Stocks rebounded on Tuesday following a losing session on Wall Street, as oil prices eased and investors assessed ongoing tensions in the Middle East.

The S&P 500 gained 0.97% to settle at 5,751.13, and the Nasdaq Composite rose 1.45% to finish at 18,182.92. The Dow Jones Industrial Average added 126.13 points, or 0.3%, to end at 42,080.37.

West Texas Intermediate oil futures dropped 4.6% Tuesday as traders monitored Israel's expected retaliation to Iran missile attacks and U.S. efforts to prevent a wider regional conflict. The move pressured energy stocks, with the S&P sector slumping 2.6%. Marathon Petroleum and Valero Energy shed 7.7% and 5.3%, respectively.

"The war seems to be on the forefront of everybody's mind," said Robert Pavlik, senior portfolio manager at Dakota Wealth Management. "Bigger picture is the election and there are a lot of uncertainties revolving around taxes and how that's going to impact earnings potentially going forward."

Technology shares powered higher Tuesday, with Nvidia and Broadcom gaining 4% and 3% respectively. Meta Platforms, Tesla and Microsoft rose at least 1% each, while Palo Alto Networks rallied 5%.

The start of the new trading month has ushered in a bout of volatility as fears mount of an escalation conflict in the Middle East. Rising bond yields have also weighed on the market, with the rate on the 10-year Treasury topping 4%.

The market rallied slightly to end last week after a blockbuster jobs report, and the Dow notched a new all-time closing high. However, enthusiasm faded this week as investors reasoned that the Federal Reserve may not be as aggressive with future rate cuts given the labor market's strength.

Short-term economic data has further signaled a resilient economy, boosting fears that the central bank may "drag their feet" on interest rate cuts from here, added Dakota's Pavlik.