Markets Rally, Oil Slumps After Iran’s Missile Strike Appears Ineffective Against U.S. Bases

Hadisur Rahman, JadeTimes Staff

H. Rahman is a Jadetimes news reporter covering Business

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Image Source: Michael M. Santiago/Getty Images

U.S. markets staged a sharp rebound and oil prices tumbled Monday after Iran fired missiles toward American military bases in Qatar and Iraq, most of which were reportedly intercepted without causing casualties or significant damage.

Investors interpreted the development as a symbolic gesture from Tehran rather than a meaningful escalation, reducing immediate fears of prolonged conflict in the Middle East.

U.S. crude oil futures fell 4.1%, settling at $70.78 per barrel, a stark reversal from a Sunday evening surge of 6% that briefly lifted prices to $78.50. The Dow Jones Industrial Average climbed 270 points (0.6%), while the S&P 500 rose 0.7% and the Nasdaq Composite gained 0.8%.

The market's reaction reflects a collective bet by traders that Iran either lacks the capacity or the political will to retaliate meaningfully after last weekend's Operation Midnight Hammer, which saw the U.S. strike three Iranian nuclear sites.

“Ten missiles is not that much. Every one is dangerous, but this looks like a symbolic attack,” said Kirk Lippold, former commander of the USS Cole, in an interview with CNN. “Hopefully at this point we’re not going to see further responses by the Iranians.”

Analysts also questioned Iran’s military effectiveness, especially when compared to its massive June 13 missile barrage against Israel. “They can’t hit us,” said Robert Yawger, commodity strategist at Mizuho Securities. “They don’t have the technology. Meanwhile, oil continues to roll unmolested including Iranian oil.”

The muted military response offered a rare moment of clarity in a landscape marked by uncertainty from escalating global tariffs to volatile interest rate expectations and persistent concerns over Middle East conflict.

Under conventional logic, a U.S. strike on Iranian nuclear sites would spark fears of broader war, lifting oil and pulling equities lower. Instead, traders saw the limited Iranian retaliation as a sign the crisis may not spiral into a full-blown war, helping reduce volatility in the short term.

Yet risks remain. Should Iran follow through on threats to close the Strait of Hormuz the critical oil shipping lane through which 20% of global crude flows or if U.S. and Israeli forces ramp up military actions, markets could quickly reverse course.

“This could go either way,” noted a CNN military analyst and retired U.S. Air Force Colonel. “Iran may want an offramp, but if either side decides to escalate, all bets are off.”

Safe-haven investments typically strong during geopolitical tension were relatively quiet. Gold edged up just 0.4% to $3,400 per troy ounce, while U.S. Treasury yields moved slightly lower as bond prices nudged higher.

The U.S. dollar, traditionally a global haven, initially strengthened but later slipped 0.25% Monday afternoon. Analysts say the dollar’s recent volatility stems more from the Trump administration’s historic tariff policies and their inflationary risk than from Middle East tension alone.

“While the broader bias still leans toward structural dollar weakness, escalating Middle East tensions are injecting support for the greenback via the commodity channel,” said George Vessey, macro strategist at Conerva, in a Monday investor note.

With Iran reportedly vowing retaliation through potential disruption of oil exports, and markets still adjusting to shifting trade dynamics and interest rate uncertainty, Wall Street’s current optimism may prove fragile.

“Unless there’s a material interruption in Gulf energy flows, I think any further spikes in oil will be contained,” said Bob McNally, president of Rapidan Energy Group. “But if we see escalation, markets will have to reprice everything from inflation expectations to growth outlooks.”

For now, investors are cautiously hopeful that the symbolic nature of the strike and its lack of immediate impact signal a de-escalation. But with tension simmering and diplomacy fragile, market calm may only be temporary.