Stocks rebound and oil whipsaws after briefly smashing through $100 per barrel

By John Towfighi, CNN

New York (CNN) — US stocks recovered losses Monday while oil prices settled at their highest level since 2022 as investors grappled with a potential energy crisis caused by the war with Iran.

The Dow closed higher by 239 points, or 0.5%, recouping losses and turning into the green after dropping 886 points earlier. The S&P 500 gained 0.83%, and the Nasdaq Composite rose 1.38%, both recovering from losses earlier in the day.

US crude oil settled higher by 4.26%, to $94.77 per barrel, paring gains after climbing to nearly $120 per barrel late Sunday. Brent crude, the international benchmark, settled up 6.76%, to $98.96 per barrel, after nearly hitting $120.

After settling around 2:30 p.m. ET, oil prices then plummeted as President Donald Trump told CBS he thinks “the war is very complete,” helping ease market jitters and fueling a rebound in stocks.

US crude oil was down 8.76% from its 2:30 p.m. settle price, to $86.47 per barrel, as of 4 p.m. ET. Brent crude was down 9.5% from its settle price, to $89.58 per barrel.

Oil whipsaws as Middle East conflict roils markets

Oil prices Monday traded at their highest level since markets were rocked as Russia invaded Ukraine in 2022. US crude and Brent gained 36% and 27% last week, respectively, before jumping higher Sunday evening when trading opened.

After smashing through $100 per barrel and approaching $120 per barrel Sunday night, oil prices pulled back from their highs after reports that finance ministers from G7 countries were set to meet to discuss the potential joint release of strategic oil reserves.

Oil further pared gains Monday after G7 finance ministers said in a statement they would take “necessary measures” to address soaring oil prices, although Roland Lescure, the French finance minister said G7 countries are “not there yet” on releasing oil reserves.

Brent crude settled higher by nearly 7% — but then dropped sharply after Trump’s comments that the war is “very complete.” The knee-jerk reaction in markets highlights how traders have been on edge.

Nerves of an energy crisis intensified over the weekend as oil producers in the Gulf announced further halts to production, with Bahrain’s national oil company declaring force majeure. Meanwhile, Mojtaba Khamenei, the late Ayatollah’s son, has been named the next supreme leader in Iran.

“Investors were hoping cooler heads would prevail in the Iran war this weekend, and instead, tensions escalated, which is exacerbating last week’s stock market declines and oil price spikes,” Carol Shleif, chief market strategist at BMO Private Wealth, said in a note Monday morning.

It was a day of enormous moves in the oil market: US crude oil prices surged as much as 31%, or $28.50, Sunday night before coming off their high and paring gains Monday. Crude prices fell nearly $25 Monday to settle just under $95 per barrel.

And as of 4 p.m. ET, crude prices were down another $8 from their settle price to $86.47 per barrel.

Concern about energy inflation muddies outlook for stocks

The surge in energy prices across the past week has been weighing on the outlook for stocks. The Dow and S&P are coming off their worst weeks since April and October, respectively. Stocks have been jolted by nerves about the Middle East conflict disrupting the global flow of oil and reigniting inflation at a time when the US labor market appears to be on shaky ground.

The three major US stock indexes are in the red this year. The Dow and Nasdaq are more than 5% off their most recent peaks, while the S&P is down roughly 3% since hitting a record high in late January.

Japan’s Nikkei 225 slumped 5.2% Monday. The slide put the index down more than 10% so far this month, although it is still up 5% this year. Europe’s benchmark Stoxx 600 index fell 0.63%, nearly putting it into the red for this year, after sliding more than 5% last week.

“Investors are clearly in a risk-off mindset as each day delivers headlines announcing a further widening of the conflict,” Sam Stovall, chief investment strategist at CFRA Research, said in a note.

“No one knows if the current crisis will result in a pullback, correction, or bear market,” Stovall said.

The war with Iran has effectively halted the flow of oil through the Strait of Hormuz, the narrow waterway off Iran’s coast through which 20% of global oil consumption flows.

“This chaos in the financial markets is all about the Strait of Hormuz,” Ed Yardeni, president of Yardeni Research, said in a note.

“This oil shock won’t end until ships can sail freely through the Strait,” Yardeni said. “Until then, the financial markets are likely to become increasingly concerned about a 1970s-style stagflation scenario.”

Treasury yields fluctuated and ticked lower after a weak jobs report released Friday showed 92,000 jobs were shed in February. The 10-year Treasury yield ticked down to 4.10% and hovered near its highest level in nearly one month.

The US dollar index fluctuated, pausing gains after a strong run to kick off the month. The dollar this month has benefited from safe haven demand.

Wall Street’s fear gauge, the VIX, fell 14% and hovered at its highest level since November. “Fear” was the sentiment driving markets, according to CNN’s Fear and Greed Index.

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CNN’s Olesya Dmitracova contributed reporting.