US stocks rebound after Trump orders Navy escorts in Strait of Hormuz

US stocks staged a sharp recovery on Tuesday after President Donald Trump ordered political risk insurance for all maritime trade through the Gulf and put Navy escorts on standby for tankers transiting the Strait of Hormuz.

The development is crucial as the Strait of Hormuz is a vital chokepoint carrying 20% of the world's seaborne oil.

The Dow Jones Industrial Average fell 301 points, or 0.6%, after dropping more than 1,200 points, roughly 2.6% at its session low.

The S&P 500 declined 0.8%, while the Nasdaq Composite slipped 0.9%.

Earlier in the day, the S&P had been down as much as 2.5%, and the Nasdaq had fallen about 2.7% at its lowest point.

Trump's Gulf stabilization play

Trump directed the US Development Finance Corporation (DFC) to offer guarantees covering political risks like seizures or attacks on vessels moving through the Gulf.

Navy escorts stand ready "if necessary" to ensure the "free flow of energy to the world," he wrote, framing the move as a direct response to recent US-Israeli strikes on Iran.

"Effective IMMEDIATELY, I have ordered the United States Development Finance Corporation (DFC) to provide, at a very reasonable price, political risk insurance and guarantees for the Financial Security of ALL Maritime Trade, especially Energy, traveling through the Gulf. This will be available to all Shipping Lines," Trump said in a Truth Social post.

"If necessary, the United States Navy will begin escorting tankers through the Strait of Hormuz as soon as possible. No matter what, the United States will ensure the FREE FLOW of ENERGY to the WORLD. The United States’ ECONOMIC and MILITARY MIGHT is the GREATEST ON EARTH — More actions to come," the US President added.

The Strait of Hormuz, a narrow waterway between Iran and Oman, handles roughly 21 million barrels of oil daily.

Iranian threats to disrupt traffic had sent energy markets into a tailspin over the weekend, with major traders already suspending some shipments.

Trump's insurance pledge removes a key financial barrier for shipping lines, while the Navy backstop signals military commitment without immediate deployment.

Markets read it as de-escalation insurance.

Shares of container lines and energy transporters jumped 3-5%, reflecting bets that Gulf trade would resume normally.

This echoes Trump-era Gulf interventions that steadied oil flows during prior flare-ups.

Oil retreats, tensions persist

Brent crude touched $85 intraday before easing as Trump's order signaled US resolve to protect the corridor.

The pullback underscores how sensitive energy prices remain to Hormuz headlines, one-fifth of global oil trade passes through the 33-km-wide strait.

Investors welcomed the stabilization, but analysts cautioned that the underlying risks haven't vanished.

Gulf convoys could still face insurance spikes or delays.

Trump teased "more actions" ahead, suggesting sustained commitment.

Wall Street stabilized on the news, but eyes stayed fixed on Tehran.

A single Iranian move against tankers could reignite the panic that drove Tuesday's early plunge.