By ELAINE KURTENBACH and MATT OTT, AP Business Writers
U.S. markets inched lower early Tuesday with a retreat in oil prices to start the week proving to be short-lived.
U.S. benchmark crude climbed 3.5% to $96.80 per barrel after dipping to about $93 on Monday, just its second decline since the Iran war began a little more than two weeks ago. Brent crude, the international standard, rose 3.2% to $103.43 a barrel.
Future contracts for the S&P 500 were off just 0.1% before the bell, while futures for the Dow Jones Industrial Average were close to flat. Nasdaq futures fell 0.2%.
With U.S. benchmark crude on Monday heading to only its second day of declines since the U.S. and Israel attacked Iran, the S&P 500 climbed 1% for its biggest gain in five weeks. The Dow Jones Industrial Average added 0.8% and the Nasdaq composite finished 1.2% higher.
Markets have moved polar to oil prices, which have spiked almost 40% since the war began. Iran has nearly halted traffic through the narrow Strait of Hormuz, where a fifth of the world’s oil sails from the Persian Gulf to customers worldwide.
Storage space for crude is a finite asset, so oil producers have begun cutting production.
The worry in financial markets is that if the strait remains closed for an extended period of time, it could keep enough oil off the market to drive inflation up to a debilitating level for the global economy.
President Donald Trump over the weekend demanded that other countries hurt by the closure of the Strait of Hormuz “take care of that passage” and said the U.S. “will help – A LOT!”
The U.S. and Israel have continued to pummel what they describe as military targets in Iran’s capital, and Israel stepped up its campaign against Iran-backed militants in Lebanon. More than 1 million people have been displaced in Lebanon — roughly 20% of the nation’s population — as U.N. peacekeepers say Israel is massing ground troops along the border.
Uncertainty over the war’s scope and duration have roiled financial markets since the war began just over two weeks ago, though markets have a track record of bouncing back relatively quickly from military conflicts. Many professional investors are expecting that to be the case again, if oil prices don’t go too high for too long. That has helped keep U.S. stock prices near their record levels.
Higher prices are complicating the Federal Reserve’s mission of balancing growth and inflation as Trump pushes the central bank to slash interest rates. Traders do not expect the Fed to cut rates at its policy meeting that wraps up on Wednesday.
In Asian trading, Tokyo’s Nikkei 225 gave up early gains to slip 0.1% to 53,700.39 and the Kospi in South Korea jumped 1.6% to 5,640.48.
Hong Kong’s Hang Seng added 0.1% to 25,668.54, while the Shanghai Composite index dropped 0.9% to 4,049.91.
In Australia, the S&P/ASX 200 gained 0.4% to 8,614.30 after the central bank hiked its benchmark interest rate to 4.1%.
Citing higher fuel prices, the Reserve Bank of Australia on Tuesday lifted the cash rate from 3.85% which it set at its Feb. 3 meeting in response to surging inflation. That rise was Australia’s first since November 2023.
Taiwan’s Taiex rose 1.5% and India’s Sensex picked up 0.6%.
In currency trading early Tuesday, the U.S. dollar barely budged at 159.03 Japanese yen from 159.05 yen. The euro rose to $1.1515 from $1.1507.
Associated Press writer Rod McGuirk in Melbourne, Australia, contributed.