U.S. markets are coming off a sharp bounce Monday, when the Dow jumped about 1.4% and the S&P 500 rose roughly 1.2%, while the Nasdaq gained around 1.4%, lifting sentiment after weeks of conflict‑driven volatility.

Even after the rebound, the S&P 500 remains below its recent highs following a stretch where the Nasdaq fell almost 10% from record levels and the Dow logged four straight weeks of declines.

Globally, risk appetite is improving at the margin, with Asian benchmarks like Japan’s Nikkei and South Korea’s Kospi managing gains as traders digest the latest moves in oil and rates.​

Energy and defense names remain in focus as the Middle East conflict keeps a floor under crude and boosts demand expectations for military hardware.

Defense contractors such as Lockheed Martin and Northrop Grumman have recently seen outsized gains on heightened geopolitical tensions and increased spending expectations.​

Rate‑sensitive growth and big‑tech shares are stabilizing after recent underperformance, as traders reassess how much higher long‑term yields can go if the Fed still aims for roughly two cuts this year.

The ongoing U.S.–Israel–Iran conflict remains the core macro overhang, with investors worried that any renewed spike in oil could re‑ignite inflation and delay Fed easing.

Fed expectations have swung back and forth: markets had pushed the first 25 bp cut into late 2026, but weaker recent jobs data nudged odds of a June move back toward roughly even.

Traders are watching upcoming inflation prints and labor data closely, since any upside surprises could revive the “higher for longer” narrative that pressured stocks earlier this month.

Crude oil has cooled from its sharp war‑driven spike, easing some of the most acute inflation fears even as prices remain elevated versus late last year.

Gold is holding firm above key technical levels as a classic hedge against both geopolitical risk and policy uncertainty, reflecting still‑elevated demand for safety trades.

U.S. Treasury yields are off their recent peaks but remain high enough that equities continue to compete with attractive real yields, keeping volatility elevated across risk assets.

The mood is cautiously constructive: investors are buying the dip after a notable pullback, but positioning stays more defensive than earlier in the year given war, oil, and Fed‑path unknowns.

Volatility metrics jumped during the height of the Iran headlines and energy spike and, while they have eased, still signal a market that is quick to react to any new geopolitical shock.

Overall, traders are walking a tightrope between optimism that rate cuts and earnings growth can support equities and concern that another inflation flare‑up could force the Fed to stay restrictive longer than currently priced.