By David Uberti and Jared Mitovich
Wall Street on Tuesday tapped the brakes on expectations for a quick deal to stave off an oil shock.
Instead, investors were left searching for direction. A report that the Pentagon is deploying a combat brigade to the Middle East was soon followed by President Trump's claim that peace talks were progressing. Crude climbed. Bonds sold off. Stocks fell.
Tuesday's choppy trading session marked the latest twist for markets that in recent weeks have been almost singularly focused on the price of oil. Front-month Brent futures rose 4.6% Tuesday to $104.49 a barrel, while West Texas Intermediate crude climbed 4.8% to $92.35.
"The longer oil stays higher, it's almost like an automatic governor on the economy," said David Lundgren, a portfolio manager and chief market strategist at Little Harbor Advisors.
The Nasdaq composite led the declines, sliding 0.8%, while the S&P 500 dipped 0.4%. The Dow Jones Industrial Average inched 0.2% lower, losing 84 points.
"All I care about is what the health of the equity market is to endure this shock," Lundgren said. "The health is not good."
The weekslong run-up in global oil prices has raised inflation expectations from Washington to Wall Street, just as the U.S. economy showed some signs of slowing. Domestic business-activity growth declined to an 11-month low in March while prices surged, according to a preliminary S&P Global survey Tuesday.
Fearful that higher inflation will discourage the Federal Reserve from cutting interest rates, investors have sold off bonds in response. The yield on 10-year U.S. Treasurys climbed to 4.390% Tuesday after a weak auction of shorter-term government debt.
An oil-price shock "is going to be a stagflationary shock to the economy, " Qian Wang, the global head of capital-market research at Vanguard, said of the effects of slow growth and elevated inflation. "The longer it lasts, the more damage there will be to the economy."
Wall Street expects energy prices will keep going up unless traffic resumes through the Strait of Hormuz, a roughly 20-mile chokepoint through which roughly one-fifth of global oil and natural-gas supplies travel.
Benchmark global futures plunged below $100 a barrel Monday following Trump's social-media post suggesting a deal with Iran was near. Still, traders piled into thousands of options bets on more expensive crude next month, according to Intercontinental Exchange data. Wagers on $110 Brent were the most popular position Monday, and bets on even costlier contracts weren't far behind.
Price hikes are a boon for oil-and-gas stocks, including on Tuesday, when the S&P 500 energy sector gained 2.1%. Investors tend to sell those equities the longer wartime commodity shocks go on. But some analysts warn supply disruptions from this conflict could last months or longer.
Nancy Tengler is taking some profits before she finds out. The chief investment officer at Laffer Tengler Investments trimmed about 20% of her energy holdings Monday after logging big gains in recent weeks. Instead, she snapped up shares in companies including Microsoft, a bet that the economy will normalize and corporate earnings will reap the benefits.
"You're hearing people say 'stagflation,'" Tengler said. "I don't buy it."
Write to David Uberti at david.uberti@wsj.com and Jared Mitovich at jared.mitovich@wsj.com
(END) Dow Jones Newswires
March 24, 2026 16:57 ET (20:57 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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