Stocks rise and oil prices ease as Wall Street keeps yo-yoing because of the war with Iran

Stocks climbed on Wall Street Wednesday as investors responded to news of a potential pause in the conflict between the United States and Iran, while oil prices retreated from recent highs.

The S&P 500 rose 0.5%, though it pared back from an earlier 1.2% jump in the first half-hour of trading. The Dow Jones Industrial Average gained 257 points, or 0.6%, while the technology-heavy Nasdaq composite advanced 0.8%.

Market optimism stemmed from reports that the United States had delivered a plan to Iran aimed at pausing hostilities. However, the rally lost some momentum as uncertainty persisted. Iran did not confirm receiving the U.S. proposal and publicly dismissed diplomatic efforts while continuing attacks on Israel and Gulf Arab countries. Adding to the complex picture, the U.S. military announced deployments of additional paratroopers and Marines to the region.

Financial markets have experienced significant volatility since the conflict escalated three weeks ago, with sudden momentum shifts occurring sometimes hourly as traders attempt to gauge the duration and intensity of the confrontation.

The tentative optimism extended globally, with European and Asian markets posting solid gains. London, Paris, and Shanghai all saw increases exceeding 1%, while Japan’s Nikkei 225 surged an impressive 2.9%.

In the energy markets, Brent crude oil dropped 4.4% to below $96 per barrel on hopes that reduced tensions could unblock critical shipping lanes in the Persian Gulf. The conflict has disrupted global oil transportation, with numerous tankers currently stranded outside the strategically vital Strait of Hormuz off Iran’s coast. These disruptions had previously pushed Brent crude prices to nearly $120 per barrel.

Bond markets also reflected the more optimistic sentiment, with Treasury yields easing. The yield on the benchmark 10-year Treasury fell to 4.34% from 4.39% the previous day, though it remains significantly higher than its pre-conflict level of 3.97%. The retreat in yields could potentially moderate increases in borrowing costs for mortgages and other loans, potentially alleviating pressure on the broader economy.

Gold, which had been one of the worst-performing assets during the conflict, rebounded 3.3% to reach $4,546.80 per ounce. The precious metal had briefly approached $5,400 earlier this month before Treasury yields surged on concerns that elevated oil prices would fuel inflation and potentially delay interest rate cuts by the Federal Reserve.

Companies particularly sensitive to fuel costs benefited from the drop in oil prices. Norwegian Cruise Line Holdings gained 3.2%, while United Airlines rose 3.3%. Transportation and travel companies often see their profitability directly impacted by energy price fluctuations, as fuel represents a significant portion of their operational expenses.

In corporate news, semiconductor designer Arm Holdings saw its U.S.-traded shares surge 15.5% after unveiling a new suite of chips designed for data centers and artificial intelligence applications. The UK-based company has positioned itself to capitalize on the growing demand for specialized AI processing capabilities.

Online brokerage platform Robinhood Markets jumped 6.6% after announcing its board had authorized a share repurchase program of up to $1.5 billion. Such buyback initiatives typically signal management confidence and can boost per-share earnings.

In the pharmaceutical sector, Terns Pharmaceuticals rose 5.3% following news that pharmaceutical giant Merck would acquire the oncology-focused company in an all-cash transaction valued at $6.7 billion. Merck shares added 1.5% on the announcement.

Not all stocks participated in the rally, however. Swiss athletic footwear company On Holding dropped 7.8% after announcing the departure of CEO Martin Hoffmann, creating uncertainty about the company’s future leadership and strategic direction.

The market’s reaction illustrates investors’ sensitivity to geopolitical developments, particularly those affecting energy supplies and global trade routes, as they assess the broader economic implications of the ongoing conflict.