Wall Street stages cautious rebound as oil prices ease on hopes of Hormuz Deal

Wall Street staged a cautious recovery as hopes of a potential agreement to ease tensions around the Strait of Hormuz pushed oil prices lower, helping reduce concerns over a renewed inflation shock, Bloomberg News reported.

US crude hovered around $82 a barrel after Pakistan’s defense minister said the US and Iran were close to reaching some form of arrangement over the strategic waterway. The prospect of reduced tensions weighed on oil prices, which had surged amid uncertainty surrounding the conflict and disruptions to energy markets.

The S&P 500 was largely unchanged, hovering near the record high reached on Friday. By 9:35 a.m. ET, the Dow Jones Industrial Average was up 101 points, or 0.2%, while the Nasdaq Composite slipped 0.1%. Mega-cap technology stocks were mixed, with Meta Platforms Inc. gaining while Alphabet Inc. declined.

Pakistan’s defense minister said Washington and Tehran were “close to some sort of arrangement” over the Strait of Hormuz, even as both sides appeared to maintain firm positions in negotiations.

The developments followed tougher comments from President Donald Trump, who said Iran should pay reparations for people killed in attacks linked to the Islamic Republic as well as during domestic protests.

Oil price movements remain central to the market outlook. According to Elias Haddad of Brown Brothers Harriman, crude prices are increasingly driving the narrative around the conflict, with their swings likely to influence the pace of escalation or de-escalation.

Treasury yields remain elevated

US Treasury yields have risen since the conflict with Iran began, as higher oil prices have raised concerns about renewed inflationary pressures.

The benchmark 10-year US Treasury yield edged down to 4.68% from 4.72% at Monday's close. However, it remains well above the 3.97% level recorded before the conflict began.

Higher Treasury yields can also influence borrowing costs across the US economy, including mortgage rates. Long-term US mortgage rates have risen to their highest level in a year.

Inflation data in focus

Investors are also awaiting the latest US consumer price index data. Bloomberg News said the report is expected to show that energy-related price pressures have begun to cool after intensifying following the start of the US war with Iran in late February.

A moderation in inflation could ease pressure on the Federal Reserve, particularly after a weak July jobs report. Three Fed officials had dissented at the July 29 meeting in favour of raising interest rates.

Dennis Follmer of Montis Financial said a continued decline in consumer prices could strengthen the case for the Fed to keep rates steady rather than raise them.

Meanwhile, existing-home sales fell to a three-month low in July as high prices and mortgage rates continued to weigh on housing demand. Small-business optimism, however, climbed to its highest level in nearly a year, supported by stronger hiring plans and easing inflation pressures.

Bloomberg News also highlighted corporate developments involving CoreWeave, Anthropic, On Holding, Fermi and Hims & Hers Health, as investors assessed earnings and new business deals across technology, artificial intelligence and consumer sectors.