US stocks rose Monday, rebounding from last week’s sharp sell-off as investors grew hopeful that tensions between Israel and Iran might not spiral into a wider conflict.
The Dow Jones Industrial Average climbed 248 points, or 0.6%, while the S&P 500 added 0.7%. The Nasdaq Composite led gains, advancing nearly 1%.
The market bounce came after a volatile weekend marked by continued hostilities between Israel and Iran. However, the prospect of a limited escalation appeared to calm investor nerves.
West Texas Intermediate (WTI) crude futures declined more than 1% to $71.87 a barrel, reversing earlier overnight gains that saw prices rise above $77.
The pullback in oil helped ease pressure on risk assets, contributing to Monday’s recovery in equities.
Major technology stocks outperformed as falling oil prices prompted a renewed appetite for risk.
Tesla rose more than 1%, while Meta Platforms gained over 2%. Palantir Technologies, often seen as a beneficiary of heightened geopolitical tensions, jumped more than 5%.
Gold, often viewed as a safe haven during times of geopolitical stress, had rallied last week but saw muted movement as risk appetite returned to markets.
Iran-Israel conflict can be contained
Hostilities between Israel and Iran entered a fourth day, with both sides reportedly targeting each other’s energy infrastructure.
Iran has raised the possibility of closing the Strait of Hormuz, a critical chokepoint for global oil shipments, while Israel on Monday claimed to have achieved “aerial superiority” over Iran.
“The market is taking comfort from the prospect that the conflict could stay in the limited war mode,” Krishna Guha, vice chairman at Evercore ISI, wrote in a note.
He added that while the conflict could persist for several weeks, there remains a risk of broader escalation that could impact global energy markets and draw in the United States.
Fed decision later this week
Attention now turns to the Federal Reserve’s interest rate decision due Wednesday.
According to CME Group’s FedWatch tool, markets are pricing in a near certainty that the Fed will hold rates steady.
While President Donald Trump has continued to pressure Fed Chair Jerome Powell to cut rates, rising geopolitical tensions and the risk of energy-driven inflation have further lowered expectations of near-term policy easing.
President Trump has called for an aggressive 100 basis point rate cut, warning that the White House may “have to force something” if the Fed fails to act, according to a report by the Financial Times.
Beyond the rate decision itself, traders will be closely parsing Fed Chair Jerome Powell’s commentary for signals on future policy direction and its potential impact on risk assets.
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