Stocks spiked and oil prices slumped after the US and Iran announced they had agreed to an interim deal to end the war.
On Sunday, President Donald Trump said the United States and Iran had reached a deal to reopen the Strait of Hormuz, signaling a possible end to a 15-week conflict that disrupted global oil supplies and stoked fears of economic turmoil.
The secretariat of Iran's Supreme National Security Council said war and military operations on all fronts, including Lebanon, would end permanently starting on Monday night, according to a statement carried by state news agency IRNA.
The deal will be signed on Friday, which is also when the Strait will open, Trump said on Truth Social.
Here's where major indexes stood as of the 4 p.m. ET market close:
- S&P 500: 7,554.29, up 1.7%
- Dow Jones Industrial Average: 51,671.03, up 0.9% (469 points)
- Nasdaq 100: 30,543.92, up 3.1%
A rundown of key commodities:
- Brent crude: $83.47 per barrel, down 4.1%
- WTI crude: $81.34 per barrel, down 4.2%
- Gold: $4,318.50 per ounce, up 2.5%
The positive Iran-war news and resulting decline in oil led investors to pare odds of a rate hike by year-end.
Trump orders immediate removal of US blockade
"The Deal with the Islamic Republic of Iran is now complete," Trump wrote on TruthSocial. "I hereby fully authorize the toll free opening of the Strait of Hormuz, and, simultaneously herewith, authorize the immediate removal of the United States Naval blockade."
Trump did not immediately offer further details about the deal.
The prime minister of Pakistan, Shehbaz Sharif, a mediator in the negotiations, said the official signing ceremony would take place on June 19.
Iran's deputy foreign minister, Kazem Gharibabadi, said the two sides would use a 60-day ceasefire to negotiate a broader accord that could include sanctions relief for Tehran, according to Iran's semi-official Mehr News Agency.
Investors may be cheering the rally, but analysts aren't ready to sound the all-clear.
Tony Sycamore, a market analyst at IG, said uncertainty over upcoming negotiations could help limit further declines in oil prices.
"Furthermore prices had fallen heavily in recent sessions on renewed expectations of a deal so likely we are seeing some profit taking on shorts ‚ aka 'sell the rumour buy the fact,'" he wrote on X.
"Whilst the deal is very good news for markets, it looks like tough conversations will have to occur in the 60-day window to ensure the peace is sustainable," wrote Jim Reid, the global head of macro and thematic research at Deutsche Bank.
Opening a major oil transit blockade
Iran effectively shut down the Strait of Hormuz to most shipping traffic after the United States and Israel first launched their surprise attacks on February 28. Iran briefly reopened the Strait in April as part of a ceasefire deal with the United States, but closed it again after the US imposed its naval blockade.
Iran's de facto control of the Strait of Hormuz, which connects the Persian Gulf with the Gulf of Oman and through which about 20% of the world's oil and liquefied natural gas flows, allowed it to wield immense economic influence during what began as a military conflict.
The Strait's closure, along with damage to major oil hubs in the region, led to a steep spike in oil prices and what the International Energy Agency said in March was the largest disruption to the global oil markets in history.
Oil prices surpassed $100 a barrel on March 8 for the first time in four years, forcing several countries to implement energy-saving strategies to address the costs. The Philippines, for example, ordered a four-day workweek for government employees alongside other measures.
In the US, the national average for a gallon of gasoline exceeded $4 by the end of March. Prices have dropped in the past month, falling for three consecutive weeks, according to AAA, but remain above the psychologically significant $4 mark. As of Monday, the average nationwide gas price is $4.065 per gallon.
Jet fuel prices spiked above $200 a barrel in April, forcing some airlines to cut routes and raise ticket prices to cover costs. The conflict also drove inflation in the United States to a three-year high.
These economic pressures have impacted average Americans just months before the midterm elections.
Some economists warned that any prolonged standoff could severely damage America's economy, including Paul Krugman, who said it could be the "straw that breaks the camel's back."
