is that energy infrastructure has largely been spared from direct attacks thus far and not a single barrel of oil has been lost," Kaneva said.
The number of oil tankers transiting through the Strait of Hormuz remains steady, she noted. The majority of the impact has been confined to the shipping market, reflected in surging insurance rates, she said.
Another sign of an imminent rate cut?
Federal Reserve Governor Michelle Bowman signaled support for a potential rate cut as soon as July. She said risks to the labor market could rise, but inflation appears to be still headed toward the Fed’s 2% goal.
Her comments echoed those of Fed Governor Christopher Waller last week. He suggested the central bank could lower interest rates as soon as next month because he believes inflation from tariffs is likely to be short-lived.
Chicago Fed President Austan Goolsbee has said the Fed could resume rate cuts if the inflation from tariffs remains subdued but didn't offer a timeframe for a potential rate cut.
Lower rates reduce the cost of borrowing, which usually encourages spendng. More spending is seen as a boost for the economy and the stock market.
All ears will be on Fed Chair Jerome Powell's two-day testimony to Congress this week.
Cryptocurrency
Bitcoin initially fell below the key psychological $100,000 level amid jitters from the U.S. strikes on Iran but has since regained the level.
Metaplanet, the Tokyo-listed hotel firm known for its bitcoin acquisition strategy, has acquired 1,111 bitcoin for $117 million. It paid an average of about $105,681 each.
Separately, Norway said it will temporarily ban new data centers that mine cryptocurrency with the most power-intensive technology, a move aimed at conserving electricity for other industries.
Texas also created a Strategic Bitcoin Reserve, the third US state to establish a crypto reserve. Only digital assets with a 24-month average market cap of $500 billion qualify, currently limiting the fund to bitcoin.
Texas is the first state to create a standalone, publicly-funded bitcoin reserve outside the usual state treasury.
Payment processing technology firm Fiserv said it plans to launch a stablecoin and digital-asset platform for banking clients and struck partnerships with Circle and Paypal. Shares of Fiserv rose 4.38%.
Bitcoin was last up 2.21% at $103,217.80.
Corporate news
- Tesla launched its long-awaited robotaxi service over the weekend. Shares of the electric vehicle maker rallied 8.23%.
- Northern Trust was approached by Bank of New York Mellon about merging, The Wall Street Journal reported. Northern Trust shares jumped 8.01%.
- Novo Nordisk reported disappointing study results from its next-generation obesity drug CagriSema. The company also ended its collaboration with Hims & Hers Health. Novo shares lost 5.49% and Hims shares plunged 34.63%.
- Trump Media & Technology Group said its board has approved a stock buyback of up to $400 million. Shares rose fractionally.
(This story was updated with new information.)
Medora Lee is a money, markets, and personal finance reporter at Paste BN. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.