Oil prices leap on worries about Iran war, while US stocks trim their sharp losses

Asia mar­kets in Hong Kong and Japan re­act af­ter the U.S. and Is­rael’s at­tacks on Iran Oil prices are leap­ing Mon­day with wor­ries that the Iran war will clog the glob­al flow of crude and make in­fla­tion even worse. U.S. stocks, mean­while, are swing­ing be­tween sharp loss­es and a tiny gain.

Crude prices jumped more than 5%, which will like­ly mean high­er prices soon at gaso­line pumps. That would hurt not on­ly U.S. house­holds, whose spend­ing makes up the bulk of the U.S. econ­o­my, but al­so busi­ness­es with big fu­el bills.

The S&P 500 fell as much as 1.2% at the start of trad­ing, and cruise lines and air­lines led the way low­er. But the in­dex quick­ly erased most of the loss, in part be­cause past mil­i­tary con­flicts have not led to sus­tained drops for mar­kets, and it fell 0.1% in af­ter­noon trad­ing.

The Dow Jones In­dus­tri­al Av­er­age was down 64 points, or 0.1%, as of 1:39 p.m. East­ern time, and the Nas­daq com­pos­ite was 0.3% high­er.

Prices for nat­ur­al gas re­mained high­er, mean­while, which could raise heat­ing bills for the re­main­der of the win­ter, af­ter a ma­jor sup­pli­er of liq­ue­fied nat­ur­al gas to Eu­rope said it would stop pro­duc­tion be­cause of the war. Gold climbed 1.2% as in­vestors looked for safer things to own and as U.S. of­fi­cials tried to per­suade the world that this war will not last for­ev­er.

“This is not Iraq,” U.S. De­fense Sec­re­tary Pe­te Hegseth said Mon­day. “This is not end­less.”

Typ­i­cal­ly, Trea­sury yields al­so fall when in­vestors are feel­ing ner­vous. But yields in­stead climbed, in part be­cause high­er oil prices will put up­ward pres­sure on in­fla­tion, which is al­ready worse than near­ly every­one would like. That could tie the Fed­er­al Re­serve’s hands and keep it from cut­ting in­ter­est rates.

Low­er in­ter­est rates can boost the econ­o­my and job mar­ket, while al­so wors­en­ing in­fla­tion. High­er rates can do the op­po­site.

Past mil­i­tary con­flicts in the Mid­dle East have not caused long-term drops for mar­kets. For this war to knock down U.S. stocks in a sig­nif­i­cant and sus­tained way, the price of oil would per­haps need to jump above $100 per bar­rel, ac­cord­ing to strate­gists at Mor­gan Stan­ley led by Michael Wil­son.

Oil prices are still well be­low there. A bar­rel of bench­mark U.S. crude rose 5.7% to $70.85. Brent crude, the in­ter­na­tion­al stan­dard, climbed 6.2% to $77.42 per bar­rel.

That helped the U.S. stock mar­ket pare some of its steep, open­ing loss. Mor­gan Stan­ley says the S&P 500 has climbed an av­er­age of 2%, 6% and 8% in the one, six and 12 months fol­low­ing “geopo­lit­i­cal risk events” his­tor­i­cal­ly. That’s go­ing back to the Ko­re­an War, which be­gan in 1950, and the 1956 Suez cri­sis.

At the mo­ment, though, fear is still run­ning through mar­kets.

Stocks of air­lines were some of Mon­day’s sharpest losers. Not on­ly do high­er oil prices threat­en their al­ready big fu­el bills, the fight­ing in the Mid­dle East al­so closed air­ports and left trav­el­ers strand­ed.

Unit­ed Air­lines fell 2.9%, and Amer­i­can Air­lines lost 3.9%.

Nor­we­gian Cruise Line Hold­ings fell even more, 9.1%. It needs cus­tomers to have plen­ty of cash to spend af­ter pay­ing for their gaso­line bills and oth­er es­sen­tials.

The cruise op­er­a­tor al­so re­port­ed weak­er rev­enue for its lat­est quar­ter than an­a­lysts ex­pect­ed, though its prof­it was bet­ter. Its fore­cast for prof­it this up­com­ing fis­cal year was low­er than an­a­lysts ex­pect­ed.

Ho­tels, dis­count re­tail­ers and oth­er com­pa­nies that ben­e­fit when cus­tomers have more cash in their pock­et from low­er fu­el bills al­so lagged the mar­ket. MGM Re­sorts fell 3.1%, and Dol­lar Tree lost 4.1%.

Stocks in the hous­ing in­dus­try al­so strug­gled as high­er Trea­sury yields could trans­late in­to more ex­pen­sive mort­gage rates. Paint com­pa­ny Sher­win-Williams fell 2.1%, and home­builder D.R. Hor­ton lost 4.1%.

Help­ing to lim­it Wall Street’s loss­es were oil com­pa­nies, which ben­e­fit­ed from the ris­ing prices for crude. Exxon Mo­bil climbed 1.2%, and Oc­ci­den­tal Pe­tro­le­um rose 1.6%.

Com­pa­nies that make equip­ment for the mil­i­tary al­so strength­ened. Lock­heed Mar­tin climbed 2.8%, and RTX ral­lied 4%.

Palan­tir Tech­nolo­gies, whose soft­ware helps glob­al de­fense agen­cies, jumped 6.5% for the biggest gain in the S&P 500.

Big Tech stocks al­so helped to sup­port the mar­ket. Nvidia rose 2.9% and was the strongest sin­gle force push­ing up­ward on the S&P 500.

In stock mar­kets abroad, in­dex­es fell across much of Eu­rope and Asia. Ger­many’s DAX lost 2.6%, France’s CAC 40 fell 2.2% and Hong Kong’s Hang Seng dropped 2.1% for some of the world’s larg­er loss­es.

Stocks in Shang­hai were an out­lier and rose 0.5%.

In the bond mar­ket, the yield on the 10-year Trea­sury rose to 4.05% from 3.97% late Fri­day. A re­port show­ing growth for U.S. man­u­fac­tur­ing was bet­ter than econ­o­mists ex­pect­ed last month al­so helped to lift yields. —NEW YORK (AP)

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Sto­ry by STAN CHOE | As­so­ci­at­ed Press

AP Busi­ness Writ­ers Matt Ott and Elaine Kurten­bach con­tributed.