US stocks fell Tuesday, though they dramatically pared back earlier losses after President Trump said the Navy would escort oil tankers through the Strait of Hormuz if necessary – as investors fear a prolonged conflict could spike gasoline prices.

The Dow Jones Industrial Average closed down 403 points, or 0.8% – marking a wild rebound after it was down more than 1,200 points earlier in the day. 

The S&P 500 and Nasdaq fell 1% and 0.9%, respectively. At their lowest points during the rollercoaster trading session, the S&P was down 2.5% and the Nasdaq lost 2.7%.

National average gasoline prices spiked overnight to roughly $3.11 a gallon, according to AAA, as Brent crude oil jumped about 2% Tuesday to more than $77 a barrel.

Wall Street’s volatility index – also known as the fear gauge – jumped to its highest level since November, while gold futures dropped 3.4% to $5,129.40 an ounce after panicked investors had flocked to the safe-haven asset on Monday.

Earlier in the session, investors dramatically dumped stocks – especially energy corporations and risky assets like tech – over concerns that the widening conflict in Iran could disrupt key oil supplies.

After joint US-Israeli airstrikes on Iran killed Iranian Supreme Leader Ayatollah Ali Khamenei over the weekend, Tehran responded with attacks on neighboring countries including the United Arab Emirates, Kuwait and Bahrain.

Trump has said the conflict could last “four weeks or so,” adding to market jitters.

Tehran reportedly announced it would close the Strait of Hormuz and warned it will attack any vessel attempting to transit the narrow waterway that carries about 20% of the world’s oil supply.

Markets recovered some losses Tuesday after Trump said the US Navy will guide oil tankers through the passage, if necessary.

A potential spike in gasoline prices is also raising fresh concerns about inflation – a key factor for investors already worried that rising energy costs could complicate the Federal Reserve’s path toward interest-rate cuts.

The latest data show inflation had been easing before the new energy shock, slowing to 2.4% in January, its tamest pace since last May, according to the Bureau of Labor Statistics.

The relatively modest readings had fueled expectations that the Federal Reserve could begin cutting interest rates later this year – though a sustained surge in oil and gasoline prices could complicate that outlook if energy costs begin feeding into broader price pressures.

Historically, energy shocks can ripple through consumer prices, though the immediate impact is often muted unless the supply disruption is prolonged.

“The recent jump in gas prices will likely nudge headline inflation higher, but it’s not enough – at this stage – to meaningfully change the broader inflation outlook,” Mark J. White, managing partner at Mark White Wealth Advisors, told The Post.

White noted that a roughly 5% increase in oil prices typically adds about 0.1 percentage point to year-over-year inflation.

Even a sustained $20 increase in crude would likely boost consumer prices only a few tenths of a percentage point, with the impact peaking within a quarter or two, according to White.

A larger risk to inflation would come if the conflict severely disrupts the Strait of Hormuz. A prolonged shutdown could push oil toward $100 per barrel and deliver a far more meaningful inflation shock.

Federal Reserve officials are already warning that the widening conflict is clouding the economic outlook.

Minneapolis Fed President Neel Kashkari said Tuesday that the war has introduced a new layer of uncertainty for policymakers who had previously expected cooling inflation to open the door to rate cuts later this year.

“I had a lot of confidence up until a couple of days ago,” Kashkari said at a Bloomberg event in New York, referring to the period before the US-Israel attack on Iran.

For now, economists say the Fed is likely to look past temporary energy spikes unless higher fuel costs begin feeding into wages or long-term inflation expectations.

Absent a major supply shock, White said the current situation “doesn’t resemble the 1970s or even the 2022 energy spike,” noting that the US economy is less energy-intensive today and inflation expectations remain relatively well-anchored.

Foreign policy expert Michael Szanto told The Post it remains unclear how long Iran can sustain a closure of the Strait of Hormuz, noting that the US and Israel are exerting “enormous military power” at a time when Iran’s forces are already weakened.

“Current US oil and natural gas production is at record highs, positioning the United States well to endure spikes in oil prices,” he said.

Energy industry veteran Derek Reisfield said markets may be betting the Hormuz disruption lasts longer than a brief flare-up, particularly after Iran reportedly struck Saudi Arabia’s Ras Tanura refinery — which produces about 550,000 barrels per day — and targeted two QatarEnergy LNG facilities that account for roughly 20% of global LNG exports.

While damage to Ras Tanura appears limited, the facility was shut down, and the extent of damage in Qatar remains unclear. Reisfield warned that if disruptions persist, higher oil and gas prices could weigh on the global economy – especially Europe – though the US, as a major producer, would be somewhat insulated from supply shortages even if prices rise.

“The US is a large oil & gas producer at the moment, so we will be somewhat insulated for supply disruptions, but prices would likely go up if the global market supply is disrupted,” said Reisfeld, a former executive at McKinsey who co-founded MarketWatch.

The conflict’s violence has spread beyond Gulf chokepoints as Iranian forces launched strikes on US diplomatic facilities and missile attacks in the region, and at least three tankers have been damaged with reported casualties as shipping traffic grinds to a near halt.