U.S. stocks remained steady on Monday, recovering from early losses during a volatile session following U.S. and Israeli air strikes on Iran, which had unsettled global markets. Investors showed enthusiasm in buying the dip, with a strong appetite for AI-focused shares.
Gains in energy, technology, and defense stocks helped offset losses in other sectors. The Dow Jones Industrial Average fell by 0.15% to 48,904.78 points, while the S&P 500 edged up by 0.04% to 6,881.60 points. The Nasdaq Composite increased by 0.36% to 22,748.86 points.
Alex Morris, CEO of F/m Investments, noted that investor confidence in U.S. markets and optimism regarding productivity gains from artificial intelligence helped mitigate concerns over rising oil prices and geopolitical instability. “The overall situation in the Middle East doesn’t significantly impact the average American stock the way we measure,” Morris stated, emphasizing the U.S. market’s strong focus on technology. “I don’t think the average market participant is greatly affected by the conflict until oil prices reach $100 a barrel, which would be an emotional trigger.”
The coordinated U.S. and Israeli strikes on Iran over the weekend resulted in the death of Tehran’s Supreme Leader Ayatollah Ali Khamenei, sending shockwaves through global markets. Oil prices surged, and most international stock indices closed lower.
Despite the initial selloff, bargain hunting emerged among U.S. investors, reflecting an expectation that the conflict’s disruptions will be limited. “Market participants believe this is temporary and that the problems in the oil sector will subside,” commented Bill Smead, founder and chairman of Smead Capital Management.
The conflict initially boosted defense shares and energy prices while pressuring travel and interest-sensitive sectors. Investors later gravitated towards technology stocks, assessing how long the Middle East conflict might last and its implications for inflation and Federal Reserve policy. Smead noted that investors were reverting to familiar, high-performing stocks like Nvidia, the Magnificent Seven technology stocks, and defense sectors. “When people get scared, they return to what is comfortable,” he said.
Several oil and gas facilities in the Middle East halted production. U.S. crude prices settled up 6% at $71.23 per barrel after having risen twice as much during the session. Brent crude settled at $77.74 per barrel, up 6.68%.
Defense stocks also received a boost, with the main U.S. defense equity benchmark, the Dow Jones U.S. Defense Index, trading higher.
President Donald Trump told CNN that the “big wave” is yet to come, although some Middle Eastern countries were urging U.S. allies to push for a swift end to the conflict.
AES Corp fell 17.8% after a consortium led by BlackRock-owned Global Infrastructure Partners and private equity firm EQT AB agreed to acquire the utilities company for $33.4 billion at a discount to its last closing price.
