Dow jumps 398 points as oil tops $100, Fed decision in focus

US stocks edged higher on Tuesday as investors looked to extend the previous session’s gains, while closely monitoring developments in the escalating Iran conflict and its impact on global energy markets.

The S&P 500 and Nasdaq 100 gained 0.6%. Dow Jones Industrial Average advanced 398 points, or 0.85%.

The cautious optimism follows a strong rebound in the prior session, when the S&P 500 posted its biggest one-day gain in over a month, driven largely by technology and artificial intelligence-linked stocks.

Oil prices climb as Hormuz tensions persist

Oil prices moved higher on Tuesday, adding to ongoing volatility driven by geopolitical tensions in the Middle East.

Global benchmark Brent crude rose about 1.6%, trading above the $100 per barrel mark.

The rebound came after President Donald Trump indicated that efforts to form a coalition to protect shipping routes through the Strait of Hormuz are still underway.

Trump acknowledged that participation among allies has been uneven.

“We have some that are really enthusiastic. They’re coming already. They’ve already started to get there,” Trump said. “We’ll give you a list. Some are very enthusiastic, and some are less than enthusiastic, and I assume some will not do it. I think we have one or two that will not do it that we’ve been protecting for about 40 years at tens of billions of dollars.”

Oil prices have surged since the start of US-Israel attacks on Iran amid concerns that any prolonged disruption in the Strait of Hormuz could significantly impact global energy supplies.

Investors are also reacting to escalating developments in the region, including reports that Iran’s security chief, Ali Larijani, was killed in overnight airstrikes, according to Israeli Defense Minister Israel Katz.

AI stocks and economic outlook support sentiment

Technology stocks, particularly those tied to artificial intelligence, continue to underpin market sentiment.

Nvidia shares rose 0.24% in early trade after gaining 1.6% in the previous session.

The company recently said the revenue opportunity for its AI chips could reach at least $1 trillion through 2027.

Other chipmakers showed mixed performance, with Advanced Micro Devices rising 0.56%, while Broadcom traded 0.36% higher.

Outside the technology sector, airline stocks showed signs of recovery after recent declines driven by rising fuel costs.

Delta Air Lines gained 4.7% after raising its revenue guidance for the current quarter, while American Airlines rose 4.86%.

Ride-hailing company Uber also climbed 5.2% after announcing plans to launch robotaxis in 28 cities starting next year using Nvidia’s autonomous driving software.

Despite the ongoing geopolitical uncertainty, US markets have remained relatively resilient compared with global peers, supported by solid earnings and a stable economic backdrop.

However, some analysts have warned that risks are increasing.

Fed decision and inflation risks in focus

Investor attention is also turning to the Federal Reserve’s two-day policy meeting, which concludes on Wednesday.

The central bank is widely expected to keep interest rates unchanged, as policymakers assess the economic impact of rising energy prices and geopolitical uncertainty.

Market expectations for rate cuts have shifted in recent weeks.

According to LSEG data, traders now anticipate just one 25-basis-point rate cut later this year, down from expectations of two cuts before the escalation of the conflict.

Analysts also noted that the impact of the conflict on inflation remains a key concern.

Rising oil prices could push inflation higher, complicating the Fed’s policy outlook and limiting its ability to ease monetary policy in the near term.

As geopolitical tensions persist, investors are likely to remain cautious, balancing optimism from recent market gains with uncertainty surrounding the global economic outlook.