Oil surges, stocks slip as US-Israel strikes on Iran roil markets

The markets opened Monday morning to a world that had shifted overnight. On February 28th, the United States and Israel had launched a coordinated military campaign against Iran, striking more than a thousand targets across the country. The operation killed Iran's supreme leader, Ayatollah Ali Khamenei, along with dozens of other senior officials. Iran responded with its own strikes against American military installations, Israeli positions, and targets throughout the Middle East. By the time trading began, investors were already calculating the cost.

Oil moved first. West Texas crude jumped 6.74 percent in the opening hours, climbing $4.52 to settle at $71.54 per barrel. The math was straightforward: roughly one-fifth of the world's oil shipments flow through the Strait of Hormuz, the narrow waterway between Iran and Oman that serves as a chokepoint for global energy supplies. Iran itself accounts for about 4 percent of worldwide oil production. Any disruption to either source ripples through every economy that depends on affordable fuel. Investors, watching the headlines from Tehran, were pricing in that risk.

The stock market absorbed the shock with a shrug that masked deeper concern. The Dow Jones Industrial Average fell 0.41 percent, or 200.4 points, closing at 48,777.52. The broader S&P 500 declined 0.31 percent, shedding 21.01 points to 6,857.87. The technology-heavy Nasdaq barely budged, dropping just 0.08 percent. On the surface, these were modest moves. But beneath them lay a familiar anxiety: if oil prices stayed elevated, they would feed inflation, which would squeeze consumers and complicate the Federal Reserve's calculations. Higher energy costs ripple through everything—transportation, manufacturing, heating, food production. Markets were not panicking yet, but they were bracing.

Analysts offered competing interpretations of what came next. Brian Gardner, chief Washington policy strategist at Stifel, noted that early polling showed voters adopting a wait-and-see posture toward the strikes. But he warned that if oil prices remained high or other measures of affordability deteriorated, public sentiment could shift quickly. The duration and intensity of the conflict would matter enormously. Angelo Kourkafas at Edward Jones took a longer view. Over the past fifteen years, he observed, geopolitical shocks had consistently produced sharp but temporary oil spikes with limited lasting damage to markets. Oil prices typically rose in anticipation of such events, meaning markets might have already absorbed much of the risk. He added a political note: the Trump administration had strong incentive to prevent sustained oil price increases heading into November's elections. The global oil market, moreover, was already oversupplied, which could act as a natural brake on prices.

For investors watching their portfolios, the question became whether to hold or move. Jay Woods at Freedom Capital Markets warned that the market had struggled to rally even on positive news, suggesting this shock could push equities into correction territory—a decline of 10 percent or more from recent highs. But he also saw potential. Market disruptions, he argued, often create opportunities for those willing to buy when others were selling. Adrian Helfert, chief investment officer of multi-asset strategies at Westwood, offered historical reassurance. Looking back at five comparable geopolitical crises since 1990, equities had risen over the following twelve months in four of the five cases. Selling into the panic, he said, had consistently proven to be the costliest move an investor could make. The advice, in essence, was to stay calm and stay invested—though he acknowledged that weathering the volatility required both nerve and a diversified portfolio.

The market's opening day reaction suggested investors were still processing what had happened and what it meant. Oil had spiked, stocks had dipped, and the usual calculus of risk and reward had shifted. Whether this was a brief tremor or the beginning of something larger remained unclear. The coming days would depend on whether the conflict escalated, whether the Strait of Hormuz remained open, and whether oil prices found a new equilibrium or continued climbing. For now, the market was waiting.