US stocks rallied and oil prices tumbled Monday on hopes that Iran will not disrupt the global flow of crude, even with the United States' entry into its war with Israel.
- The S&P 500 rose 57.33 points, or 1%, to 6,025.17.
- The Dow Jones Industrial Average gained 374.96 points, or 0.9%, to 42,581.78.
- The Nasdaq composite rose 183.56 points, or 0.9% to 19,630.9.
A barrel of benchmark US oil swung toward $68 on Monday after briefly topping $78 Sunday night, the
AP reports. Iran has the ability to block access to much of the world's oil, but it would also hurt its own economy by doing so.
Brent crude, the international standard, dropped 5.3% to $71.50 per barrel. That brought oil prices nearly back to where they were before the fighting began over a week ago, when a barrel of US crude was just above $68. The drop in prices accelerated sharply Monday after Iran announced a missile attack on Al Udeid Air Base in Qatar, which the US military uses. Iran said it matched the number of bombs dropped by the United States on Iranian nuclear sites this past weekend, which could be a potential signal of a desire to deescalate the conflict. Perhaps most importantly for financial markets, the retaliation did not seem to target the flow of oil.
Iran is a major producer of crude, and it could also try to block the Strait of Hormuz off its coast, through which 20% of the world's daily oil needs passes on ships.
- Several analysts said Iran would likely not close the waterway because Iran itself uses the strait to move its own crude, mostly to China, and it needs the revenue made from such sales of oil. "It's a scorched-earth possibility, a Sherman-burning-Atlanta move," said Tom Kloza, chief market analyst at Turner Mason & Co. "It's not probable."
- Andy Lipow, a Houston analyst covering oil markets for 45 years, said countries are not always rational actors and that he wouldn't be surprised if Tehran lashed out for political or emotional reasons. "If the Strait of Hormuz was completely shut down, oil prices would rise to $120 to $130 a barrel," said Lipow, predicting that that would translate to about $4.50 a gallon at the pump and hurt consumers in other ways. "It would mean higher prices for all those goods transported by truck, and it would be more difficult for the Fed to lower interest rates," he said.
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On Wall Street, Elon Musk's Tesla was the single strongest force pushing the S&P 500 higher after jumping 8.2%. The electric-vehicle company began a test run on Sunday of a small squad of self-driving cabs in Austin, Texas. It's something that Musk has long been touting and integral to Tesla's stock price being as high as it is. Hims & Hers Health tumbled 34.6% after Novo Nordisk said it will no longer work with the company to sell its popular Wegovy obesity drug. Novo Nordisk's stock that trades in the United States fell 5.3%.
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