Wall Street closed sharply higher on Tuesday, buoyed by growing speculation that the conflict between the United States and Iran could de-escalate, easing pressure on energy markets and global inflation expectations.
All three major US indexes rallied after a report indicated that Donald Trump is willing to end the military campaign against Iran even if the Strait of Hormuz remains largely closed.
The prospect of an earlier-than-expected end to hostilities helped lift investor sentiment following weeks of volatility driven by surging oil prices.
The S&P 500 rose 2.91% to 6,528.81, while the Nasdaq Composite surged 3.84% to 21,592.47.
The Dow Jones Industrial Average climbed 2.49% or 1125 points.
The gains marked one of the strongest sessions in recent months, with the Nasdaq and S&P 500 on track for their best day since May.
Hopes of de-escalation drive market rebound
Investor optimism was fueled by reports suggesting both Washington and Tehran may be open to a diplomatic resolution.
Iranian President Masoud Pezeshkian reportedly indicated a willingness to end the conflict if certain guarantees are met, raising the possibility of a negotiated settlement.
The conflict, now entering its second month, has disrupted energy flows and pushed oil prices higher, stoking concerns about inflation and economic growth.
Brent crude futures settled near $118 per barrel, marking their highest close since mid-2022, while West Texas Intermediate hovered above $100.
Despite the rally, uncertainty remains.
US Defense Secretary Pete Hegseth warned that the coming days would be decisive and signaled the possibility of further escalation if Iran does not reach an agreement.
Technology stocks lead gains amid relief rally
Technology stocks, which have been under pressure for much of 2026, led Tuesday’s rebound.
Major names, including Nvidia, Alphabet, Meta Platforms, and Amazon, posted strong gains, lifting broader indexes.
The PHLX Semiconductor Index also jumped, reflecting renewed investor appetite for growth stocks.
Chipmaker Marvell Technology surged after Nvidia invested $2 billion in the firm, while CoreWeave rallied following an $8.5 billion loan to expand artificial intelligence infrastructure.
The sector’s recovery comes after a prolonged downturn driven by concerns that large technology companies were taking longer than expected to generate returns from heavy investments in artificial intelligence.
Economic concerns linger despite rally
While markets rallied, underlying concerns about inflation and economic growth persist.
The surge in oil prices has renewed fears that higher energy costs could force the Federal Reserve to keep interest rates elevated or even raise them further.
Money market traders are increasingly pricing in the possibility of rate hikes by year-end, reflecting the inflationary impact of disrupted energy supplies.
At the same time, economic data pointed to softening labour market conditions.
Job openings fell more than expected in February, while hiring dropped to the lowest level in nearly six years, suggesting cooling demand for workers even before the latest geopolitical escalation.
On the corporate front, Unilever agreed to separate its food unit and merge it with McCormick in a deal valuing the latter at about $44.8 billion, though McCormick shares declined.
Meanwhile, Constellation Energy fell after issuing a weaker-than-expected profit forecast for 2026.
Despite Tuesday’s gains, major indexes remain under pressure.
The Nasdaq is still in correction territory, while the Dow and S&P 500 are on track for their steepest quarterly declines since 2022, underscoring the fragile backdrop facing global markets.
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