At their worst, markets were looking at their steepest single-day drop in months. Then the president posted.
Tuesday started ugly. The Dow fell more than 1,200 points at its intraday low. The S&P 500 dropped 2.5%. The Nasdaq slid nearly 2.7%. Fresh Israeli and US strikes on Iran overnight spooked investors who had mostly shrugged off the initial attack over the weekend — and this time, the selling was harder to shake off.
Airlines sank on soaring jet fuel costs and route disruptions. Gold, which had rallied to $5,400 Monday, reversed sharply and fell more than 4%. Even defense stocks, which had been the war trade's biggest winners, couldn't hold their gains.
Just after midday, President Trump posted on Truth Social that the US Navy would escort tankers through the Strait of Hormuz if necessary, and pledged to "ensure the FREE FLOW of ENERGY to the WORLD." Oil prices pulled back from their highs. Yields eased. Stocks bounced.
By the close, the S&P 500 was down 0.94%, the Dow off 0.83%, and the Nasdaq down 1.02% — still losses, but a far cry from the morning's damage. The NYSE noted that markets had been reasonably well-hedged going into Tuesday, and traders moved quickly to cash out those hedges once the Hormuz narrative softened.
Closing off the lows isn't the same as being fine. New York Fed President John Williams said Tuesday that the conflict will affect the near-term inflation outlook and increase economic uncertainty. The FOMC meets March 17. Every day of elevated oil prices between now and then makes a rate cut harder to justify.
Trump also said oil prices could drop "lower than even before" once the war ends. That's a promise Wall Street will believe when it sees it.