U.S. stocks rallied sharply on Monday after the United States and Iran confirmed a preliminary peace agreement. The proposed deal aims to end the conflict and restore shipping through key Middle Eastern trade routes.
The Nasdaq led the advance as technology and growth stocks benefited from falling oil prices, lower bond yields and improving investor sentiment.
Nasdaq Jumps 3% as U.S. Stocks Rally
At 12:02 ET, the S&P 500 gained 1.9% to reach 7,575.44 points.
The technology-heavy Nasdaq Composite surged 3% to 26,664.58 points. Meanwhile, the Dow Jones Industrial Average climbed 1.4% to 51,915.46 points.
The major indexes had also ended the previous week higher. Investors were already anticipating progress in negotiations between Washington and Tehran.
SpaceX Rally Supports Market Sentiment
Strong gains in SpaceX shares also supported the broader market.
The stock climbed following the company’s record-breaking public debut. SpaceX traded above its IPO price of $135 per share, lifting the rocket and satellite company’s valuation beyond $2 trillion.
That valuation placed Elon Musk’s company among the largest publicly traded businesses in the United States.
However, some analysts continued to question whether SpaceX’s financial fundamentals justified its elevated market value.
Other space-related companies also benefited from the enthusiasm. Shares of Rocket Lab and Planet Labs advanced following the SpaceX listing.
U.S. and Iran Confirm Preliminary Peace Deal
The United States and Iran have reached an interim agreement designed to end a war that has lasted for more than three months.
The conflict disrupted energy markets, increased inflationary pressure and threatened the global economic outlook.
Pakistan, which acted as a mediator during the negotiations, said the two countries would sign a memorandum of understanding in Switzerland on Friday.
Pakistani Prime Minister Shehbaz Sharif said both sides had agreed to an immediate and permanent end to military operations across all fronts, including Lebanon.
Israel-Hezbollah Tensions Raised Concerns
Uncertainty surrounding the agreement increased over the weekend after Israel attacked the Iran-backed Hezbollah militia in Lebanon.
The strikes led U.S. President Donald Trump to criticize Israeli Prime Minister Benjamin Netanyahu.
Despite those tensions, Washington and Tehran continued moving toward the planned signing.
Neither country has published the full details of the agreement. Iran has also said the deal will not take effect until it is formally signed.
Strait of Hormuz Could Reopen on Friday
Trump said the peace agreement would halt hostilities and reopen the Strait of Hormuz.
The waterway, located off Iran’s southern coast, is essential to global energy markets. Before the conflict began in late February, approximately one-fifth of the world’s oil passed through the Strait.
Trump said shipping could resume on Friday after mine-clearing operations are completed.
He also announced that the United States would lift its long-standing naval blockade of Iranian ports.
Oil Prices Fall as Supply Fears Ease
Brent crude oil prices declined following the announcement.
The prospect of renewed shipping through the Strait of Hormuz reduced fears of prolonged disruptions to global oil supplies.
Lower crude prices also eased concerns about another energy-driven rise in inflation. Such an increase could have encouraged central banks to maintain higher interest rates or tighten monetary policy further.
Gold prices advanced as expectations for aggressive interest rate increases weakened. At the same time, the U.S. dollar declined against a basket of major currencies.
Falling Bond Yields Support Equities
U.S. government bond yields also moved lower. Bond yields usually fall when government debt prices rise.
Lower yields can benefit stocks by reducing borrowing costs and making equities more attractive compared with fixed-income investments.
Technology and growth companies often receive the greatest support from declining yields because much of their expected value depends on future earnings.
Federal Reserve Decision Moves Into Focus
Investors are now preparing for the Federal Reserve’s two-day policy meeting, which will conclude on Wednesday.
The central bank is widely expected to leave interest rates unchanged.
However, markets continue to see a possibility that the Fed could raise borrowing costs later in 2026. Expectations for interest rate cuts have largely disappeared following recent evidence that U.S. inflation is accelerating.
Analysts at Vital Knowledge said the Federal Open Market Committee could remove its easing bias from the latest policy statement.
Nevertheless, Federal Reserve Chair Kevin Warsh may adopt a more dovish tone during his post-meeting press conference.
Several Fed officials have suggested that lower interest rates could become appropriate if the U.S.-Iran conflict ends and energy-driven inflation pressures continue to ease.
