Wall Street started August on a positive note after the suspension of planned attacks on Iran, reviving hopes for a diplomatic solution and easing fears of a broader escalation in the Middle East.
The Dow Jones Industrial Average rose more than 600 points (+1.1%), while the S&P 500 gained 0.4% and the Nasdaq Composite advanced 0.2%.
Supporting the market was a sharp decline in oil prices. Brent crude fell around 6% to $82.95 per barrel, while West Texas Intermediate (WTI) dropped nearly 7% to $78.93 per barrel. The sell-off reflected a reduction in the geopolitical risk premium after President Donald Trump said he had canceled a new round of strikes against Iran and was prepared to reopen negotiations between Washington and Tehran.
According to the U.S. president, the decision followed requests from Saudi Arabia, the United Arab Emirates, Qatar, and Iran. However, Tehran struck a more cautious tone, with a spokesperson for Iran's Foreign Ministry stating that there are currently no immediate plans for peace talks.
The decline in crude prices also supported the bond market. The yield on the benchmark 10-year U.S. Treasury fell by about 7 basis points to 4.67%, as investors scaled back expectations of renewed inflationary pressure driven by energy prices.
Despite the rebound in equities, market sentiment remains cautious. Investors believe tensions in the Middle East are far from resolved and that the diplomatic process could still face significant obstacles, keeping market volatility elevated.
Attention now turns to this week's U.S. macroeconomic data. On Friday, investors will closely watch the July labor market report. Economists expect the U.S. economy to have added around 87,500 nonfarm payrolls, up from 57,000 in the previous month, while the unemployment rate is forecast to edge higher to 4.3% from 4.2%.