New York
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Global stocks closed lower Tuesday after a volatile day that saw the Dow briefly tumble by more than 1,200 points as concerns linger among investors that the widening conflict in the Middle East could escalate further.

The Dow closed lower by 404 points, or 0.83%, paring earlier losses. The S&P 500 sank 0.94% and the Nasdaq moved 1.02% lower, partially recovering from earlier declines of nearly 2.5% and 2.75%, respectively.

Wall Street’s fear gauge, the VIX, was up 10% after briefly rising as much as 31%. The VIX settled at its highest level in just over three months.

Stocks in Europe and Asia were also lower for a second day. Europe’s benchmark Stoxx 600 sank 3.08%. Japan’s Nikkei 225 fell 3.06%. South Korea’s Kospi index tumbled 7.24%, posting its worst day since April. Markets in South Korea were closed Monday in observance of a holiday.

“It is not possible at this time to know the full scope and duration of military operations that may be necessary,” President Donald Trump wrote Monday in a letter to Sen. Chuck Grassley.

Trump on Tuesday took questions from reporters at the White House and justified the attack on Iran, saying “it’s something that had to be done.” The president said “just about everything’s been knocked out” when discussing Iran’s military installations, and expressed surprise at Iran’s decision to strike its neighbors in the Middle East.

Military action in the region intensified for a fourth-straight day, with Israel saying it is conducting “simultaneous strikes in Tehran and Beirut,” targeting Iranian military sites and the Iran-backed group Hezbollah. The US closed embassies in Saudi Arabia, Kuwait and Lebanon and warned Americans to leave 14 countries in the region including Israel and Egypt. And non-emergency US government personnel in Jordan, Bahrain, Iraq, Qatar, Kuwait and the United Arab Emirates have been ordered to depart due to security concerns.

Investors are watching for additional pressure on oil prices after Iran said Monday it would attack any ship trying to pass through the Strait of Hormuz, the narrow channel off Iran’s coast through which nearly 20% of global oil consumption flows. Vessel operators and maritime insurers are unwilling to risk sailing through it while fighting rages.

But oil prices pulled back in the afternoon after Trump posted on Truth Social that he has ordered the United States International Development Finance Corporation to provide “insurance and guarantees” for ships traveling through the Persian Gulf and is directing the US Navy to escort tankers through the Strait of Hormuz “if necessary.”

Oil prices at one point Tuesday were up more than 9% before paring gains to settle at their highest levels since January 2025. US crude oil prices rose 4.68%, to $74.56 per barrel, after rising 6.3% on Monday. Brent crude, the international oil benchmark, gained 4.7%, to $81.40 per barrel. And gas shot 11.2 cents higher to $3.11 a gallon, its biggest single-day jump since 2005.

Stocks pared some losses Tuesday as the surge in oil prices moderated and investors monitored comments from the White House.

Traditional safe haven assets showed mixed moves Tuesday: The 10-year Treasury yield ticked higher, extending gains from Monday, as investors sold bonds and weighed the inflationary impact of higher oil prices.

The US dollar index gained 0.65% on expectations that inflation could further delay Federal Reserve rate cuts, supporting the greenback. The dollar index is up nearly 1.5% so far this week.

“That the current war may be ‘inflationary’ is what’s panicking traders today,” Thierry Wizman, global FX and rates strategist at Macquarie Group, said in a note.

“The view of a short war been upended today because of suggestions from the US administration that the war may be prosecuted for longer than a few weeks,” Wizman said.

Gold was down 3.8%, continuing a recent bout of volatility and reversing course after climbing 1.2% on Monday to reach its highest level in a month.

Natural gas futures in Europe surged almost 20% Tuesday to their highest level in three years, extending gains after soaring 38% Monday. US natural gas futures were up 3% after climbing 3.5% Monday.

For the United States, gains in diesel prices outstripped gains in oil and natural gas: Diesel futures surged 8% Tuesday after climbing nearly 12% Monday.