U.S. stocks tumbled and energy prices soared Tuesday as fears spread through global markets that the Iran war may bring prolonged disruption.
The S&P 500 and Nasdaq Composite both closed down around 1%, while the Dow wrapped up the trading session by falling more than 400 points.
Earlier in the day, stocks faced steeper losses. At the lows earlier in the session, the S&P 500 declined as much as 2.5% and the Dow plunged 1,277 points. The Nasdaq was down as much as 2.7%.
Meanwhile, energy prices continued to soar after posting a large jump Monday.
Earlier in the day, U.S. crude oil traded higher by 8%, bringing its total increase since Sunday night to more than 13% and pushing prices to their highest since January 2025. The international crude oil benchmark also jumped sharply to its highest level since July 2024.
However, later in the day Trump said on Truth Social that he had ordered the U.S. Development Finance Corp. to provide "political risk insurance and guarantees for the Financial Security of ALL Maritime Trade, especially Energy, traveling through the Gulf."
"If necessary, the United States Navy will begin escorting tankers through the Strait of Hormuz," Trump added in the social media post.
Oil nearly erased its gain for the day on that announcement, but then resumed climbing again.
As of 4 p.m. ET, U.S. crude oil was still up about 4%.
The reaction came as President Donald Trump indicated the U.S.-Israeli operation may last weeks. Iran’s retaliatory attacks across the Middle East have hit U.S. embassies and Gulf oil facilities, and brought shipping through the Strait of Hormuz, a key waterway for global fuel supplies, to a near standstill.
The conflict has also caused huge travel disruptions, with tens of thousands of people and air cargo stranded in popular destinations like Dubai, in the United Arab Emirates, that have been targeted in strikes by Tehran.
The soaring price of crude oil has also pushed retail gasoline prices higher. As of Tuesday afternoon, the average price of a gallon of gas had jumped 19 cents since last week to $3.138 — the biggest one-day price jump since the Russian invasion of Ukraine in 2022.
By the end of the week, GasBuddy analyst Patrick De Haan predicted prices could hit $3.20 per gallon.
Natural gas prices also continued their rise, jumping more than 3% Tuesday morning. Natural gas futures traded in Europe rose 20%, after QatarEnergy said it would halt liquified natural gas production Monday and on Tuesday suspended the production of a number of other energy products.
Markets also reacted negatively around the world.
In Spain, the IBEX stock index dropped sharply, ending the day down 4.5%. Italy's FTSE MIB closed down 3.9%, Germany's DAX stock index tumbled 3.6%, while stocks traded on the flagship indexes in France and the United Kingdom declined around 3%.
The Stoxx 600, Europe's answer to the S&P 500, slid nearly 3.2%. In Asia, Korea's Kospi average plummeted 7% and Japan's Nikkei 225 slid 3%. Stocks in China, Hong Kong and India also fell more than 1%.
“The negative tone in risk arguably reflects the sense that missile and drone attacks are intensifying and spreading through the Middle East as Iran hit the U.S. embassy in Riyadh and Israel targeted Hizbollah in Lebanon,” analysts at Lloyds Bank said Tuesday.
“Trump equivocating on the potential duration of the war and remaining questions about the precise objective don’t help quell market uncertainty either,” they added.
U.S. markets finished Monday on a relatively muted note. However, the additional strikes overnight and new comments from Trump seemed to raise alarm among traders, who moved out of more volatile assets like stocks and into bonds.
"The focus will now be on whether Iran can escalate its attacks on the production facilities of the region's key marginal energy suppliers," analysts at ING wrote in a research note Tuesday.
