Global stock markets advanced on Monday while oil prices fell sharply after the United States and Iran reached a tentative agreement to extend their ceasefire and reopen the Strait of Hormuz, according to reports. The deal raised hopes of easing inflationary pressures and restoring crude oil flows.
Market Rally and Oil Drop
The S&P 500 rose 1.5%, the Dow Jones Industrial Average gained 638 points (1.2%), and the Nasdaq Composite climbed 2.3% as of 9:35 a.m. Eastern time, the Associated Press reported. Brent crude oil prices dropped 4.8% to $83.18 a barrel, returning to levels seen in early March. Although still above the roughly $70 level prevailing before the conflict began more than three months ago, prices remain well below the $100-plus levels seen just weeks ago. The expectation is that lower energy costs could ease pressure on households and businesses that have faced higher prices for food, fuel and fertiliser during the conflict.
Iran confirmed the agreement but indicated implementation would begin only after the deal is formally signed. Pakistan said the signing is expected to take place on Friday in Switzerland. Broader negotiations, including discussions on Iran's nuclear programme, are expected to continue over the next 60 days, leaving room for potential setbacks. Even if the Strait of Hormuz reopens fully, industry observers expect it could take months before energy flows normalise.
Winners: AI and Travel Stocks
On Wall Street, companies with significant fuel expenses were among the biggest gainers. United Airlines rose 5.2%, American Airlines climbed 7%, and cruise operator Carnival advanced 5.7%.
Artificial intelligence-linked stocks also rallied after experiencing sharp volatility in recent weeks. Micron Technology gained 7.8%, while Advanced Micro Devices rose 7%. Nvidia advanced 2.7%, providing the largest boost to the S&P 500 because of its heavy weighting in the index.
SpaceX, Elon Musk's rocket company and owner of AI firm xAI, climbed 5.4% in its second day of trading on Wall Street. Its strong market debut reinforced investor appetite for AI-related companies. The market now values SpaceX at more than $2.1 trillion, making it larger than Exxon Mobil, Bank of America and Coca-Cola combined.
The following table summarises key market movements:
| Asset/Index | Change | Level |
|---|---|---|
| S&P 500 | +1.5% | — |
| Dow Jones Industrial Average | +638 pts (+1.2%) | — |
| Nasdaq Composite | +2.3% | — |
| Brent crude oil | -4.8% | $83.18/bbl |
| 10-Year Treasury yield | -3 bps | 4.45% |
| Probability of Fed rate hike this year | -16 pp | 55% |
Broader Implications and Fed Watch
In the bond market, Treasury yields eased as lower oil prices reduced concerns that central banks may need to tighten monetary policy further. The yield on the 10-year Treasury note fell to 4.45% from 4.48% late Friday.
Attention is now turning to the US Federal Reserve's policy decision later this week, the first under new chair Kevin Warsh. President Donald Trump has repeatedly called for lower interest rates, but traders widely expect the Fed to keep rates unchanged at the conclusion of its two-day meeting on Wednesday. Before the US-Iran agreement, markets had increasingly priced in the possibility of a rate hike this year due to elevated inflation and a resilient labour market. Following the tentative deal, traders are now assigning only a 55% probability of a rate increase this year, down from 71% a week ago, according to CME Group data.
Markets in Asia and Europe also rallied. Japan's Nikkei 225 surged 5% to a record high, while South Korea's Kospi climbed 5.2%, supported in part by gains in AI-related stocks such as Samsung Electronics.
"This is great news," said Takashi Hiroki, chief strategist at Monex, as quoted by the Associated Press. "Buying by foreign investors is leading the market with expectations of easing tensions around the situation in the Middle East."
The next milestone will be the formal signing of the US-Iran agreement expected Friday in Switzerland, followed by the Federal Reserve's policy decision on Wednesday.
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