US stocks rose on Tuesday, as investors responded positively to signs of potential de-escalation in the Middle East conflict, even as oil prices remained elevated and broader market risks persisted.
The Dow Jones Industrial Average climbed 380 points or 0.8%, while the S&P 500 and Nasdaq 100 also advanced more than 1%.
The gains followed a report that US President Donald Trump may be open to ending the military campaign against Iran, even if the Strait of Hormuz remains largely closed.
De-escalation hopes lift sentiment
The Wall Street Journal reported that Trump had told aides he was willing to halt hostilities under such conditions, easing investor concerns after weeks of heightened geopolitical tension.
The conflict has weighed heavily on global markets, with the S&P 500 and Dow on track for their steepest monthly declines since September 2022, while the benchmark index is also heading for its worst quarterly performance since that year.
Investor sentiment has been particularly sensitive to developments in the Middle East, where disruptions to oil supply routes have driven volatility across asset classes.
The latest report offered a degree of relief, prompting a rebound in equities, particularly in the technology sector.
Tech stocks, which have faced sustained pressure since the conflict began, showed early signs of recovery.
The Technology Select Sector SPDR Fund rose about 1.4%, while shares of Nvidia and Microsoft also moved higher by 1.7% and 2.1%, respectively.
Oil surge keeps pressure on markets
Despite the improvement in sentiment, energy markets remained under strain.
Brent crude futures climbed roughly 5% to trade above $118 per barrel, while US West Texas Intermediate crude rose to above $103 per barrel.
Oil prices have surged throughout March and are on track for a record monthly gain, driven by supply concerns linked to the conflict.
The S&P 500 energy sector has risen more than 11% over the month, making it the only sector set to end in positive territory.
Fresh geopolitical developments continued to underscore the fragility of the situation.
Bloomberg reported that Iran struck a Kuwaiti oil tanker in Dubai waters, though authorities confirmed that all crew members were safe.
The sustained rise in oil prices has revived inflation concerns, complicating the outlook for monetary policy.
According to CME Group’s FedWatch Tool, traders have largely priced out interest rate cuts this year, a sharp shift from expectations for two cuts before the conflict began.
Markets brace for data and policy signals
Investors are also turning their attention to upcoming economic data and central bank commentary.
The job openings and labor turnover survey (JOLTS) for February is due later in the week, providing fresh insight into the labor market.
Remarks from Federal Reserve officials, including Austan Goolsbee and Michelle Bowman, will also be closely watched for clues on the policy path.
On Monday, Fed Chair Jerome Powell said the central bank can afford to wait before assessing the full economic impact of the conflict.
With the final trading day of the month underway, the S&P 500 remains down nearly 8% for March, highlighting the extent of recent volatility even as markets attempt to stabilize.
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