International Oil Prices Plunge Boosts U.S. Stocks; Morgan Stanley Chief Says Market Correction Nearing End

On March 17, international oil prices fell sharply in early trading as expectations grew that disruptions to shipping in the Strait of Hormuz might ease and that multiple countries could release additional crude reserves. The decline in oil prices alleviated inflation concerns, supporting gains in both U.S. equities and Treasuries and contributing to a stronger open across Asian markets, with the Nikkei 225 rising 0.9% at the open and South Korea’s KOSPI advancing 2.9%.

Morgan Stanley’s chief U.S. equity strategist observed that, despite the absence of a clear end to the conflict, the recent pullback in U.S. stocks may be approaching its conclusion. On Monday evening Beijing time, Brent futures fell more than 3%, slipping below $100 per barrel, while WTI plunged over 5% to about $91 per barrel. By Tuesday morning, prices recovered modestly; as of 08:00 Beijing time, Brent had gained roughly 2% to $102.22 per barrel and WTI had risen more than 2% to $95.47 per barrel.

Movements in oil prices remain closely linked to developments in Iran. U.S. officials indicated on Sunday that the Pentagon expects the conflict to last four to six weeks, and that the situation had entered its third week. Yaderni Research noted in a Monday report that, although tensions in the Middle East have escalated, financial markets have shown a degree of calm, suggesting investors are cautiously anticipating a relatively swift resolution while remaining alert to the risk of further deterioration. The firm concluded that energy and financial markets have reacted with a measured response to the conflict and that investors appear to expect a near‑term end to hostilities.

Following the announcement of a record 400 million barrel coordinated release, the International Energy Agency stated on Monday that additional reserves could be deployed if necessary. IEA Executive Director Fatih Birol said the current emergency release reduces the agency’s stocks by about 20%, leaving more than 1.4 billion barrels available for further action if required.

Despite ongoing volatility tied to the conflict, Morgan Stanley’s Michael Wilson argued that the U.S. equity correction has matured. In a Monday report, he acknowledged the possibility of modest further declines in the near term but maintained that the pullback is close to an end in both time and price terms. Wilson highlighted that roughly half of the Russell 3000 constituents are down at least 20% from their 52‑week highs, indicating a broad‑based correction. He added that market performance appears to have moved ahead of the clearly visible risks and that, while this year’s pattern resembles early warning signs from the prior year, the magnitude of the decline should be materially smaller. Wilson cautioned that geopolitical tensions could sustain volatility.

Morgan Stanley expects a wide trading range for U.S. equities in the coming weeks and noted that if the 200‑day moving average is breached, the S&P 500 could find sustained support in the 6400–6500 range, with resistance near 6850. The firm has been taking profits in small‑cap stocks and has adjusted its rating on that segment to neutral. Notwithstanding short‑term uncertainty, Morgan Stanley retains a constructive outlook for U.S. equities over the next six to twelve months.