Oil Jumps Again as Gulf Tensions Flare, Stocks Take a Breather

The Wall Street Journal, CNBC, AP, Reuters, ABC News, and Market Watch contributed to this report.

Wall Street hit the brakes Monday. After last week’s euphoric run to record highs, investors are starting to second-guess just how much good news is already priced in.

The Dow Jones Industrial Average slipped about 110 points, while the S&P 500 dropped 0.4%. The Nasdaq Composite – coming off a blistering rally – fell 0.5%, suggesting that the recent surge in tech-heavy optimism is losing a bit of steam.

Energy, meanwhile, is back in the spotlight.

Crude prices climbed sharply after fresh friction between the US and Iran. West Texas Intermediate jumped roughly 6% to hover near $89 a barrel, with Brent crude pushing above $95. The trigger: a US seizure of an Iranian-flagged cargo ship in the Gulf of Oman and renewed uncertainty around the Strait of Hormuz, one of the world’s most critical chokepoints.

That waterway has become the market’s pressure valve. It briefly reopened last week, sparking a rally in stocks and a drop in oil. By the weekend, restrictions were back. Traders didn’t miss the signal.

Still, the reaction feels restrained compared to earlier phases of the conflict. Oil has surged before – at one point Brent shot past $119 – and equities have already proven surprisingly resilient. The S&P 500 remains well above where it was before the war began.

That resilience is shaping how investors are reading the situation now. There’s tension, yes, but also a widespread belief that a worst-case scenario may never materialize.

Some on Wall Street are already moving on. David Wagner of Aptus Capital Advisors summed up the mood bluntly, saying the Iran conflict is “in the rearview mirror” for markets. That might be optimistic, but it helps explain why stocks aren’t falling harder.

Under the surface, the market is still finding pockets of strength. Software names pushed higher, lifting the iShares Expanded Tech-Software Sector ETF by more than 1%. Strong earnings are doing a lot of the heavy lifting. Corporate profits for early 2026 have largely beaten expectations, and forecasts keep inching upward despite geopolitical noise.

That earnings story matters. Roughly 90% of S&P 500 companies that have reported so far have topped estimates, putting the index on track for double-digit profit growth year over year. Big names like UnitedHealth Group, Tesla, and Procter & Gamble are up next, and their results could set the tone for the days ahead.

Meanwhile, companies that burn through fuel are feeling the squeeze. Airlines and cruise operators slid as oil climbed, reversing some of last week’s gains.

The broader takeaway? Markets are wobbling, not cracking.

There’s a clear tension between two forces: geopolitical risk on one side, and strong corporate performance on the other. For now, earnings are winning that tug-of-war. But with a ceasefire deadline between the US and Iran fast approaching, traders aren’t getting too comfortable.

The rally hasn’t broken. It’s just catching its breath.