Stocks rebound as oil pulls back from war-driven surge

Markets tried to find their footing Wednesday as oil prices eased and new jobs and services data offered fresh signs the U.S. economy remained resilient even as the U.S.-Iran conflict entered its fifth day.

The S&P 500 rose 0.8%, the Dow Jones industrial average added 238 points and the Nasdaq composite gained 1.3% after two sessions of sharp swings driven largely by crude prices.

History suggests patience may be warranted. The U.S. stock market has a long track record of shaking off military conflicts in the Middle East relatively quickly, and some market strategists invoked that pattern Wednesday as they urged clients to hold steady through the volatility, though that guidance comes with the caveat that oil prices don’t jump too high or stay there for long.

The strength followed a scary start to Wednesday, when South Korea’s Kospi stock index plunged 12.1%, in what the Associated Press described as its worst loss on record. Uncertainty about the conflict has sent prices in financial markets careening up and down this week, with most taking their cues from what the price of oil is doing.

Oil prices moderated as trading moved westward from Asia to Europe and across the Atlantic. After briefly topping $84 per barrel, the price for a barrel of Brent crude, the international standard, settled at $81.40, back to where it was a day earlier. A barrel of benchmark U.S. crude rose 0.1% to $74.66.

Stocks also got a boost from signs of strength for the U.S. economy.

One report said growth for U.S. businesses in the real estate, finance and other services industries accelerated last month at the fastest pace since the summer of 2022. Encouragingly for inflation, it also said prices for such businesses are increasing at a slower rate, at least before the conflict with Iran began.

A second report suggested U.S. employers outside of the government picked up their hiring last month. That could be a hopeful signal for the more comprehensive report coming Friday from the U.S. government about the overall job market.

In financial markets, worries are centered on how long the conflict with Iran could last, how high inflation will go because of more expensive oil and how much corporate profits will sink because of it.

Not everyone is optimistic.

“I think the Iran situation is getting out of hand, and I think that U.S. President Donald Trump miscalculated enormously,” said Francis Lun, CEO of Venturesmart Asia. “The situation is very grim.”

On Wall Street, a mix of companies helped drive Wednesday’s rise.

Stocks enmeshed in the crypto industry climbed as bitcoin’s price rebounded back above $73,000. Coinbase Global jumped 14.6%, and Robinhood Markets rallied 8.1%.

Retailers and travel companies strengthened with hopes a solid economy and easing gasoline prices will leave customers with more to spend.

Wednesday’s gains came as the U.S.-Iran conflict entered its fifth day since hostilities began Feb. 28. The U.S. military said it launched Operation Epic Fury on that date, with U.S. and Israeli forces striking Iranian military and Revolutionary Guard command-and-control facilities. Mr. Trump said in a social media post that Supreme Leader Ayatollah Ali Khamenei was killed in the strikes; Iranian state media also reported his death. Iranian state media said several other senior officials were killed as well.

The private-sector jobs report that helped lift markets Wednesday was released by ADP, which said U.S. employers outside the government picked up hiring in February. Friday’s more comprehensive Labor Department report will offer a fuller picture of the job market’s health heading into the conflict.

The oil market, and by extension, the broader conflict-driven trade, continues to pivot on the fate of the Strait of Hormuz, the narrow waterway through which about 20 million barrels per day flowed in 2024, representing roughly one-fifth of global petroleum liquids consumption, according to the U.S. Energy Information Administration. Tanker traffic through the strait was disrupted earlier this week amid the fighting. Mr. Trump said in a social media post Tuesday that U.S. Navy escorts for tankers would be deployed if necessary, a pledge that helped cool crude prices.

OPEC+ said eight member countries, including Saudi Arabia and Russia, agreed Sunday to increase production to help offset any drop in Iranian exports. Analysts noted, however, that the additional output the cartel pledged pales next to the volumes at stake if the strait remains disrupted for long.

While markets have historically recovered from geopolitical shocks, analysts cautioned that a prolonged disruption to oil supplies could complicate that pattern, particularly if higher energy costs feed into broader inflation at a time when the Federal Reserve’s interest rate path is already uncertain.