US stocks advanced on Thursday, extending their recent rally as investors grew more optimistic about a potential de-escalation in the Middle East conflict, even as oil prices remained elevated and concerns over supply disruptions persisted.
All three major indexes ended higher after recovering from early session weakness, supported by signs of diplomatic progress and renewed confidence in the durability of a fragile ceasefire between the United States and Iran.
The Dow Jones Industrial Average rose 275.88 points, or 0.58%, to close at 48,185.80, turning positive for the year. The S&P 500 gained 0.62% to finish at 6,824.66, while the Nasdaq Composite climbed 0.83% to 22,822.42.
Ceasefire optimism supports market sentiment
Markets found support as geopolitical tensions showed tentative signs of easing.
Israeli Prime Minister Benjamin Netanyahu said the country was open to direct negotiations with Lebanon, helping calm investor concerns.
The broader ceasefire framework, though still fragile, has encouraged cautious optimism among market participants.
However, uncertainty remains elevated. Iran’s parliamentary speaker Mohammad Bagher Ghalibaf accused Israel of violating the ceasefire through continued attacks on Lebanon, underscoring the fragile nature of the truce.
President Donald Trump reiterated that US military forces would remain in the region until Iran complies with what he described as the “real agreement,” warning of further escalation if terms are not met.
Despite the ceasefire agreement, shipping activity through the Strait of Hormuz—through which roughly one-fifth of global oil supply flows—remains severely constrained, with traffic still well below historical levels.
Oil volatility and macro data in focus
Crude prices fluctuated throughout the session as investors monitored developments around the Strait of Hormuz.
West Texas Intermediate futures rose about 4% to trade above $98 per barrel after briefly crossing the $100 mark earlier in the day. Brent crude also gained, trading above $96 per barrel.
The persistence of supply concerns has kept energy markets volatile, even as equities rallied.
Meanwhile, economic data offered mixed signals. Reports from the Commerce Department showed that US economic growth slowed more than expected in the fourth quarter, while inflation remained elevated based on the personal consumption expenditures index.
Minutes from the Federal Reserve’s latest meeting indicated that policymakers are increasingly considering potential interest rate hikes to counter inflationary pressures stemming from prolonged geopolitical tensions.
The CBOE Market Volatility Index, often referred to as the “fear index,” declined to its lowest level since the onset of the conflict, reflecting improved investor sentiment.
AI momentum and sector performance
Market gains were also supported by strength in select sectors, particularly those linked to artificial intelligence and consumer spending.
Amazon shares rose sharply after CEO Andy Jassy said the company’s AI services business is generating annualized revenue exceeding $15 billion, boosting sentiment around the technology sector.
Retail and semiconductor stocks outperformed during the session, while software stocks lagged behind.
Elsewhere, Constellation Brands shares jumped after reporting a smaller-than-expected decline in quarterly sales, while Applied Digital fell after posting a wider net loss.
Sandisk gained 9% in the session after Bernstein raised the target price to $1250 while Palantir plunged 7% after Big Short investor Michael Burry said Anthropic is eating Palantir’s lunch.
With geopolitical developments, oil price movements, and central bank signals all in play, markets appear set to remain sensitive to both macroeconomic and geopolitical shifts in the near term.
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