U.S. stock markets experienced a strong rally on Monday, fully recovering from the losses incurred during the ongoing conflict between the U.S., Israel, and Iran. Wall Street’s optimism about the global economy avoiding a worst-case scenario drove the S&P 500 up by one percent, bringing it within 1.3 percent of its record high earlier this year. Similarly, the Dow Jones Industrial Average surged by 301 points (0.6 percent), and the Nasdaq composite climbed by 1.2 percent.
In Canada, the S&P/TSX composite index also saw a positive trend, rising by 183.48 points to reach 33,879.24.
Oil prices, which had spiked above $100 per barrel following unsuccessful ceasefire negotiations, moderated their gains as Monday progressed. These adjustments were less dramatic compared to the volatile swings witnessed in financial markets since the conflict began in late February.
Following the breakdown of talks over the weekend, President Donald Trump proposed a blockade of the Strait of Hormuz. This potential blockade could exacerbate the oil market’s volatility, as it would further restrict global oil supplies already impacted by Iran’s limitations on traffic in the crucial strait, a primary route for oil transportation from the Persian Gulf region to international markets. In response, Iran issued threats regarding all ports in the Persian Gulf and the Gulf of Oman.
The price of Brent crude, the global benchmark, rose by 4.4 percent to settle at $99.36 USD, significantly higher than its pre-war price of about $70 USD. However, it remained below the peak of $119 USD reached during heightened tensions over the Iran conflict, and retreated from its nearly $104 USD level earlier on Monday.
Market sentiment improved as talks between the conflicting parties continued, providing some reassurance to investors. Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute, noted that markets were encouraged by the ongoing discussions and the apparent adherence to a broader ceasefire.
Meanwhile, major U.S. corporations began releasing their first-quarter earnings reports. Positive financial results could help alleviate concerns related to the situation in the Strait of Hormuz since stock prices generally align with corporate profitability trends in the long term.
In the bond market, Treasury yields dipped slightly as oil prices eased from their morning highs. The yield on the 10-year U.S. Treasury decreased to 4.29 percent from 4.31 percent at the end of the previous week.
On the international front, stock indexes in Europe and Asia experienced declines. Hong Kong’s Hang Seng index dropped by 0.9 percent, while South Korea’s Kospi index also fell by the same percentage, marking significant losses in both regions.
