US markets make sharp rebound as crude oil prices slump below $90 per barrel

The US stock market careened through a manic Monday, going from a steep early loss to a solid gain as worries turned into hope that the war with Iran may not last that long. Oil prices whipped from nearly $120 per barrel, their highest since 2022, back toward $90.

The S&P 500 dropped as much as 1.5% in the morning before flipping to a gain of 0.8%. The Dow Jones Industrial Average clawed back a plunge of nearly 900 points to rise 239 points, or 0.5%, while the Nasdaq composite climbed 1.4%.

Markets made their remarkable reversals during the last hour of Wall Street's trading after President Donald Trump told CBS News that he thinks "the war is very complete, pretty much".

That calmed worries that had built earlier in the morning, when the price for a barrel of Brent crude, the international standard, briefly touched $119.5. It had not been that expensive since the summer of 2022, after Russia invaded Ukraine.

Concerns have focused in particular on the Strait of Hormuz, a narrow waterway off Iran's coast that a fifth of the world's oil sails through on a typical day. Iran had earlier threatened to set fire to ships sailing the strait.

If the strait remains closed for only a few weeks, the price of oil could push to $150 per barrel or higher, according to oil and gas strategists at Macquarie Research.

A barrel of Brent crude pulled back to settle at $98.96 in the afternoon and then kept falling afterwards below $90. A barrel of benchmark US crude touched $119.48 during the morning, then pulled back to settle at $94.77 and then sank toward $85.

The US stock market has a history of bouncing back relatively quickly from past military conflicts, as long as oil prices do not stay too high for too long. Some professional investors continue to suggest that drops in prices for stocks could ultimately offer opportunities to buy them at cheaper levels before they rise again.

"We continue to believe that the current acute shortage of oil will be reversed in the coming months as new supply comes online and oil should drop significantly," according to Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute.

Even with all the recent swings in the market, the S&P 500 index that sits at the heart of many 401(k) accounts is still within 3% of its record set in January.

All told, the S&P 500 rose 55.97 points to 6,795.99. The Dow Jones Industrial Average added 239.25 to 47,740.8, and the Nasdaq composite gained 308.27 to 22,695.95.

To be sure, prices could reverse again in the coming days given all the uncertainties about the war. That is what happened through the huge swings that rocked Wall Street last week.

In stock markets abroad, where economies are more dependent on the import of oil and natural gas, stocks fell sharply before Trump's comments were published. South Korea's Kospi sank 6%, Japan's Nikkei 225 tumbled 5.2% and France's CAC 40 dropped 1%.

Trump's comments came after he said late on Sunday that high oil prices at the moment were worth the cost.

"Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, are a very small price to pay for USA, and World, Safety and Peace," he said in a posting on his social media network.

In the bond market, the yield on the 10-year Treasury fell to 4.1% from 4.15% late on Friday.

Worries about high inflation and oil prices are pushing upward on Treasury yields, and the 10-year yield briefly rose above 4.2% early on Monday.

But worries about a potentially slowing economy are pulling downward at the same time. On Friday, a discouragingly weak report on the US job market showed that employers cut more jobs last month than they added.

Yields then slid late in the day when oil prices eased.