Port strike also contributes to softer October start.

Iran's missile attack on Israel contributed to a selloff for U.S. stocks Tuesday, sent oil prices soaring and triggered ripples across other financial markets.

But it wasn't the only thing rattling Wall Street, analysts said, nor was it clear that it would end up having much staying power. Still, it served as a reminder that a wider Middle East conflict has the potential to upend a bull market in stocks that's been gaining momentum heading into the final quarter of 2024.

So what else was at play? Jitters were also tied to the start of a strike by dockworkers that has closed U.S. East Coast and Gulf ports and could affect the U.S. economy by as much as $4 billion a day, according to analysts.

"The strike is driving uncertainty concerning the availability of goods and their prices in the near term, with [International Longshoremen's Association] President Harold Daggett issuing dramatic statements about the damage a prolonged standoff will cause," said Jose Torres, senior economist at Interactive Brokers, in a note.

That said, it was a warning Tuesday morning from the White House that a missile strike by Iran was imminent that appeared to send stocks to session lows and sparked a so-called flight to quality that saw investors snap up U.S. Treasurys, gold (GC00) and other assets usually viewed as safe havens. The Cboe Volatility Index VIX, often referred to as Wall Street's "fear gauge," also jumped - but remained below its long-term average of 20, trading just above 19 near the end of Tuesday's session.

As the attack materialized, oil futures extended their surge, with West Texas Intermediate crude (CL.1) and global benchmark Brent crude (BRN00) up by more than 5% on the day at their peak. Stocks and Treasury yields BX:TMUBMUSD10Y, which move opposite to bond prices, remained down but didn't take out the morning lows - and both trimmed their declines once the all-clear was sounded in Israel.

The Dow Jones Industrial Average DJIA ended the day down around 173 points, or 0.4%, according to preliminary figures, after falling 385 points at its session low. The S&P 500 SPX finished with a loss of 0.9%. Both the Dow and S&P 500 ended Monday at records.

Oil also pulled back from session highs, with WTI and Brent ending Tuesday with gains of more than 2% on the day. Both remain down for the year to date.

"The markets' initial reactions moderated by early afternoon after what seems to have been a limited strike on Israel by Iran with no serious casualties," said Ed Yardeni, president of Yardeni Research, in a note.

Oil traders have only reluctantly priced in a risk premium for crude, with prices falling since summer on worries over China's demand, increased production by producers outside of OPEC+ and, more recently, expectations that OPEC+ producers will follow through with plans to begin unwinding some production cuts in December.

An escalation that curtails Iranian crude exports or more broadly curtails crude flows out of the Middle East remains the key threat, carrying the potential for an oil shock that could disrupt the global economy and trigger widespread market ructions. But Tuesday's modest moves aside, investors don't yet appear ready to hit the panic button, analysts said.

"Although the VIX is edging higher it remains sufficiently just below 20 to suggest that markets - including the crude-oil market - do not yet envision an all-out military scenario," said Quincy Krosby, chief global strategist at LPL Financial, in emailed comments.

Tuesday's events, however, underline that the risk of a wider Middle East war remains the top threat to the bull market in stocks, Yardeni wrote.

"For now, we are sticking with our subjective probabilities: 50% Roaring 2020s, 30% 1990s-style meltup, and 20% reprise of geopolitical turmoil reminiscent of the 1970s," he said. "As we've often noted in the past, geopolitically induced selloffs tend to be buying opportunities."