Why is US markets trading higher? Nasdaq in green, Dow recovers from lows as crude falls 6% to 96, JPMorgan expects 10% correction

Brent crude, which had earlier jumped as much as 15% to $107 per barrel, later recovered and fell about 6% to around $96 per barrel after intervention by the G7. The easing in oil prices helped calm investors and reduced some of the panic in the markets.

By 12:39 p.m. EDT, the Nasdaq was in green gaining 0.17%. The Dow Jones Industrial Average also recovered from its earlier losses, though it was still down 332.75 points at 47,171.96. S&P 500 futures, however, were still lower by about 1.3%.

War fears triggered the initial market sell-off

The sharp fall earlier in the day was due to fears that the ongoing Iran-related conflict in the Middle East could disrupt global energy supplies. When oil prices rise quickly, investors worry that inflation will increase and economic growth could slow.

The surge in crude prices also pushed bond yields higher. The yield on the 10-year US Treasury rose by five basis points to 4.19%, but the US dollar strengthened by 0.6%, reaching its highest level since January.

Financial stocks were among the worst hit sectors during the recent sell-off. Banks and other financial companies often suffer when investors become nervous about the economy.

JPMorgan turns cautious on US stocks

Some market experts are warning that stocks could fall further if the geopolitical tensions continue.

Andrew Tyler, JPMorgan’s head of global market intelligence, turned “tactically bearish” on US stocks Monday as the Middle East conflict showed no signs of abating, sending oil above $100 a barrel. A correction would mark a 10% drop in the US benchmark from its peak, implying the S&P 500 would drop to roughly 6,270 points or roughly 7% lower from where the index closed on Friday.

“A definitive off-ramp to the conflict will end this tactical call as the underlying macro fundamentals remain supportive of risk-assets,” he wrote.

Investor sentiment falls into extreme fear

Investor confidence has also dropped sharply. The widely followed Fear and Greed Index has fallen into the “Extreme Fear” zone for the first time since December 3.

The index currently stands at 22. The indicator measures market sentiment on a scale from 0 to 100, where lower numbers show fear among investors and higher numbers show strong optimism.

Developed by CNN Business, the index uses seven market indicators including stock momentum, market volatility, options trading, safe-haven demand and junk bond demand to measure whether investors are acting out of fear or greed.

Rising oil prices raise stagflation concerns

The surge in oil prices is raising concerns that the global economy could face stagflation, a situation where inflation rises while economic growth slows.

“The market is anticipating the worst-case scenario,” said David Kruk, head of trading at La Financiere de l’Echiquier in Paris told Bloomberg. “The selloff is all about oil, it’s about the inflation that is deduced from it, it’s about the risk of stagflation.”

“The EU economy is the most vulnerable with a double hit from the oil and gas price spike, and let’s not forget, another war closer to home.”

Another sign of rising anxiety is the Cboe Volatility Index (VIX), often called Wall Street’s “fear gauge,” which jumped above 30 for the first time since the tariff-driven market sell-off in April 2025.

Earlier in the session, the Dow had fallen more than 716 points at one stage, showing how quickly investor sentiment has turned negative.

Economists warn oil shock could hurt growth

Many economists say oil prices above $100 per barrel can become a serious problem for the global economy because they increase transportation, manufacturing and consumer costs.

If energy prices remain high for a long period, companies may face higher expenses while consumers cut spending, slowing economic growth.

Ed Yardeni, president of Yardeni Research, warned that markets could slide further if investors begin pricing in a 1970s-style stagflation scenario.

Stagflation occurs when inflation rises while economic growth slows, a situation that leaves policymakers with limited options. The Federal Reserve’s dual mandate, maintaining stable prices while supporting employment, becomes harder to manage during such periods.

“If the oil shock persists, the Fed could face rising inflation and rising unemployment at the same time,” Yardeni wrote in a market note.

Meanwhile,some strategists believe the market weakness may only be temporary.

“Our base case still assumes that oil prices will ultimately retreat below $100 as policy responses and market adjustments ease supply fears, although the weekend’s news flow raises the probability of a more persistent energy shock,” said Mathieu Racheter, head of equity strategy at Julius Baer.

Yardeni also believes that once geopolitical tensions ease, the US economy could continue to expand, especially with support from technology-driven growth.

Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a registered financial advisor in the respective jurisdiction.