TLDR

  • U.S. stocks declined on Tuesday, with both the Dow and S&P 500 dropping approximately 0.5%, as conflicting signals from the Iran conflict unsettled financial markets.
  • Trump suggested the conflict might conclude “very soon,” though Defense Secretary Hegseth stated the U.S. would “not relent” until Iran is defeated.
  • An oil tanker exploded near Abu Dhabi, and a key UAE refinery ceased operations following a drone strike.
  • Brent crude prices retreated to roughly $91 per barrel after approaching $120 on Monday, though they remain more than 50% above their level at the start of the year.
  • Two critical U.S. inflation reports — the CPI on Wednesday and PCE on Friday — are scheduled for this week, though neither will account for the recent surge in oil prices.

U.S. stocks dipped Tuesday morning as investors grappled with conflicting messages from Washington and the Iran conflict zone. These mixed signals complicated efforts to assess the conflict’s duration and its implications for oil prices and the broader economy.

E-Mini S&P 500 Mar 26 (ES=F)
E-Mini S&P 500 Mar 26 (ES=F)

The Dow Jones Industrial Average and S&P 500 each declined by approximately 0.5%, while the Nasdaq Composite fell roughly 0.3%. This came after a volatile Monday session that closed with slight gains.

Market sentiment deteriorated after Iranian state media reported an oil tanker explosion near Abu Dhabi. This development cast doubt on earlier optimism spurred by President Trump, who had suggested the conflict might end “very soon.”

Trump informed Republican lawmakers that the U.S. had struck 5,000 targets in Iran, reducing the country’s missile capability to roughly one-tenth of its prior capacity. He characterized the military objectives as “pretty well complete.”

However, Defense Secretary Pete Hegseth struck a contrasting tone at a Tuesday press conference, stating the U.S. was conducting its “most intense” day of strikes on Iran and would “not relent” until the Islamic Republic is defeated.

Oil Prices and Global Supply Under Pressure

Israeli Prime Minister Benjamin Netanyahu stated the offensive was “not done yet” and launched a new wave of strikes on Tehran Tuesday. Iran retaliated with drone and missile attacks across the Middle East, impacting the UAE, Bahrain, and Kuwait.

The UAE’s largest oil refinery, situated in Ruwais, suspended operations after a nearby fire caused by a drone strike. Abu Dhabi National Oil Co. was evaluating damage at the facility.

Brent crude surged to nearly $120 per barrel early Monday before retreating to around $91 following Trump’s remarks. West Texas Intermediate traded near $89. Both benchmarks remain more than 50% above their start-of-year levels.

Saudi Arabia, Iraq, the UAE, and Kuwait have reduced their combined output by up to 6.7 million barrels per day — roughly 6% of global supply. Saudi Aramco’s CEO described the disruption as “the biggest crisis the region’s oil and gas industry has faced.”

Trump noted the U.S. Navy would escort tankers through the Strait of Hormuz to maintain oil flow. He also mentioned potential waivers for certain oil-related sanctions to help lower prices, though specifics were not provided.

Iran’s New Leadership and Path Forward

Iran selected Mojtaba Khamenei as its new supreme leader on Sunday. His father, Ali Khamenei, was killed when U.S.-Israeli strikes commenced on February 28. The younger Khamenei maintains strong links to the Islamic Revolutionary Guard Corps.

Iranian President Pezeshkian stated Iran was open to de-escalating the conflict, but only if neighboring nations halt the use of their territory for attacks against Iran. Iran’s foreign minister noted talks with the U.S. were not “on our agenda.”

The conflict has now spanned 11 days, resulting in over 1,300 Iranian fatalities, along with seven U.S. service members, two Israeli soldiers, and several others in Gulf countries.

Two key U.S. inflation reports — the CPI on Wednesday and PCE on Friday — are due this week, though neither will reflect the recent surge in oil prices.