US stocks rise, Asian markets get rocked as Middle East conflict intensifies
By John Towfighi, CNN
New York (CNN) — Oil prices Wednesday paused their recent surge, supporting a rebound in European and US stocks, as investors hold hope for limited long-term disruptions to energy markets and monitor developments in the Middle East.
Global investors are digesting the market turmoil spurred by the US-Israeli war with Iran and subsequent conflict across the region. Asian stocks sank Wednesday, while European and US stocks gained after two days of intense volatility.
Oil prices steadied, easing pressure on stocks, after the New York Times reported that Iran made indirect contact with the United States to discuss negotiations to end the conflict. Europe’s Stoxx 600 gained 1.37% Wednesday, halting a two-day slide. The index is still down 3.3% this week.
Separately, Treasury Secretary Scott Bessent on Wednesday confirmed to CNBC that the United States Navy is set to provide “safe passage” for oil tankers through the crucial Strait of Hormuz “when it is appropriate and should it be needed,” reinforcing comments made by President Donald Trump on Tuesday that helped oil prices moderate and boosted stocks.
To some investors, markets remain complacent.
“There are still some real risks out there for investors…given that the stock market is pricing in the best-case scenario outcome right now,” Matt Maley, chief market strategist at Miller Tabak + Co, said in a note.
Earlier in the day, markets in Asia were rocked by concerns about disruption to energy markets. South Korea and Japan rely on imports of liquefied natural gas from the Middle East, leaving their economies and market particularly exposed to the ongoing turmoil.
South Korea’s benchmark Kospi index has been hit the hardest. The index plunged 12% Wednesday after dropping 7.24% Tuesday, putting it on the precipice of a technical bear market. Markets in South Korea were closed Monday in observance of a holiday.
Despite the plunge, the Kospi is still up nearly 21% this year. South Korea’s stock market was a top performer in 2025, surging 76% on enthusiasm about artificial intelligence and chipmakers.
“The fact that these countries are all almost entirely dependent on LNG for their supply of natural gas makes them especially vulnerable to the current halt in supply from the Middle East,” analysts at Capital Economics said in a note.
Diversifying and investing in Europe and Asia markets proved a popular theme across the past year, with international stocks outperforming the S&P 500. That theme has been tested this week as Asia in particular has borne the brunt of the stock market pain. Japan’s Nikkei 225 is down roughly 8% this week and on pace for its worst week since March 2020.
Oil prices moderate after two-day surge
Oil prices steadied Wednesday, pausing a recent jump. US crude oil moved 0.1% higher, to $74.66 per barrel. Brent crude, the international benchmark, fluctuated between gains and losses and finished unchanged at $81.40 per barrel, its highest level since January 2025.
The muted moves in oil Wednesday were a stark shift after prices climbed more than 10% across the past two days. The relative calm after two days of prices soaring helped ease some pain in the US stock market. The Dow ended the day with a gain of 238 points, or 0.49%. The S&P 500 rose 0.78% and the tech-heavy Nasdaq gained 1.29%.
“If yesterday was capitulation, today is investors catching their breath,” Russ Mould, investment director at AJ Bell, said in a note.
The Dow and S&P are down just 0.5% and 0.14% this week, respectively, and the Nasdaq is up 0.61%, despite the geopolitical uncertainty. A strong report Wednesday on the US service economy also helped boost stocks.
US natural gas futures moved 4.3% lower, reversing course after rising 3.2% Tuesday. US diesel futures climbed 3% and are up nearly 27% this week, outstripping gains in US oil and natural gas prices.
While some energy markets experienced relative calm Wednesday, gasoline prices jumped roughly 9 cents, to nearly $3.20 a gallon, according to AAA.
Europe natural gas and diesel prices fell roughly 10% and 1%, respectively, calming after two days of sharp rises. Natural gas and diesel futures for the region are still up 55% and 30%, respectively, this week.
“The war in the Middle East continues, but markets have settled down for the time being,” John Canavan, lead analyst at Oxford Economics, said in a note.
“President Trump’s promises to use the US navy to escort vessels through the Strait of Hormuz helped to steady energy prices, which has allowed other markets to stabilize while awaiting further developments,” Canavan said.
Havens and bonds fluctuate as resurgent inflation worries linger
US Treasury yields ticked higher, extending gains, as investors sold bonds and digested the potential inflationary impacts of higher energy prices.
The 10-year yield, which dipped to 3.96% early Monday, is trading at 4.09%. Yields, which influence borrowing costs across the economy, remain relatively low, with the 10-year yield just at its highest level in two weeks. But the knee-jerk move higher highlights that traders are suddenly skittish about inflation.
The US dollar weakened against other major currencies, pausing a strong two-day jump. The dollar index is up 1.2% this week as the greenback has benefited from investors seeking safe havens as well as nerves about inflation that could keep the Federal Reserve on hold, supporting the dollar.
Gold climbed 0.5%. The yellow metal is down 1.9% this week despite traditionally being considered a safe haven. Bitcoin surged more than 7% across the past day to rise above $73,000.
“Any signs of the war ending soon, of course, also helps dampen worries of a prolonged shortage of energy for the world’s market,” Thierry Wizman, global FX and rates strategist at Macquarie Group, said in a note.
“Hopes aside, the prospect of a long (i.e., multi-month) conflict that draws in other countries remains a potential scenario, as do more attacks on the civilian and energy infrastructure of the Gulf nations,” Wizman said.
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