Stocks Whipsawed by Hormuz Tensions…Losses Pare Back After Trump Pledges to Protect Sea Lanes

Global financial markets swung on fallout from the Middle East conflict, but losses were partly pared after U.S. President Donald Trump said he would protect maritime shipping routes.

According to a Bloomberg report on the 3rd (local time), tensions around the Strait of Hormuz escalated amid spillovers from the Iran war, sending oil prices up more than 9% at one point and triggering a simultaneous selloff in stocks and bonds. The S&P 500, which had fallen as much as 2.5% intraday, trimmed its decline to close down 0.9%.

Trump said the U.S. would escort tankers and ships through the Strait of Hormuz and provide insurance support. The remarks were interpreted as an effort to ease concerns about supply disruptions at the world’s most important energy shipping chokepoint. After the comments, Brent crude gave back part of its gains, hovering around $80 a barrel.

The Dow Jones Industrial Average plunged more than 1,200 points at one stage before narrowing its loss to about 400 points. The yield on the 10-year U.S. Treasury rose 3 basis points to 4.06%. Bloomberg’s dollar spot index climbed 0.6%.

In the region, Israel carried out airstrikes on Tehran, and Iran fired missiles toward Qatar, Bahrain and Oman. Qatar and Iraq halted production at key energy facilities. With worries over supply disruptions, diesel and gasoline prices surged, raising the prospect of stoking inflationary pressure.

Market experts said that if oil prices remain in the $90 to $100-a-barrel range for an extended period, the economy could face a substantial burden. Still, if central banks judge the shock to be temporary and refrain from raising rates, the impact could be limited—though the timing of rate cuts could be pushed back.

Historical data were also cited showing that during crisis episodes, equities tend to fall an average of 7% and a median of 3%, but have typically recovered within a few months unless the broader economy suffers structural damage.

Meanwhile, the digital-asset (cryptocurrency) market also weakened. Bitcoin (BTC) fell 1.8% to $68,187.82, and Ethereum (ETH) dropped 3.4% to $1,975.07.