U.S. equities opened sharply higher on Monday, with the Dow Jones Industrial Average climbing approximately 602 points, or 1.16%, as a de-escalation in hostilities between the United States and Iran lifted risk appetite. The S&P 500 advanced 0.79%, while the Nasdaq Composite gained 0.86%, recovering from last week's losses driven by geopolitical jitters and concerns over artificial intelligence spending.
Geopolitical pause fuels risk-on move
The rally followed a weekend pause in direct U.S.-Iran military engagements, which reduced immediate fears of energy supply disruptions. However, markets remain vigilant as Houthi attacks on Saudi oil infrastructure along the Red Sea persist, and shipping through the Strait of Hormuz continues to operate below normal capacity. For more on the broader implications, see our analysis of military constraints and market pressures behind the Iran pause.
Oil prices tumble, travel stocks soar
Crude prices fell sharply on the easing of supply fears. Brent crude dropped about 6.8% to around $90.10 per barrel, while West Texas Intermediate declined roughly 5.7% to about $84.20 per barrel. The slide in oil prices provided a tailwind for sectors sensitive to fuel costs. United Airlines and Southwest Airlines each rose more than 3%, Royal Caribbean gained 2.7%, and Carnival advanced 4.3%. Conversely, energy stocks retreated, with Occidental Petroleum and Exxon Mobil each falling about 2%. For a deeper dive into the oil market dynamics, see oil's 5% tumble on the US-Iran pause.
Investors are also monitoring a separate incident in which Ukraine reportedly struck an Iranian commercial vessel in the Caspian Sea, prompting Tehran to accuse Kyiv of a hostile act.
Fed decision and inflation data in focus
Market attention now shifts to the Federal Reserve's policy meeting on Wednesday, where policymakers are widely expected to hold interest rates steady. However, traders continue to price in at least 25 basis points of rate hikes later this year. The June Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred inflation gauge, will be released the day after the decision and could offer further clues on the monetary policy trajectory. The CBOE Volatility Index fell to 17.77, signaling easing anxiety.
Last week, markets ended under pressure as rising oil prices and escalating Middle East conflict stoked inflation concerns ahead of the Fed meeting.
Big Tech earnings test AI investment thesis
This week's earnings season presents a critical test for investor confidence in artificial intelligence spending. Microsoft, Amazon, Meta Platforms, and Apple are all set to report quarterly results after Alphabet's increased capital spending and negative free cash flow, along with Tesla's weak cash generation, raised concerns. In Monday's trading, Microsoft, Amazon, and Meta each gained more than 1%, while Apple edged 0.7% higher. Nvidia slipped 0.26%.
Despite the day's rebound, caution lingers after the recent selloff in chip stocks. The Nasdaq Composite remains about 8% below its record high, and the Philadelphia Semiconductor Index entered bear market territory earlier this month after falling more than 20% from its peak. The upcoming tech earnings will likely determine whether enthusiasm for AI infrastructure spending revives or worries over rising capital expenditures continue to weigh on the sector. For a broader market perspective, see our coverage of Dow futures jumping 550 points on the oil slide.
This article is for informational purposes only and does not constitute financial advice.
