Major US equities staged a dramatic comeback on Monday as traders debated the effects of the Iran conflict and widening turmoil in the Middle East.
Traders on Wall Street had about two days to assess the impact the Iran conflict would have on the broader region after co-ordinated US-Israeli strikes resulted in the death of Iran's supreme leader Ayatollah Ali Khamenei.
Retaliatory strikes by Iran on Arab nations led to a jump in oil prices, and the potential closure of the Strait of Hormuz threatened to disrupt the global energy supply.
The UAE, Qatar, Saudi Arabia, Bahrain, Jordan and Kuwait condemned Iran's strikes on the region, saying in a joint statement that the Arab states “stand united” in defending their citizens and sovereignty.
The tech-heavy Nasdaq Composite gained 0.36 per cent, while the S&P 500 finished nearly flat, climbing 0.04 per cent.
The Dow Jones Industrial Average, which was down nearly 600 points earlier in the session, ended the day 73 points – or 0.15 per cent – lower when the closing bell rang on Wall Street at 4.30pm ET.
The CBOE Volatility Index – Wall Street's so-called fear gauge – eased off from its three-month high earlier in the day and was last up 1.49 points at 21.35.
“It actually surprises me there hasn't been a spectacular sell-off. It's been pretty much almost like it's getting absorbed within one day of trading, which is unprecedented,” said Peter Andersen, founder of Andersen Capital Management.
Gains in technology and defence stocks helped boost markets, with Nvidia and Microsoft gaining 2.93 and 1.43 per cent respectively. Shares in Palantir were up 5.78 per cent, while Lockheed Martin and RTX climbed 3.37 per cent and 4.71 per cent.
Airlines were one of the sectors most affected by tension in the region, with several carriers halting flights in response to Iran launching attacks against Gulf nations. Delta and United Airlines fell 2.24 and 2.91 per cent, respectively, while American Airlines dipped 4.21 per cent.
US President Donald Trump on Monday said the White House projected the conflict to last “four to five weeks, but we have capability to go far longer than that".
“Whatever the time is, it’s OK. Whatever it takes,” he said during an event at the White House.
However, fears persist that a prolonged conflict could bleed into financial markets.
“A quick resolution should be greeted with a market recovery. If the conflict is not resolved quickly or if it escalates, it would likely cause a sharper and longer-lasting sell-off in stock prices,” Sean Clark, chief investment officer at Clark Capital Management Group, wrote to clients.
