US stocks mostly overcame early losses as energy prices trimmed their surge, and traders bought the dip in anticipation that the market will soon overcome the impact of the latest conflict in the Middle East.
The S&P 500 swung from an opening loss of around 1.2% to a closing gain of 0.04%. The Nasdaq Composite led with a rise of 0.36% as traders pivoted into cash-rich mega-companies such as Microsoft and Nvidia. The Dow Jones Industrial Average dipped 73 points or 0.15%.
Stocks quickly climbed off their lows as buyers took advantage of the opening weakness. "Market participants think this is all just temporary and that the problems in the oil patch will disappear," Bill Smead, founder and chairman of Smead Capital Management, told Reuters. “Futures markets overreacted to the Iranian conflict, creating an opportunity to buy the S&P 500 as it neared its 2026 lows,” Jeff Kilburg, CEO of KKM Financial, told CNBC. “We remain in a bull market despite escalating geopolitical tensions.”
US and Israeli missile strikes against Iran continued overnight for a third day. President Donald Trump said US airstrikes could continue for four or five weeks, but potentially longer. More than 500 Iranians have reportedly been killed. There were also more than 50 casualties in Lebanon after Israel responded to rocket attacks from Hezbollah. Iran's security chief said Tehran will not negotiate with the US.
Oil settled more than 6% ahead but below session highs amid uncertainty over how long production from the Middle East will be disrupted by the conflict. Brent crude settled US$4.87 or 6.68% ahead at US$77.74 a barrel after trading briefly above US$80 at an eight-month high. The US oil benchmark, West Texas Intermediate, settled US$4.21 or 6.28% higher at US$71.23. JPMogan Chase forecast crude prices could hit US$120 a barrel if the conflict lasts more than three weeks. “On Sunday, March 1, vessel transit through the Strait of Hormuz slowed to a near standstill, marking the first near complete halt in its modern history,” Natasha Kaneva, head of global commodities research at J.P. Morgan, told Barron's. “We estimate that if the conflict lasts more than three weeks, GCC [Gulf Cooperation Council] oil producers would exhaust storage capacity and would be forced to shut in production... Under this scenario, Brent could trade in the $100-$120 range.” The S&P energy sector jumped 1.93%.
Historical data from Wells Fargo confirm Wall Street has in the past quickly moved past geopolitical conflicts. The S&P 500 was typically higher two weeks after the start of a major conflict and ahead by an average 1% three months on.
Investors turned to some of the Magnificent Seven group of market leaders, energy producers and military suppliers. "When people get scared, they go back to what is comfortable," Smead Capital Management's Bill Smead told Reuters. The S&P tech sector firmed 0.91% as Nvidia gained 2.93% and Microsoft added 1.48%.
Four of eleven sectors posted gains: energy, industrials, tech and real estate. Besides travel companies and airlines, the night's biggest drags were health, utilities and consumer stocks as US treasury yields surged.
Gold lost some of its initial "safe haven" gains as profit-taking set in as the price pushed nearer record levels and the US dollar index jumped almost 1%. Spot gold was lately up US$49.19 or 0.93% at US$5,327.20 an ounce after initially gaining more than 2%. US gold futures settled 1.2% ahead at US$5,311.60. Spot gold hit an all-time high of US$5,594.82 on January 29. The NYSE Arca Gold Bugs index of US miners eased 0.42%. Silver, platinum and palladium declined. Spot silver was lately down US$4.31 or 4.59% to US$89.51 after touching its highest since January 30.
Aluminium was the only industrial metal to rise overnight on the London Metal Exchange as buyers anticipated significant disruption to supplies from the Middle East. "Aluminium climbs on concerns that a critical supply route for Middle Eastern producers will be disrupted by conflict in a region responsible for a significant chunk of global output," Neil Welsh at Britannia Global Markets told Reuters. "The region accounts for about nine per cent of the world's aluminium production capacity and prices have typically been sensitive to spikes in regional tensions." Benchmark aluminium on the London Metal Exchange rallied 1.43% to US$3,185 per metric ton. Other metals fell amid expectations higher energy prices due to the conflict will undermine global economic growth. "We should expect global investment sentiment to falter, undermining industrial metals demand growth - including copper," Panmure Liberum analyst Tom Price wrote. LME copper, nickel and tin all lost at least 1.9%.
Iron ore overcame an early dip triggered by production curbs in China's major steelmaking region. Authorities in Tangshan declared a level-two emergency on Sunday to combat a forecast deterioration in air quality, a measure that typically forces steel mills to reduce production. Benchmark ore on the Dalian Commodity Exchange flipped a morning loss to a gain of 0.87% at US$109.63 per metric ton in daytime trade.
