Major United States benchmark averages rallied on Monday (Tuesday AEDT), after President Donald Trump said the United States and Iran had held “productive” talks, raising hopes of a de-escalation in Middle East tensions.
Investor sentiment improved after Trump announced a pause in planned strikes on Iranian power plants and energy infrastructure, with investors cheering the potential easing of conflict that had recently driven oil prices higher and heightened fears of a global recession.
The Dow Jones Industrial Average climbed 631 points, or 1.4%, to close at 46,208.5. The S&P 500 rose 74.5 points, or 1.2%, to 6,581.0, while the Nasdaq Composite gained 299.2 points, or 1.4%, to finish at 21,946.8.
Oil markets reacted swiftly to the developments, with West Texas Intermediate futures falling 10.28% to settle at US$88.13 per barrel, while Brent crude declined 10.92% to $99.94 a barrel.
“I AM PLEASED TO REPORT THAT THE UNITED STATES OF AMERICA, AND THE COUNTRY OF IRAN, HAVE HAD, OVER THE LAST TWO DAYS, VERY GOOD AND PRODUCTIVE CONVERSATIONS REGARDING A COMPLETE AND TOTAL RESOLUTION OF OUR HOSTILITIES IN THE MIDDLE EAST,” Trump wrote on Truth Social.
“BASED ON THE TENOR AND TONE OF THESE IN DEPTH, DETAILED, AND CONSTRUCTIVE CONVERSATIONS, WHICH WILL CONTINUE THROUGHOUT THE WEEK, I HAVE INSTRUCTED THE DEPARTMENT OF WAR TO POSTPONE ANY AND ALL MILITARY STRIKES AGAINST IRANIAN POWER PLANTS AND ENERGY INFRASTRUCTURE FOR A FIVE DAY PERIOD, SUBJECT TO THE SUCCESS OF THE ONGOING MEETINGS AND DISCUSSIONS,” he added.
Later in the session, Trump said both countries were willing to “make a deal” and indicated they could “get together” via phone.
However, optimism was partially tempered after Iran’s parliamentary speaker reportedly said on social media that no talks had taken place, contradicting Trump’s claim that both sides had reached “major points of agreement” and were close to a resolution.
The latest developments follow an escalation in tensions over the weekend, when Trump issued an ultimatum threatening strikes on Iranian energy infrastructure within 48 hours if the Strait of Hormuz was not reopened.
Iran had warned it would retaliate by targeting U.S. infrastructure across the Persian Gulf if the threat was carried out.
Prior to Monday’s rebound, U.S. equities had been under sustained pressure. The Dow and Nasdaq Composite were both nearing correction territory, down around 9.8% from recent highs, while the S&P 500 had declined approximately 7%.
Energy-sensitive sectors led gains as oil prices retreated. Airline stocks rose strongly, with Alaska Air Group up 4.7%, American Airlines up 3.6%, and United Airlines advancing 4.5%.
Cruise operators also surged, with Norwegian Cruise Line Holdings up 6.2%, Carnival Corporation gaining 5.5%, and Viking Holdings lifting 5.7%.
In individual company news, Synopsys shares rallied 2.9% after reports that activist investor Elliott Investment Management had taken a multibillion-dollar stake in the firm.
On the bond markets, yields moved lower, with the 10-year Treasury yield falling to 4.354% and the 2-year yield declining to 3.854%.
