Markets React with Cautious Relief After U.S. Strikes Iranian Nuclear Sites

Markets opened the new week on edge following news that the U.S., in coordination with Israel, launched airstrikes against Iranian nuclear facilities over the weekend. The military action, while not entirely unexpected, caught many off guard in terms of timing and immediacy. Early Sunday evening, equity futures tumbled and crude oil spiked sharply, reflecting investor concerns over potential retaliation, a spike in energy prices, and broader geopolitical escalation. Yet as the night progressed, markets appeared to stabilize, and in some corners, optimism began to surface.

As of 6:00 p.m. Eastern on Sunday, U.S. equity futures were in the red across the board. Dow futures fell 251 points, or 0.41%, while the S&P 500 and Nasdaq 100 were down 0.42% and 0.55%, respectively. The initial reaction was swift, as headlines around Iranian threats to close the Strait of Hormuz—through which roughly 20% of the world’s oil flows—amplified investor fears. At the same time, West Texas Intermediate (WTI) crude oil surged over 4%, briefly topping $78 before pulling back to the $75 range. Brent crude futures followed suit, peaking above $81—a five-month high—before settling closer to $79.

Despite the initial volatility, the tone in markets began to shift away from pure risk-off by mid-evening. The S&P 500, which dipped as low as 5,959, rebounded to near 5,990, and the Nasdaq 100 futures staged a similar recovery. Oil, too, came well off its highs, with traders noting that while the threat of disruption is real, tanker traffic through the Strait of Hormuz remained unaffected as of Sunday evening. Analysts and energy executives alike emphasized that while Iran’s parliament had reportedly voted to close the strait, the final decision lies with Iran’s Supreme National Security Council—adding a layer of complexity and delay to any meaningful disruption.

While the military action raised the temperature in an already tense Middle East, market participants appeared to be interpreting the strikes through a strategic lens: that a successful attack on Iranian nuclear infrastructure—without a broader war breaking out—may ultimately remove one of the most destabilizing variables from the regional equation. As Dan Ives of Wedbush Securities noted in a Sunday research note, “A weakened Iran with no nuclear capacity removes the biggest threat to the Middle East and Israel, which will be viewed as a positive for the market and tech stocks in particular.”

Indeed, Israeli markets rallied on Sunday. The Tel Aviv 125 Index rose 1.8%, hitting a fresh all-time high, while a narrower index of 35 stocks gained 1.5%. The rally suggests local investors may be viewing the developments as a turning point in the long-running nuclear standoff. In U.S. markets, however, the reaction was more muted and measured—reflecting a mix of cautious relief and lingering concern over potential retaliation.

The currency and commodity complex offered further evidence of a nuanced market response. The U.S. Dollar Index rose 0.35%, reflecting modest safe-haven flows, but gold futures surprisingly fell 0.35%, suggesting a lack of full-throttle panic. Bitcoin dropped 2.6%, testing support near the psychologically important $100,000 mark, underscoring some risk aversion in speculative assets.

Despite the Biden administration’s insistence that the mission was not aimed at regime change, President Trump added confusion to the messaging by posting on social media that regime change may, in fact, be on the table. “If the current Iranian Regime is unable to MAKE IRAN GREAT AGAIN, why wouldn’t there be a Regime change???” he wrote. Still, Defense Secretary Pete Hegseth and Vice President JD Vance both reiterated that the U.S. had no interest in a ground war and that the target of the strikes was Iran’s nuclear capability, not its government.

Iran’s response remains the critical unknown. While its parliament postured toward closing the Strait of Hormuz, actual decisions on escalation rest with Supreme Leader Ayatollah Khamenei. His first public remarks since the strikes pointed fingers at Israel but notably avoided direct threats toward the United States. The damage to Iran’s facilities appears substantial—satellite imagery from Maxar Technologies showed large holes at the Fordow uranium-enrichment complex—but the fate of Iran’s enriched uranium stockpile remains unclear.

Looking ahead, markets are expected to remain headline-driven as traders assess whether the weekend strikes mark the beginning of a wider conflict or the start of a new negotiating phase. Energy prices will remain sensitive to developments in the Gulf, while equities may continue to rebound if fears of escalation remain contained.

For now, the market appears to be cautiously embracing the idea that a weakened Iran—particularly one without nuclear capabilities—could reduce long-term geopolitical risk. That optimism is tempered by the reality that Iran’s response is still a wild card, but early price action reflects a market that is leaning toward relief rather than fear.