Volatility Eases as Oil Pullback Helps Markets Recover From Lows – US Market Wrap

Volatility moderated across asset classes as oil gave back early gains, helping stocks and bonds rebound from session lows after Israel said it was assisting the US in reopening the Strait of Hormuz.

The S&P 500 erased most of an earlier 1% decline. US crude dropped to around $95 in post-settlement trading. Israeli Prime Minister Benjamin Netanyahu said Iran can no longer enrich uranium or produce ballistic missiles, and suggested the conflict could end sooner than many expect. In late trading, FedEx rose after issuing a bullish outlook.

Treasuries also recovered from their weakest levels of the session after earlier pressure tied to concerns that major central banks may need to stay tighter for longer if inflation accelerates. In the UK, short-dated bond yields jumped after the Bank of England signaled it remains prepared to respond to inflation risks.

Markets continue to react sharply to headlines for clues on how long the war with Iran may last and whether the conflict will widen further.

After three weeks of fighting in the Middle East, energy supply chains have come under severe strain. With the Strait of Hormuz nearly shut, prices for gasoline and jet fuel have surged, shortages of cooking gas have emerged in India, and concerns have grown over diesel and fertilizer supplies.

The US is also exploring ways to ease energy pressures. Treasury Secretary Scott Bessent said Washington is considering removing longstanding sanctions on Iranian oil, while the White House indicated it does not plan to restrict US oil and gas exports.

Iran continued targeting energy infrastructure even after Trump called for restraint. Investors are also preparing for a large options expiration on Friday, with about $5.7 trillion in notional contracts tied to individual stocks, indexes, and exchange-traded funds set to roll off in the quarterly triple-witching event.