Stocks Volatile and Oil Prices Surge Amid Uncertainty Over US Exit Strategy in Middle East Conflict
By John Towfighi and Lucy Bayly, CNN Business
Published April 2, 2026, Updated April 2, 2026, 4:05 PM ET
New York — Global financial markets experienced significant turbulence on Thursday following escalating tensions in the Middle East and uncertainty surrounding the US government’s approach to the ongoing conflict involving Iran and Israel. The volatility was further fueled by President Donald Trump’s recent address, which offered no clear exit plan from the hostilities.
Stock Market Swings Amid Geopolitical Concerns
Stocks opened lower amid investor apprehension but staged a partial recovery as the day progressed. The Dow Jones Industrial Average dropped 61 points (0.13%) by the close, having fallen more than 650 points earlier in the session. Meanwhile, the S&P 500 and Nasdaq managed to finish the day slightly higher by 0.11% and 0.18%, respectively, after initially sliding over 1.5%.
The market’s swings reflect investors’ sensitivity to the conflict’s implications, especially as no resolution to the blockade of the Strait of Hormuz—a critical global oil shipping lane—was announced. The Strait’s effective closure has disrupted roughly one-fifth of world oil supply, raising concerns about energy availability and escalating inflation risks.
Oil Prices Surge as Strait of Hormuz Remains Disrupted
Crude oil prices surged sharply in response to the ongoing conflict and President Trump’s declaration on April 1 that the US intends to "hit Iran extremely hard." Brent crude, the global benchmark, jumped nearly 7.8% to close at $109.03 a barrel, while West Texas Intermediate (WTI), the US benchmark, soared 11.41% to $111.54 a barrel. The premium on near-term WTI contracts reflects traders’ expectations of continued short-term disruptions.
The spike in oil prices adds to inflationary pressures worldwide, as energy costs underpin prices across various sectors. Domestic consumers are already feeling the impact—US gas prices have increased 37% since the conflict began, with the latest average per-gallon price at $4.08. ### Uncertainty Persists Amid Limited Diplomatic Progress
Investor focus turned briefly hopeful when reports surfaced that Iran and Oman are drafting protocols to ease traffic through the Strait of Hormuz. However, President Trump’s speech, which extended expectations of the war’s duration by two to three weeks and hinted at potential US strikes on Iranian oil facilities, dampened market optimism.
Felix Vezina-Poirier, chief strategist at BCA Research, noted, “The fog of war remains thick and crude flows are still too low to sound the all-clear.” Similarly, Kyle Rodda, senior financial market analyst at Capital.com, observed that sustainable market recovery hinges on normalization in global energy markets.
Global Markets React to Rising Tensions
International equity markets also declined in response to the conflict. Japan’s Nikkei 225 fell 2.38%, South Korea’s Kospi plunged 4.47%, and Germany’s DAX index dropped 0.78%, recovering somewhat from earlier steep losses.
In the bond markets, yields initially climbed but then fell slightly by the end of Thursday’s trading. Despite this, yields remain elevated from pre-conflict levels, reflecting investor expectations for sustained inflation and a possible prolonged Federal Reserve stance on interest rates.
Economic Ripple Effects and Market Outlook
The ongoing surge in energy prices and geopolitical uncertainty continue to weigh on economic growth prospects. Higher fuel and transportation costs are feeding into broader inflation measures, pressuring both consumers and businesses.
The US stock market has reflected this strain, with the Dow and S&P 500 marking their worst quarterly performances since September 2022, and the Nasdaq experiencing its weakest month in a year just last month.
While stocks rallied earlier this week amid tentative hopes for diplomacy, President Trump’s latest remarks have stoked market unease. With the US market closed on Friday for Good Friday, investors remain cautious as they await further developments.
Key Takeaways:
- Oil prices surged sharply, with Brent closing above $109/barrel and WTI surpassing $111/barrel.
- US stocks volatile, with major indexes erasing early losses yet ending nearly flat or slightly up.
- No clear US exit strategy from Middle East conflict announced, increasing market uncertainty.
- Rising energy costs contributing to higher inflation and impacting economic growth prospects globally.
- International stocks also declined amid ongoing geopolitical tensions.
For ongoing updates on the US-Israeli-Iran conflict and its economic impact, stay tuned to CNN Business.