(Sharecast News) - US stocks rebounded off their lows but still finish mixed on Monday, as the escalating conflict in the Middle East limited upside on Wall Street as oil prices surged to eight-month highs.
While geopolitical risk weighed on sentiment - hammering share prices in the travel sectors in particular - defence contractors gained on the back of the outlook for demand, and energy producers tracked commodity prices higher. Meanwhile, tech stocks were largely resilient, bouncing back after recent weakness.
As a result, the Dow fell just 0.15%, the Nasdaq gained 0.36%, while the S&P 500 - which dropped as much as 1.2% earlier on - finished marginally in positive territory (+0.04%).
Oil prices surged after the US and Israel started a war with Iran at the weekend, assassinating the country's leader Ayatollah Ali Khomenei and several members of his administration, in an attack aimed at regime change in the Persian Gulf state.
The attacks across multiple provinces sparked a rapid reaction from Iran, which fired missiles and drones across the region, hitting US bases in Kuwait and Bahrain, along with other strikes on Israel, Oman, Dubai and the British air force base on Cyprus.
WTI crude finished up 6.0% at $71.03 a barrel - its highest since mid-June - on fears of oil supply disruption as Iran's Revolutionary Guard warned ships not to use the vital Strait of Hormuz - through which 20% of the world's oil is transported, along with other commodities.
Meanwhile, European natural gas futures rocketed 50% to a one-year high of €48MWh as gas production was disrupted by the conflict.
In economic news, the ISM's US manufacturing purchasing managers' index eased to 52.4 in February from 52.6 in January, but came in higher than the 51.8 consensus forecast.
Energy stocks in focus
Shares in AES plunged 18% after the news that the energy company has been acquired by a consortium, including BlackRock's Global Infrastructure Partners and EQT, for $10.7bn. The purchase values AES at $15 a share, well below the $17.26 price tag as of Friday's close, but includes the assumption of some $22.7bn in debt.
Others in the energy sector, however, were tracking oil prices higher, with Chevron, Marathon Petroleum, Valero Energy, Exxon Mobil, Oneok and ConocoPhillips putting in decent gains.
Defence stocks also benefitted from geopolitical risk, with Lockheed Martin, Northrop Grumman and Palantir Technologies on the rise.
In contrast, rising oil prices and travel disruption hit prices for cruise operators Carnival, Royal Caribbean and Norwegian, and airlines American Airlines, United, Delta and JetBlue.
Meanwhile, tech heavyweights provided a bit of a lift to markets, with Microsoft, Apple, Nvidia and Meta all finishing higher.