US equities closed higher Wednesday as investor concerns over an escalating Middle East conflict eased following reports of Iranian openness to diplomacy and a commitment by US President Donald Trump to stabilize the oil market. This improved risk sentiment prompted a return of capital to technology stocks, driving major indices up across the board.
The Dow Jones Industrial Average rose 238.14 points, or 0.49%, to 48,739.41. The S&P 500 gained 52.87 points, or 0.78%, to 6,869.50. The Nasdaq Composite advanced 290.79 points, or 1.29%, to 22,807.48. A resurgence in tech buying allowed the tech-heavy Nasdaq to maintain its upward trajectory despite recent US and Israeli airstrikes on Iran.
Market sentiment stabilized partly due to a New York Times report indicating that Iranian intelligence officials reached out indirectly to the Central Intelligence Agency the day after the airstrikes, suggesting room for a diplomatic resolution. The Trump administration also announced plans to deploy the US Navy to escort oil tankers through the Strait of Hormuz and provide political risk insurance to mitigate the threat of energy supply disruptions.
Jim Awad, a strategy analyst at Clearstead Advisors, noted that these oil market stabilization measures reduced fears of surging energy prices and inflationary pressures. This reassurance encouraged investors to repurchase technology stocks that had experienced a significant pullback in February. While current market sentiment shows some optimism, he added that developments over the coming weeks require close monitoring.
Concerns linger that a prolonged Middle East conflict could drive up energy costs, exacerbate inflation, and increase broader market volatility. Richard Bernstein, chief executive officer of Richard Bernstein Advisors, stated that equities could see further gains if investors perceive the war as having a limited and brief impact. He warned that volatility would likely intensify if the conflict drags on and begins to affect the US economy.
Reflecting this improved sentiment, the VIX volatility index dropped by about 10% to approximately 21, indicating that traders anticipate less short-term market turbulence.
Energy stocks were the weakest segment within the S&P 500. Energy companies that had previously rallied on expectations of rising oil prices experienced a pullback, with Exxon Mobil falling 1.3% and ConocoPhillips declining 2.42%.
Oil prices remained flat following a volatile trading session. Brent crude settled at $81.40 per barrel, unchanged from the previous session and remaining near its highest level since January 2025.
On the economic data front, the latest Federal Reserve report indicated modest recent growth in US economic activity alongside persistent price increases and a stable labor market. A private employment report showed stronger-than-expected private sector job gains in February, and a separate survey highlighted robust activity in the services sector, pointing to continued resilience in underlying economic fundamentals.
In corporate news, vaccine maker Moderna surged 16% after agreeing to pay up to $2.25 billion to resolve a long-standing legal dispute over COVID-19 vaccine patents.