Wall Street rallied on Monday (Tuesday AEST) to recoup some of last week’s steep losses, as investors bet the conflict between Israel and Iran might be contained and a spike in oil prices showed signs of reversing.
The Dow Jones Industrial Average climbed 317.3 points or 0.8% to finish at 42,515.1, the S&P 500 gained 56.2 points or 0.9% to 6,033.1, while the Nasdaq Composite surged 294.4 points or 1.5% to close at 19,701.2.
The rebound followed Friday’s sell-off, during which the Dow lost nearly 770 points and all three benchmarks dropped by more than 1%, driven by concerns over rising geopolitical tensions.
Oil prices, which had soared following Israeli strikes on Iranian nuclear and energy sites, pulled back on Monday. Crude futures fell more than 1% as hopes grew that diplomatic channels could prevent a broader regional escalation.
According to NBC News, Iran has asked several countries — including Saudi Arabia — to persuade U.S. President Donald Trump to pressure Israel into a ceasefire. In exchange, Tehran is reportedly willing to show more flexibility in its nuclear negotiations.
Despite continued hostilities into a fourth day, with Israel and Iran targeting each other’s energy infrastructure, investors took comfort in the possibility of a diplomatic resolution.
Israel declared on Monday that it had achieved “aerial superiority” over Iran, while Tehran threatened to close the Strait of Hormuz, a strategic waterway for global oil shipments.
Oil’s retreat helped lift risk appetite across markets. Gold, which had rallied amid rising volatility, steadied as demand for safe-haven assets moderated.
Tech stocks led the recovery, with Tesla rising 1.2%, Meta Platforms up 2.8% after announcing plans to introduce advertising to WhatsApp.
Palantir Technologies, often viewed as a beneficiary of geopolitical instability due to its defence-related software, also advanced 2.9%.
Investor sentiment was further buoyed by softer-than-expected U.S. manufacturing data released earlier in the day.
The market is now focused on the Fed’s interest rate decision due Wednesday. According to the CME FedWatch Tool, traders see a 99.8% chance that the central bank will leave rates unchanged.
Nonetheless, political pressure is mounting, with President Donald Trump calling on Fed Chair Jerome Powell to begin cutting rates, arguing inflation has been curbed.
On the bond markets, 10-year Treasury note yields ticked up 0.9% to 4.45%, while the 2-year yield was up 0.6% to 3.973%.
