U.S. and European stocks rebound as oil prices retreat despite escalating war with Iran

The U.S. stock market is rebounding Wednesday from two days of punishing swings after oil prices stopped spiking and reports gave encouraging updates on the economy.

The S&P 500 rose 0.6% in midday trading and is on track to claw back most of its loss since the war with Iran began. The Dow Jones Industrial Average was up 237 points, or 0.5%, as of 11:15 a.m. Eastern time, and the Nasdaq composite was 1.1% higher.

The strength followed a scary start to Wednesday, when South Korea’s Kospi stock index plunged 12.1% for its worst day in history. Uncertainty about the war has sent prices in financial markets careening up and down hour by hour this week, with most taking their cues from what the price of oil is doing.

Oil prices moderated as trading moved westward from Seoul and the rest of Asia to Europe. After briefly topping $84 per barrel, the price for a barrel of Brent crude, the international standard, eased back to $81.49, a 0.1% rise. A barrel of benchmark U.S. crude fell 0.6% to $74.11.

Stocks also got a boost from increased hopes for the U.S. economy.

One report said growth for U.S. businesses in the real estate, financial and other services industries accelerated last month at the fastest pace since the summer of 2022. Encouragingly for inflation, it also said prices for such businesses are increasing at a slower rate, at least before the war with Iran began.

A second report suggested U.S. employers outside of the government picked up their hiring last month. That could be a hopeful signal for the more comprehensive report coming Friday from the U.S. government about the strength of the job market.

In financial markets, worries are centered on how long the war with Iran could last, how high inflation will go because of more expensive oil and how much corporate profits will sink because of it.

The U.S. stock market has a history of shaking off military conflicts in the Middle East relatively quickly, though that comes with a caveat that oil prices don’t jump too high. That has some professional investors suggesting patience through the volatility, at least when it comes to financial markets.

Not everyone is so optimistic, though.

“I think the Iran situation is getting out of hand, and I think that U.S. President Donald Trump miscalculated enormously,” said Francis Lun, CEO of Venturesmart Asia. “The situation is very grim.”

On Wall Street, a mix of companies helped drive Wednesday’s rebound.

Stocks enmeshed in the crypto industry climbed as bitcoin’s price rebounded back toward $73,000. Coinbase Global jumped 14.5%, and Robinhood Markets rallied 8.8%.

Retailers and travel companies also strengthened with hopes that a solid economy and an easing for jumps in gasoline prices will mean their customers may have more to spend.

Ross Stores climbed 7.2% after it also reported better profit and revenue for the latest quarter than analysts expected and said it’s entering 2026 with “solid momentum.” Expedia Group rose 3.9%.

Big Tech stocks, meanwhile, were the strongest forces lifting the market. Nvidia added 1.2%, and Amazon rose 3.5%. Because they’re among the biggest stocks in the U.S. market in terms of total value, their movements carry more weight on the S&P 500.

In stock markets abroad, indexes rebounded in Europe following sharp drops in Asia. France’s CAC 40 rose 1.2%, and Germany’s DAX climbed 1.8%. That followed losses of 2% for Hong Kong’s Hang Seng and 3.6% for Japan’s Nikkei 225, along with Seoul’s historic plunge.

In the bond market, Treasury yields ticked higher after jumping early in the week with worries about worsening inflation. The yield on the 10-year Treasury rose to 4.07% from 4.06% late Tuesday.

Wednesday’s strong reports on the economy were welcome news for the Federal Reserve, whose job it is to keep the U.S. job market healthy and inflation low. The Fed’s job has become more difficult because of the jump in oil prices, which is pushing upward on already high inflation.

The Fed could keep interest rates high to keep a lid on inflation. But high interest rates would also keep borrowing costs more expensive for U.S. households and companies, grinding down on the economy.

The central bank had earlier been on track to resume its cuts to interest rates later this year, in hopes of giving a boost to the job market and economy. Because of the war, traders are pushing back their forecasts for when the Fed could begin cutting rates again.

—Stan Choe, AP business writer

AP Writers Matt Ott, Kim Tong-hyung and Elaine Kurtenbach contributed