Dow surges 621 points as US-Iran peace deal lifts stocks

The Dow Jones Industrial Average surged 621 points, or 1.21%, after the US and Iran reached a deal to end their three-month conflict.

"Prior to the deal, investors had become increasingly concerned that higher energy costs would feed into broader inflation pressures," said Daniela Hathorn, senior market analyst at Capital.com. "The sharp decline in oil prices does not eliminate inflation risks altogether, but it does reduce some of the urgency surrounding them."

The S&P 500 advanced 1.5% in early trading, building on Friday's gains that pushed the benchmark to 7,431.46. The Nasdaq Composite added 0.3% in the prior session to close at 25,888.84. All three major indices posted weekly gains of 0.7% last week. WTI crude futures tumbled more than 5% after President Donald Trump announced that the Strait of Hormuz would reopen following a formal signing on Friday, easing supply disruptions that had pushed gasoline prices up 7% in May alone.

The agreement removes a key source of uncertainty that has weighed on equities since the conflict erupted Feb. 28. With oil prices retreating, investors are turning their attention to the Federal Reserve's first policy meeting under new Chair Kevin Warsh on Wednesday, where the central bank is expected to hold rates steady. The May CPI report showed headline inflation at 4.2% year over year, driven largely by energy costs, while core inflation eased to 2.9%.

The rally extended beyond US borders, with Japan's Nikkei 225 jumping 3% in Tokyo trading as the prospect of lower energy costs boosted import-dependent economies. The broader market advance reflected broad-based buying, with transportation and consumer discretionary sectors among the leaders on expectations that falling fuel prices would ease cost pressures.

Continued enthusiasm surrounding SpaceX's blockbuster market debut added to the positive tone, with the space company's listing drawing strong investor demand and lifting sentiment across the technology and defense sectors.

The Cboe Volatility Index declined as the peace deal reduced geopolitical risk premiums, with traders pricing in a lower probability of further escalation in the Middle East. The agreement, brokered with support from Qatar, Saudi Arabia and Turkey, calls for an immediate end to military operations on all fronts, including Lebanon, and a 60-day negotiation period to address Iran's nuclear program. The US is expected to release $12 billion in frozen Iranian assets during the talks, according to Iran's Mehr news agency.

This article is for informational purposes only and does not constitute investment advice.