U.S. stocks moved higher during Tuesday's midday trading, with major indices posting gains amid volatile trading activity, extending the rebound from the previous session. Market sentiment improved as oil prices retreated and traders continued to monitor developments in the Iran conflict.
The Dow Jones Industrial Average rose 195.65 points, or 0.41%, to 47,936.45. The Nasdaq Composite gained 116.67 points, or 0.51%, reaching 22,812.62. The S&P 500 added 21.74 points, or 0.32%, settling at 6,817.73.
Oil prices experienced a sharp decline. After a recent surge, crude prices fell sharply on Tuesday. Traders attributed the drop to expectations that a group of nations would tap emergency oil reserves to alleviate supply disruptions caused by the conflict. West Texas Intermediate (WTI) crude futures were recently down 10%, trading near $84 per barrel. Brent crude fell approximately 10%, to around $88 per barrel.
The International Energy Agency (IEA) stated it would hold a meeting later on Tuesday to discuss releasing oil reserves. IEA Executive Director Fatih Birol said in a statement that member countries would "assess current supply security and market conditions to inform a subsequent decision on whether to release emergency stocks to the market."
Previously, the Group of Seven (G7) nations—Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States—discussed the release of strategic petroleum reserves on Tuesday but had not yet reached a decision.
U.S. stocks experienced significant volatility throughout the session. As crude prices moderated, the Dow Jones Industrial Average erased an early-session loss of more than 800 points. This reversal was fueled by comments from the U.S. President on Monday, suggesting the conflict could end soon. He later stated, "We have made significant progress toward our military objectives."
Meanwhile, the U.S. Secretary of Defense stated on Tuesday, "Today will be our most intense day of strikes inside Iran." He also described Iran as "suffering a devastating defeat."
With oil remaining a key market focus, Mike Sanders of Madison Investments suggested that even if oil prices fall into the $70s or even $60s per barrel, the impact on the economy might not be severe. The portfolio manager and head of fixed income noted, "If oil prices remain elevated—and considering all the uncertainties, the market premium might even warrant higher levels—I do think it will have an effect. It will take some time for that to be digested."
In a Tuesday report, Paul Gooden, Global Head of Natural Resources at Ninety One, indicated that if market disruptions persist, oil prices could surge above $120 per barrel. He commented, "Prices could spike further before high levels begin to suppress demand. At that point, consumers and businesses will alter behavior: reducing driving, cutting back on air travel, or switching to alternative energy sources. This process of 'demand destruction' has historically acted as a natural ceiling preventing sustained price spikes."
