The US stock market rallied on Monday, with the Dow Jones Industrial Average gaining 516 points, or 1%, after investors responded favourably to President Donald Trump’s announcement that a deal had been reached to bring an end to the conflict between the United States and Iran. The benchmark index also touched a record intraday high during the session, reflecting growing optimism among market participants following the peace development.
Broader markets also posted strong gains, with the S&P 500 advancing 1.5% and the Nasdaq climbing 2.3%. Investor sentiment was buoyed by expectations that easing tensions in the Middle East could lower the risk of disruptions to global oil supplies and reduce uncertainty for the world economy.
SpaceX stock jumps
Shares of SpaceX surged more than 6% on Monday after already jumping 19% during their public market debut on Friday. Brian Mulberry, Chief Market Strategist at Zacks Investment Management, said to CNBC, the stock market reaction had been more orderly than expected and that investors appeared to be buying and holding shares rather than trading them quickly.
US-Iran peace deal
Trump said on social media late Sunday that a deal with Iran was “now complete.” Pakistan Prime Minister Shehbaz Sharif said the memorandum of understanding underpinning the agreement is expected to be signed in Switzerland on Friday. The development follows fears that the accord might be delayed or derailed after fresh hostilities between Israel and the Iran-backed Hezbollah group in Lebanon heightened regional tensions.
Oil prices fall
Trump also announced that he had authorized the reopening of the Strait of Hormuz, one of the world’s most important oil shipping routes. News of the reopening caused oil prices to fall sharply because traders expected oil supplies to move more freely again. US Vice President JD Vance said he expects the Strait of Hormuz to remain open without tolls for the long term.
Also read: Crude oil prices drop 4.7% after US-Iran agreement to end war and reopen Hormuz: Here’s what experts say
US crude oil prices dropped about 5%, falling to around $80 per barrel. Mulberry said lower crude oil prices could reduce inflation pressure and lower the chances that the Federal Reserve would need to raise interest rates. He added that prices for products made from oil, such as jet fuel, may take longer to fall even though crude prices have already dropped, as reported by CNBC.
According to CME’s FedWatch Tool, futures markets show a more than 98% chance that interest rates will remain unchanged by the end of the year.
Airline and cruise stocks rise
Companies that benefit when fuel prices fall saw strong gains after the Strait of Hormuz reopening announcement. Shares of United Airlines rose about 3%. Shares of Delta Air Lines gained around 1.5%. Cruise operator Royal Caribbean Group climbed more than 4%. Carnival Corporation shares rose more than 3%.
Investors expected lower oil prices to reduce fuel costs for airlines and cruise companies, improving their profit outlook.
Stocks opened even higher early in the day
Shortly after trading started at 9:30 a.m. ET, the Dow Jones was up 607 points, or 1.2%. At the same time, the S&P 500 and Nasdaq had risen 1.3% and 2.2% respectively in early trading.
Overall, Wall Street focused more on the US-Iran peace agreement, falling oil prices, and hopes for stable interest rates, helping push the Dow Jones and other major indexes higher.
