US stocks rallied sharply on Monday after President Donald Trump said the United States had held talks with Iran and would postpone planned strikes on Iranian power plants, triggering a relief rebound across global markets and a steep fall in oil prices.The Dow Jones Industrial Average rose 1,021.70 points, or 2.24 per cent, to 46,599.17, while the S&P 500 gained 136.26 points, or 2.09 per cent, to 6,642.74, and the Nasdaq Composite advanced 493.02 points, or 2.28 per cent, to 22,140.63.
Trump’s delay on Iran strikes sparks relief rally
The rebound came after Trump said he would postpone military action against Iranian power plants and energy infrastructure, easing immediate fears of a deeper escalation in the Middle East war.Trump made the announcement just hours before a deadline that had raised concerns of further conflict. In a post on Truth Social, he said the US and Iran had held “very good and productive” conversations over the past two days on a “complete and total resolution of hostilities in the Middle East”.Trump also said he was delaying attacks on Iranian power plants by five days to allow talks to continue.The announcement marked a notable shift from his weekend warning that he would “obliterate” Iran’s power plants if Tehran did not reopen the Strait of Hormuz within 48 hours.
Oil prices tumble, fueling risk-on move
The sharp rise in equities was closely tied to a sudden drop in crude prices, which had been a major source of market stress in recent weeks.Brent crude fell 10.5 per cent to $100.37 per barrel, down from nearly $120 last week. It briefly dropped as low as $96 immediately after Trump’s announcement before recovering part of the decline.Brent was last down 9.14 per cent at $101.89 per barrel, while US crude fell 8.58 per cent to $89.80 a barrel.Benchmark US crude initially fell toward $84 per barrel before trimming losses and rising back to $88.85.The easing in oil prices was a major positive for equities because investors had been worried that prolonged disruption in the Persian Gulf could drive a fresh inflation shock across the global economy.
S&P 500 heads for best day since before war
The S&P 500 jumped 1.9 per cent and was on track for its best day since well before the war began, reflecting broad-based relief after severe losses in previous sessions.The rally was widespread, with AP saying nine out of every 10 stocks in the S&P 500 were in positive territory.Companies with large fuel costs led gains as lower oil prices improved the outlook for operating expenses.Norwegian Cruise Line Holdings surged 7.9 per cent, while United Airlines climbed 4.5 per cent and American Airlines rose 4.9 per cent, news agency AP reported.Smaller companies also outperformed, with the Russell 2000 jumping 3 per cent, which AP described as a market-leading move.
Iran pushes back on Trump’s negotiation claims
Despite the market relief, uncertainty remained high because Iranian media quickly challenged Trump’s version of events.Iran’s Tasnim news agency, citing an Iranian official, said the Strait of Hormuz would not return to pre-war conditions and that energy markets would remain unsettled, while also stating that no negotiations with the US were under way.Iranian state television said Trump had backed down “following Iran’s firm warning”, while a state-owned newspaper said Iran’s Foreign Ministry denied that any negotiations had taken place.That contradiction limited the scale of optimism, even as investors welcomed the pause in immediate military escalation.
Global markets rebound, but Asia missed the turn
The US rally was part of a wider rebound in risk assets after Trump’s comments.MSCI’s global stock index rose 1.31 per cent to 994.34, while the pan-European STOXX 600 gained 1.87 per cent.European markets reversed earlier losses and held gains, with France’s CAC 40 up 1.7 per cent and Germany’s DAX rising 2.2 per cent.Asian markets, however, had already closed before Trump’s announcement and ended sharply lower. South Korea’s Kospi fell 6.5 per cent, while Japan’s Nikkei 225 and Hong Kong’s Hang Seng each dropped 3.5 per cent.
Treasury yields and dollar ease as fear trade unwinds
Bond markets also reflected a reduction in immediate panic.The 10-year US Treasury yield fell to 4.34 per cent from 4.39 per cent late Friday, though it remained well above the 3.97 per cent level seen just before the war began.Two-year and 10-year Treasury yields were each 5 to 6 basis points lower, with the 10-year yield last at 4.344 per cent.The dollar also softened after initially rising earlier in the day. Reuters said the euro was last up 0.4 per cent at $1.1616.
Analysts caution against assuming full de-escalation
Market strategists warned that Monday’s rally may prove fragile unless diplomatic progress becomes more concrete.“The market woke up to some potentially good news out of the Middle East on Monday. But follow-through on any relief rally will likely require tangible follow-through on the geopolitical front,” Chris Larkin, managing director of trading and investing at E*TRADE from Morgan Stanley, told Reuters.Reuters also quoted Elias Haddad, global head of markets strategy at Brown Brothers Harriman, as saying, “It’s clearly jawboning in the face of the meltdown that we’ve seen. We’re seeing a bit of a knee-jerk reaction to this positive news.”He added, “There’s certainly room for a bit of an unwind in the fear trade. A more sustained rally in risk assets will depend on whether this is legit de-escalation or simply a pause before a next leg up in escalation.”
