Stocks Mixed as Wall Street Rebounds, Oil Stays Elevated Amid Iran War Risks

Global equity markets diverged on Tuesday, with Asian shares under pressure and Wall Street rebounding, as oil prices eased slightly but remained elevated amid ongoing U.S.–Iran hostilities that continue to cloud the outlook for energy supply and global growth.

Equity markets across Asia weakened in thin trading on May 5, reflecting caution after renewed exchanges of fire in the Persian Gulf raised doubts about the durability of a fragile ceasefire.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.6 percent, with Hong Kong’s Hang Seng dropping more than 1 percent and India’s Sensex down 0.7 percent.

European shares edged higher, recouping some of the previous session’s losses as investors weighed upbeat corporate earnings against persistent geopolitical risks and elevated energy costs.

By contrast, U.S. stocks moved higher in early trading, recovering from Monday’s pullback as oil prices retreated modestly from recent spikes. At 10:01 a.m. ET, the Dow Jones Industrial Average rose about 0.5 percent, while the S&P 500 gained roughly 0.7 percent and the Nasdaq Composite advanced around 0.8 percent.

Markets have been volatile in recent sessions, caught between escalating geopolitical tensions and a still-resilient domestic backdrop in the United States, where major indexes have recently touched record highs on strong earnings and economic momentum.

“Earnings have been better than expected, which has been great, considering the valuations. ​You need the earnings to support where you are,” said Joe Saluzzi, co-head of ⁠equity trading at Themis Trading.

“There are certainly big issues out there that I think the market is overlooking ​and that might come back to haunt us.”

Oil Eases but Supply Risks Persist

Oil prices pulled back slightly after a sharp surge in the previous session but remained firmly above $100 a barrel, underscoring persistent concerns about supply disruptions.

Brent crude futures fell about 1.6 percent but held above $110 per barrel, while U.S. West Texas Intermediate hovered near $102—both still far above pre-war levels of around $70.

The modest retreat in oil offered some relief to equities, particularly in the United States, though analysts cautioned that the underlying risks remain unresolved.

Crucially, the Strait of Hormuz—through which roughly one-fifth of global oil flows—remains heavily disrupted, with limited shipping activity continuing under military escort.

BlackRock analysts led by Wei Li predicted that even U.S. markets may not remain unaffected if the situation deteriorates further.

“Even U.S. equities won’t be insulated” if the strait fails to reopen, the team said in a note.

Escalation Rekindles Uncertainty

Despite the resilience in U.S. markets, geopolitical tensions remain a key risk factor.

Tensions intensified on Monday after the United States and Iran exchanged new strikes in and around the Gulf, as both sides attempted to assert control over maritime access.

The U.S. military said it destroyed several Iranian vessels and continued escort operations under “Project Freedom,” an initiative aimed at guiding stranded commercial ships through the Hormuz chokepoint. U.S. Central Command said two U.S.-flagged vessels have completed the transit with naval support, though Iran has disputed those claims.

At the same time, Iranian forces launched missile and drone attacks on regional infrastructure, including a strike on Fujairah port in the United Arab Emirates—an important oil export hub located outside the strait. While shipments from the facility have proven resilient despite the ongoing conflict and Iran’s near-blockade of the strait, the attack highlighted the risk to energy infrastructure if the war escalates.

“Markets may find some relief today following President Trump’s overnight comments suggesting the conflict could continue for another two to three weeks,” ING analysts said.

“However, markets are likely to view this with considerable skepticism, given the recent escalation and the repeated extensions of projected timelines for ending hostilities since the conflict began.”

The Strait of Hormuz, which previously handled roughly one-fifth of global oil and liquefied natural gas flows, has been largely closed to international shipping for weeks, with only limited movement under military escort. Major shipping companies have signaled reluctance to resume transit without a clear and durable ceasefire.

Analysts have said that even successful escorted crossings may offer only temporary relief.

“Continuation of ‘Project Freedom’ risks further escalation,” ING analysts said, adding that inbound traffic into the Gulf remains minimal and that any easing of bottlenecks is likely to be short-lived.

During a phone interview with Hugh Hewitt on Monday, Trump said that he expects the conflict to last no more than another three weeks, adding that Iran must either agree to a deal that prevents it from ever acquiring nuclear weapons or face a crushing military defeat.

“One way or the other, we win,” Trump said. “We either make the right deal, or we win very easily from the military standpoint.”

Investors have repeatedly reassessed timelines for resolving the conflict, with the latest uptick in hostilities adding to the uncertainty.

“We started yesterday with high hopes that operation ‘Project Freedom’ would be, I guess, a success on the ground,” said Tony Sycamore, a market analyst at IG. “But as we saw … the stalemate remains in place, it’s been a very shaky start.”

Reuters contributed to this report.