Wall Street Edges Higher as Investors Monitor Iran Tensions and Inflation Data
U.S. stocks traded slightly higher on Monday, recovering from earlier weakness despite renewed diplomatic tensions between Washington and Tehran.
Investor sentiment remained cautious as markets prepared for key U.S. inflation reports later this week, which could reveal the growing economic impact of soaring oil prices linked to the ongoing Middle East conflict.
By 11:03 ET (15:03 GMT), the S&P 500 gained 0.3% to 7,417.74, while the NASDAQ Composite rose 0.2% to 26,290.04. Both indexes reached fresh record highs during the session.
Meanwhile, the Dow Jones Industrial Average remained mostly flat near 49,624.68.
Trump Rejects Iran Peace Response
Over the weekend, Iranian state media reported that Tehran had officially responded to a U.S. proposal aimed at ending the conflict that has now lasted for more than two months.
Iran’s proposal reportedly called for a ceasefire across all fronts, recognition of Iranian sovereignty over the Strait of Hormuz, and financial compensation from the United States for war-related damages.
President Donald Trump quickly rejected the proposal, writing on social media that the response was “TOTALLY UNACCEPTABLE.”
According to reports from The Wall Street Journal, Iranian officials responded by stating that Tehran was focused on protecting its “national interests and legitimate rights” rather than satisfying U.S. demands.
Strait of Hormuz Remains Central Market Risk
One of the key unresolved issues between the two countries remains Iran’s nuclear program and control over the Strait of Hormuz.
The strategically critical shipping route handles roughly 20% of global oil and gas flows and has remained heavily disrupted since late February, contributing to one of the largest energy supply shocks in modern history.
Additional reports on Monday suggested Iran may have deployed deep-water submarines within the strait, although the claims have not been independently verified.
President Trump also stated during an interview with Fox News that he was considering restarting “Project Freedom,” a U.S. initiative designed to protect commercial shipping through the waterway.
Oil Prices Climb Following Diplomatic Setback
Oil markets reacted sharply to the renewed geopolitical tensions.
Brent Crude futures climbed 2.6% to $103.88 per barrel, while West Texas Intermediate crude futures rose 2.4% to $97.70 per barrel.
The sharp rise in crude prices has intensified concerns over inflationary pressures and the broader impact on global economic growth.
Trump-Xi Meeting in China Draws Attention
Markets are also closely watching President Trump’s upcoming visit to China later this week after Beijing confirmed he will meet Chinese President Xi Jinping from Wednesday through Friday.
The talks are expected to focus on trade, Taiwan, and the Iran conflict.
China has reportedly continued purchasing Iranian oil throughout the conflict while simultaneously providing diplomatic support to Tehran, increasing tensions with Washington.
Investors Await Key U.S. Inflation Reports
Beyond geopolitics, investor attention is turning toward major U.S. inflation data releases scheduled this week.
The Consumer Price Index (CPI) report for April will be released on Tuesday, followed by Producer Price Index (PPI) data on Wednesday.
Rising oil prices tied to the Iran conflict have already pushed gasoline prices sharply higher across the United States, fueling concerns that headline inflation could accelerate further.
Analysts at RSM US warned that markets may still be underestimating the risk of a second wave of inflation caused by supply shocks moving through the economy.
Strong Earnings and AI Rally Continue Supporting Stocks
Despite ongoing geopolitical uncertainty, U.S. equities have continued rallying strongly.
Wall Street is currently in the middle of a six-week winning streak, its longest since October 2024, supported by strong corporate earnings, renewed enthusiasm around artificial intelligence, and hopes for an eventual diplomatic resolution in the Middle East.
According to Robert Edwards, investors who previously exited markets during the initial Iran-related panic are now rushing back into stocks out of fear of missing out.
Edwards maintained a year-end 2026 S&P 500 target of 7,700, citing strong economic data, resilient labor markets, AI-driven growth, and nearly $8 trillion sitting in money-market funds that could potentially flow back into equities.
Alibaba, Cisco and Applied Materials Earnings in Focus
Investors are also preparing for another busy week of corporate earnings.
Major companies reporting results include Alibaba, Cisco, and Applied Materials.
Among individual stock movers, Lumentum Holdings surged more than 18% after being added to the Nasdaq 100 index.
