Wall Street rebounded and oil prices retreated early Tuesday despite an exchange of fire between the U.S. and Iran near the Strait of Hormuz.
Futures for the S&P 500 rose 0.3%, while futures for the Dow Jones Industrial Average inched up 0.1%. Nasdaq futures climbed 0.5%.
Tensions in the Middle East escalated when the United Arab Emirates, a U.S. ally, said it came under attack from Iran for the first time since the ceasefire last month.
The fragile ceasefire between the U.S. and Iran was tested after the U.S. military said it had sank six Iranian small boats targeting civilian ships, while two U.S.-flagged ships successfully passed through the Strait of Hormuz as part of U.S. President Donald Trump’s “Project Freedom” plan under which the United States attempts to guide stranded ships through the strait.
The key waterway for oil and gas transport remains largely closed despite repeated demands from the U.S. for Iran to reopen the strait and as the United States imposed a sea blockade on Iranian ports.
“We are seeing the first signs of the ceasefire between the U.S. and Iran breaking down amid a re-escalation in the Persian Gulf,” ING Bank analysts Warren Patterson and Ewa Manthey wrote in a note Tuesday.
“Continuation of ‘Project Freedom’ risks further escalation,” they wrote. “Any relief from stranded vessels making their way through the Strait will be temporary, with very few inbound vessels moving into the Persian Gulf.”
Oil prices came back down slightly after surging on Monday.
Brent crude, the international standard, fell $1.14 to $113.30 per barrel. Before the war began in late February, it was trading near $70. Benchmark U.S. crude slipped $1.84 to $104.58 per barrel.
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