U.S. stocks rallied Monday to their best day since the Iran war began, as oil prices eased and traders leaned into the idea that energy costs could stabilize. The S&P 500 climbed 1% for its biggest gain in five weeks, while the Dow Jones Industrial Average added 387 points, or 0.8%, and the Nasdaq composite rose 1.2%, according to market closes reported by The Associated Press.
The market’s main swing factor was the move in oil. A barrel of benchmark U.S. crude fell 5.3% to settle at $93.50 after earlier topping $102 during the day. Brent crude, the international benchmark, dropped 2.8% to settle at $100.21 a barrel after earlier reaching as high as $106.50.
Investors had been bracing for higher prices since oil surged from roughly $70 before the United States and Israel began their attacks on Iran. The disruption has centered on the Strait of Hormuz, a narrow shipping chokepoint where a fifth of the world’s oil typically sails from the Persian Gulf to customers worldwide. AP reported that Iran has nearly halted traffic through the strait, leaving producers with nowhere to send crude and leading them to cut production.
Even with Monday’s relief rally, AP said financial-market concern remains that if the strait stays closed for a long time, it could keep enough oil off the market to push inflation higher for the global economy. Traders also tied the move in yields to the oil pullback: Treasury yields eased as falling oil reduced inflation pressure, with a separate report on weaker manufacturing activity in New York state also weighing on yields.
At the center of the week’s policy debate, AP reported that traders have pushed back expectations for when the Federal Reserve could resume cutting interest rates because of the earlier oil-price spike tied to the war. Such cuts would normally support the economy and jobs, AP said, but they also risk worsening inflation, and traders saw “virtually no chance” the Fed would cut rates after its next meeting concludes on Wednesday, based on data from CME Group.
AP also pointed to sector-specific winners that benefited from lower fuel costs and from company news. Norwegian Cruise Line Holdings rose 5.1%, while United Airlines climbed 4.2%. Stocks in storage and retail also moved on deal and earnings items: National Storage Affiliates Trust jumped 30% after Public Storage said it would buy National Storage in an all-stock deal valued at $10.5 billion, and Dollar Tree rose 6.4% after reporting stronger profit than analysts expected even as fewer shoppers visited its stores.
Elsewhere, Nebius Group, a Dutch AI cloud company whose stock trades in the United States, rose 15% after announcing a five-year infrastructure contract with Meta Platforms that could be worth up to $27 billion. Nvidia gained 1.6% after its CEO, Jensen Huang, talked up AI chip demand at an AI conference, saying he foresaw $1 trillion in demand for AI chips through 2027—described by AP as the strongest single force lifting the S&P 500.
Over the weekend, AP said President Donald Trump demanded that other countries affected by the Strait of Hormuz closure “take care of that passage” and added that his country “will help - A LOT!” European countries, AP reported, wanted more information about Trump’s war plans for Iran and when the conflict might end as they weighed that demand. AP also cited Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute, saying the market’s rising concern about escalation could also reflect growing constraints on both sides that may prevent a long conflict.
In bond markets, the 10-year Treasury yield fell to 4.22% from 4.28% late Friday, AP said, remaining higher than before the war when the 10-year yield was at 3.97%. Stocks also rose abroad with modest gains in Europe, after a mixed finish in Asia, with Hong Kong up 1.4% and Shanghai down 0.3%.