11. Energy Markets Stabilize as Wall Street Recovers from Morning Shock

US stock markets finished Monday with a surprising rally, overcoming an early-morning panic triggered by the escalating conflict between Iran and the US-Israel alliance. While oil prices initially rocketed past the $100-per-barrel mark, they saw a dramatic retreat in the afternoon as geopolitical fears began to subside. Investors pivoted from a defensive stance to a buying spree, allowing major indices to erase their earlier losses and close in positive territory.

The day’s volatility was fueled by reports of “apocalyptic” airstrikes on at least five Iranian energy facilities over the weekend. These attacks, combined with Bahrain’s state oil company declaring force majeure after its refinery was set ablaze, initially sent Brent crude to a four-year high of $119.50. Markets were further pressured by the functional closure of the Strait of Hormuz, which disrupted the flow of roughly 20% of the world’s oil and liquefied natural gas.

Sentiment shifted rapidly following statements from President Donald Trump, who suggested the military objectives against Iran were “very complete” due to the destruction of their naval and air capabilities. By the closing bell, the Dow Jones Industrial Average gained 230 points, while the Nasdaq rose by 1.38%. West Texas Intermediate crude, which had peaked at $103, settled significantly lower at approximately $86 per barrel by the afternoon.

Despite the recovery on Wall Street, the global impact remains severe, particularly in Asia where the Nikkei 225 and Kospi indices saw drops between 5% and 6.6%. Analysts warn that the loss of 20 million barrels per day in global supply balances is a deficit that cannot be easily ignored. To combat the surge, G7 finance ministers have begun discussing a coordinated release of petroleum from strategic reserves to prevent a long-term economic downturn.

The outlook for the energy sector hinges on how quickly shipping lanes in the Middle East can be secured for commercial transit. While the US Energy Secretary expressed optimism that the disruption would only last a matter of weeks, the threat of $150 oil remains a concern if Gulf production is forced to shut down. For now, the market’s “grace period” for the administration appears to have been extended by the late-day price correction.