The United States and Iran reached a preliminary agreement on Sunday aimed at ending their more than three-month-old conflict, with the deal framework expected to be formally signed in Switzerland on Friday. Under the agreement, which President Trump has said "is now complete", both the US and Iran will end their blockade of the Strait of Hormuz within 30 days and negotiators will work towards a nuclear deal within a 60-day ceasefire timeframe. Iran will be allowed to resume oil exports during the ceasefire period, though there's uncertainty about whether sanctions relief would begin before or after any final agreement. The deal also includes a ceasefire for Lebanon, though this may complicate final negotiations amid Trump reportedly lashing out at Israel's Netanyahu for continuing to strike at Hezbollah targets. The agreement did not address key issues such as Tehran's nuclear program and the Israel-Lebanon conflict, leaving significant uncertainties for future negotiations.
Wall Street's main indexes rallied on Tuesday, with the Dow Jones Industrial Average closing at a record high of 51,977.30, gaining 306.27 points or 0.59%. The S&P 500 gained 0.95 points, or 0.01%, to 7,555.24, while the Nasdaq Composite lost 8.40 points, or 0.03%, to 26,675.54. According to The Economic Times, the rally was driven by the US-Iran deal that's driving oil sharply lower, easing inflation fears and pushing investors back into risk assets like technology. The three main indexes were on track for a third consecutive session of gains, recovering after Middle East tensions and a pullback in AI-related stocks had put Wall Street's record climb on pause more than a week ago. Gene Goldman, chief investment officer at Cetera Investment Management, noted that "Markets are higher on a classic relief rally. We have a U.S.-Iran deal that's driving oil sharply lower. This is easing inflation fears and basically pushing investors back into risk assets like technology."
Oil prices experienced a dramatic decline as the US-Iran interim peace deal boosted Hormuz reopening hopes, with U.S. crude futures settling down 4.9% following the news and hitting their lowest level since March. WTI crude was quoted at $80.80, while Brent crude traded around $83.55. The move came as WTI crude prices extended a multiweek decline, falling toward the low-$80 range from earlier levels above $100 this year. The decline was particularly significant for energy-sensitive sectors, with airline and cruise stocks benefiting from lower oil prices. United Airlines rose 5.4%, while Delta Air Lines and American Airlines added 2.2% and 4.4%, respectively. Norwegian Cruise and Carnival Corp advanced about 4% each, while shares of oil majors Exxon Mobil and Chevron fell almost 4% each. The S&P 500 energy index was down 3.6%, reflecting the broad impact of lower crude prices on energy companies. Recent developments show Brent crude trading over 3% lower at $80.58 per barrel, while West Texas Intermediate declined 3.6% to $77.93 per barrel, with global benchmark Brent crude slipping past $80 per barrel to a low of $79.6 for the first time since March.
SpaceX shares rallied almost 8% after the Elon Musk-led firm ended its blockbuster IPO with a more than $2 trillion valuation, positioning it as the fifth most valuable U.S. company. Memory chipmakers were at record highs, with Micron soaring 9.2% after multiple brokerages raised its price targets. The Philadelphia SE Semiconductor index hit a record high and rose 4.5%, with chip giant Nvidia up 3%. Seven of the 11 major S&P 500 sectors were in the green, with the S&P 500 tech index leading the advance with a 3.4% gain. The S&P 500 posted 38 new 52-week highs and three new lows, while the Nasdaq Composite recorded 178 new highs and 51 new lows. However, Fox tumbled 16.7% after the company said it would buy Roku in a $22 billion deal, with Roku shares also falling as the market digested the major acquisition news. Among the 11 major S&P 500 industry sectors, the S&P 500 tech index led the gainers with a 3.4% advance, while the S&P 500 energy index was its biggest laggard, finishing down 3.6%.
The US-Iran deal comes ahead of the Federal Reserve's next policy update on Wednesday, following Chair Kevin Warsh's first meeting since taking over from Jerome Powell last month. According to CME Group's FedWatch tool, traders expect the Federal Reserve to leave interest rates unchanged this week, but are still pricing in a nearly 42% probability for a 25-basis-point hike by the end of the year, up from 70% previously. The meeting follows May inflation data that showed higher energy costs filtering into consumer prices, making the Fed's decision particularly significant for market direction. One hope among investors is that a resumption of oil flows from the Middle East and easing crude prices could give the U.S. Federal Reserve room to hold interest rates steady instead of raising borrowing costs. The CBOE Volatility Index, Wall Street's fear gauge, slipped to a more than one-week low at 16.35 points, after rising to a more than two-month high the previous week, reflecting improved market sentiment following the geopolitical developments.
