U.S. equities finished modestly higher on Thursday after investors navigated a highly volatile session dominated by conflicting developments surrounding negotiations between Washington and Tehran. Stocks recovered from early losses as oil prices retreated during afternoon trading, helping stabilize broader market sentiment despite continued uncertainty over Iran’s nuclear program and the future of energy flows through the Strait of Hormuz.

Markets Swing With Every Iran Headline

The S&P 500 ended the session slightly higher, gaining roughly 0.16%, while the Nasdaq Composite added a modest 0.09%. The Dow Jones Industrial Average outperformed, climbing more than 278 points as investors rotated into industrial and defensive sectors.

Trading conditions remained unstable throughout the day as financial markets reacted almost in real time to headlines surrounding diplomatic negotiations between the United States and Iran. Oil prices initially surged after Iranian Supreme Leader Ayatollah Mojtaba Khamenei signaled opposition to transferring enriched uranium abroad, a key demand in ongoing negotiations with Washington.

However, crude prices later reversed lower after U.S. Secretary of State Marco Rubio said there had been “some good signs” emerging from negotiations, reinforcing hopes that a broader agreement could still be achieved.

Investors continue viewing the Strait of Hormuz as the central risk factor for global markets. Any disruption to the strategic shipping corridor could significantly impact global oil supply, inflation expectations, and central bank policy decisions.

Oil and Inflation Remain Core Market Drivers

Market volatility increasingly reflects broader concerns surrounding inflation and interest rates rather than purely corporate fundamentals. With earnings season largely complete, investor attention has shifted back toward macroeconomic and geopolitical developments.

Several strategists noted that elevated stock valuations now leave markets more vulnerable to sudden swings tied to external risks. Jason Pride, chief of investment strategy and research at Glenmede, noted that geopolitical uncertainty is now replacing earnings momentum as the primary short-term market driver.

Oil price fluctuations remain especially important because energy costs continue feeding into broader inflation concerns across transportation, manufacturing, and consumer spending. Walmart’s weaker-than-expected forward guidance reinforced those worries after the retailer warned that higher gasoline prices are beginning to pressure household budgets.

The retailer’s shares fell sharply, dragging consumer staples lower and weighing on broader defensive retail names including Costco and Casey’s General Stores.

Technology Leadership Faces New Pressure

Technology shares also struggled to maintain momentum following Nvidia’s latest earnings release. Although the chipmaker delivered strong guidance and announced an $80 billion share repurchase program, some investors locked in profits after the stock’s enormous rally earlier this year.

Markets increasingly believe competition within the artificial intelligence semiconductor industry may intensify as rivals including Intel and Advanced Micro Devices continue expanding their AI product offerings.

Meanwhile, fresh economic data showed U.S. jobless claims declined last week, reinforcing signs of labor market resilience. Manufacturing activity also climbed to its highest level in four years during May as companies accelerated inventory building amid concerns over potential supply disruptions linked to the Middle East conflict.

The stronger economic data may give the Federal Reserve additional room to maintain its focus on inflation risks rather than pivoting toward rate cuts in the near term.

Looking ahead, investors are expected to remain highly reactive to geopolitical developments, oil price movements, and inflation indicators. Markets appear increasingly dependent on diplomatic progress between Washington and Tehran as traders search for greater clarity on the trajectory of energy markets, interest rates, and global economic stability.