Israel and Iran are continuing to attack each other, and a fear remains that a wider war could constrict the flow of Iran's oil to its customers. That in turn could raise gasoline prices worldwide and keep them high.
But past conflicts in the region have seen spikes for crude prices last only briefly. They’ve receded after the fighting showed that it would not disrupt the flow of oil, either Iran’s or other countries’ through the narrow Strait of Hormuz off Iran’s coast.
Hopes that the fighting could remain similarly contained this time around helped send oil prices back toward $71 per barrel on Monday.
Iran’s foreign minister, Abbas Araghchi, appeared to make a veiled outreach for the U.S. to step in and negotiate an end to hostilities between Israel and Iran, saying in a post on X that a phone call from Washington to Israel’s leader “may pave the way for a return to diplomacy.”
A barrel of benchmark U.S. oil fell 1.7% to $71.77, while Brent crude, the international standard, dropped 1.3% to $73.23 per barrel. They had both jumped roughly 7% on Friday after the initial attacks.
In another signal of calming fear in financial markets, the price of gold also gave back some of its knee-jerk climb from Friday, when investors were looking for someplace safe to park their cash. An ounce of gold fell 1% to $3,417.30.
Wall Street has plenty of other concerns in addition to the fighting in Iran and Israel. Key among them are President Donald Trump's tariffs, which still threaten to slow the economy and raise inflation if the U.S. government doesn't win trade deals with other countries to reduce Trump's taxes on imports.
The United States is meeting with six of the world's largest economies in Canada for a Group of Seven meeting, with the specter of tariffs looming over the talks.
Later this week, the Federal Reserve is set to discuss whether to lower or raise interest rates, with the decision due on Wednesday. The nearly unanimous expectation among traders and economists is that the Fed will make no move.
The Federal Reserve has been hesitant to lower interest rates, and it's been on hold this year after cutting at the end of last year, because it's waiting to see how much Trump's tariffs will hurt the economy and raise inflation. Inflation has remained relatively tame recently, and it's near the Fed's target of 2%.
More important for financial markets on Wednesday will likely be the latest set of forecasts that Fed officials will publish for where they see the economy and interest rates heading in upcoming years. Economists at Bank of America say it could show a forecast for just one cut to interest rates this year, along with three more in 2026.
In the bond market, the yield on the 10-year Treasury rose to 4.45% from 4.41% late Friday
On Wall Street, Sage Therapeutics jumped 35.4% for one of the market’s biggest gains after Supernus Pharmaceuticals said it would buy the biopharmaceutical company in a deal worth up to $795 million, or $12 per share, if certain conditions are met.
U.S. Steel rose 5.1% after Trump signed an executive order on Friday paving the way for an investment in the company by Japan's Nippon Steel. Trump would have unique influence over the operations of U.S. Steel under the terms of the deal.
They helped offset drops for defense contractors, which gave back some of their jumps from Friday. Lockheed Martin fell 4%, and Northrop Grumman sank 3.7%.
All told, the S&P 500 rose 56.14 points to 6,033.11. The Dow Jones Industrial Average added 317.30 to 42,515.09, and the Nasdaq composite gained 294.39 to 19,701.21.
In stock markets abroad, indexes rose across most of Europe and Asia.
Stocks climbed 0.7% in Hong Kong and 0.3% in Shanghai after data showed stronger Chinese consumer spending for May but slower growth in factory activity and investment.
South Korea’s Kospi climbed 1.8%, and Japan’s Nikkei 225 rallied 1.3% for two of the world’s bigger gains.
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AP Writer Jiang Junzhe contributed.