Oil markets jolted sharply higher after joint U.S.–Israeli strikes on Iran over the weekend, sending crude prices to their highest levels in a year and raising concerns about rising gasoline costs for American consumers. At the same time, U.S. stock indexes reversed steep early losses and finished the day largely intact, reflecting a split reaction between energy markets and Wall Street investors.
Brent crude climbed 9.3 percent to $79.40 per barrel, marking a 52-week high. U.S. West Texas Intermediate crude rose 9 percent to $73.10 per barrel. At its peak during the session, crude had gained as much as 12 percent before easing later in the day. Even after retreating from intraday highs, oil prices remained elevated, with U.S. crude still up more than 5 percent as traders assessed the risk of further escalation.
The strikes reportedly killed Iran’s Supreme Leader Ayatollah Ali Khamenei. President Donald Trump defended the operation on Monday, saying the military action against Iran “was our last, best chance to strike” to “eliminate the intolerable threats posed by this sick and sinister regime.”
Iranian officials vowed retaliation. Reports of blasts in Dubai and Abu Dhabi fueled concerns that the confrontation could expand across the region. Investors focused closely on the Strait of Hormuz, the narrow waterway that handles roughly 20 percent of global petroleum and liquified natural gas flows. The Iranian government reportedly closed off the strait over the weekend, intensifying fears about shipping disruptions.
A Sunday research note from Wells Fargo cited by CNBC warned that a “prolonged” closure of the strait would result in “an oil shock to $100+ per barrel,” describing it as the “worst-case scenario” for global stock markets. The prospect of such a disruption raised alarms about inflationary spillovers into transportation, food, and utilities.
Further rattling markets, Bloomberg reported that Saudi Arabia’s largest oil refinery at Ras Tanura ceased operations Monday after being struck in a drone attack. “An attack on major energy infrastructure is a nightmare scenario for global markets,” noted Bloomberg, “with maritime traffic through the crucial Strait of Hormuz all but halting.”
Energy analysts signaled that the crude rally is already filtering through to gasoline prices. Petroleum industry analyst Patrick De Haan wrote in a Monday update on his Substack page that gas prices in the United States had already risen by roughly six cents over the past week. He added, “Developments surrounding Iran—particularly any threat to regional production or shipping flows—are likely to remain the dominant driver of oil prices,” and “could keep crude elevated or push it higher if tensions intensify further.”
Iran is the fourth-largest oil producer in OPEC, making its output and shipping routes central to global supply stability. Any sustained disruption could ripple through global energy markets and add pressure to households already facing high costs for essentials. Polling has shown that voters are particularly anxious about the price of groceries and utilities, making fuel prices politically and economically sensitive.
Despite the spike in oil, equity markets staged a notable recovery. The S&P 500 fell as much as 1.2 percent at its lowest point Monday before turning positive and trading up 0.1 percent. The Nasdaq Composite dropped 1.6 percent at its low but later rose 0.5 percent. The Dow Jones Industrial Average was down nearly 600 points at its intraday low before hovering near flat.
Some investors attributed the rebound to oil prices pulling back from session highs, easing fears of a sustained shock. Others pointed to buying in large technology companies seen as financially resilient. Nvidia and Microsoft were up around 2 percent apiece.
Jeff Kilburg, CEO of KKM Financial, said the early reaction had been excessive. “Futures markets overreacted to the Iranian conflict, creating an opportunity to buy the S&P 500 as it neared its 2026 lows,” he said. “We remain in a bull market despite escalating geopolitical tensions.”
Ross Mayfield of Baird suggested that the absence of immediate further escalation was helping stabilize sentiment. He said the market was clawing back losses because “there hasn’t been escalation from here.” He added, “If Iran were going to take the nuclear option of closing the Strait or really trying to do damage to energy infrastructure, we’d have a better sense that that was going to be their path by now.”
Defense contractors rallied as investors anticipated increased military spending. Northrop Grumman advanced around 4 percent, as did RTX, while Lockheed Martin climbed 3 percent. Energy companies including Exxon Mobil and Chevron also saw gains.
Historical data cited in the coverage suggested that markets often recover after geopolitical shocks. According to Wells Fargo data, the S&P 500 typically turns positive within two weeks of a major conflict and is higher by 1 percent on average three months later.
Not all companies moved higher. Shares of Berkshire Hathaway fell roughly 5 percent following weaker earnings. Operating earnings totaled $10.2 billion in the fourth quarter, down more than 29 percent from $14.56 billion a year earlier. Insurance underwriting profits dropped 54 percent to $1.56 billion from $3.41 billion. In his first annual shareholder letter as CEO, Greg Abel wrote that the company’s culture of financial conservatism and disciplined investing will continue “into perpetuity.”
Environmental advocates argued that the episode highlights systemic vulnerabilities tied to fossil fuel dependence. Olivia Langhoff, managing director at 350.org, said, “When global energy security can be upended by a single flashpoint, it shows how unstable and risky our dependence on oil and gas is.” She added, “Renewable energy provides homegrown power that remains secure and affordable regardless of geopolitical shocks.”
Mads Christensen, executive director of Greenpeace International, said, “As long as our world runs on oil and gas, our peace, security and our pockets will always be at the mercy of geopolitics.” He continued, “Increasing output may temporarily ease price pressures, but it does not address the structural vulnerability at the heart of this recurring crisis: the world’s continued dependence on fossil fuels.”
All quotes in this article are verbatim and drawn exclusively from the source material provided.
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