United States benchmark indices closed mixed on Monday (Tuesday AEDT) as investors tracked escalating U.S. and Israeli military action against Iran, rising oil prices and fresh economic data pointing to renewed inflation pressures.
The Dow Jones Industrial Average slipped 73.1 points or 0.2% to finish at 48,904.8, the S&P 500 edged up 2.7 points or 0.04% to 6,881.6, while the Nasdaq Composite gained 80.7 points or 0.4% to close at 22,748.9.
Investor sentiment was dominated by developments in the Middle East after joint U.S.-Israeli strikes killed Iran’s Supreme Leader, Ali Khamenei, marking one of the most consequential moments for the Islamic Republic since 1979.
President Donald Trump defended the operation, saying it “was our last, best chance to strike” to “eliminate the intolerable threats posed by this sick and sinister regime”.
He added that he believes the U.S. will “easily prevail” and anticipates the conflict will last four to five weeks, though he cautioned it could continue “far longer than that”.
Iranian officials vowed forceful retaliation, heightening fears the confrontation could broaden across the region after explosions were reported in Dubai and Abu Dhabi.
Oil prices spiked as investors assessed the risk of supply disruption. U.S. crude rose as much as 12% at its intraday high before paring gains. Brent futures remained up nearly 8% after an Iranian Revolutionary Guard commander declared the Strait of Hormuz — the world’s most important chokepoint for crude flows — closed.
Iran is the fourth-largest oil producer in OPEC, and a sustained interruption through Hormuz would have far-reaching implications for global energy markets, potentially reigniting inflation pressures just as central banks seek to stabilise price growth.
ANZ analysts said in a note: “The rise in the oil price represents a negative supply-side shock, which raises inflation and downside growth risks. The outcome for economies will depend on how long the conflict lasts, whether it intensifies and broadens or whether it heralds focused negotiations and a resolution with Iran.
"Central bankers typically look through short-lived supply-side shocks, and we expect this framework will remain. However, if energy market supply fundamentals point to persistent inflation risks, central banks will be attentive.”
The rebound in crude prices supported energy stocks, with Exxon Mobil up 1.1% and Chevron gaining 1.5%.
Defence stocks also rallied amid expectations of increased military spending. Northrop Grumman jumped 6%, while Lockheed Martin advanced 2.8%.
In the technology sector, Nvidia rose 3%, and Microsoft gained 1.5%, helping the Nasdaq outperform.
On the economic front, the February ISM manufacturing index eased 0.2 points to 52.4. New orders declined 1.3 points to 55.8, while employment rose 0.7 points to 48.8.
The prices paid index climbed sharply by 11.5 points to 70.5, its highest reading since mid-2022. The gauge, which measures the cost of raw materials, reflected higher steel and aluminium prices alongside the impact of tariffs.
U.S. Treasury yields moved higher, with the 10-year yield rising to 4.036%, while the 2-year yield climbed to 3.473%, increases of 2.2% and 2.7%, respectively, on the session.
