U.S. stocks surged early Monday as investors embraced signs of a breakthrough in the Iran War, betting that a reopening of the Strait of Hormuz could ease energy market disruptions, lower inflation pressures and improve the outlook for interest rates. Early in the trading session, the Dow Jones Industrial Average rose 613 points, or 1.20%, to 51,815.3, while the S&P 500 gained 103.61 points, or 1.39%, to 7,535.07. The Nasdaq Composite led major indexes higher, climbing 597.58 points, or 2.31%, to 26,486.4.
Risk appetite accelerated after President Donald Trump posted on Truth Social that ships carrying oil had begun moving safely through the region. “Ships are starting to move, many loaded up with Oil, out of the Strait of Hormuz,” Trump wrote, adding that routes were “safe, secure, and pristine.”
The comments came as investors digested reports of diplomatic progress involving Iran. According to The Wall Street Journal, negotiations surrounding a broader agreement remain focused on security guarantees and regional stability, with markets increasingly pricing in the possibility that a formal peace agreement could be signed later this week.
Energy markets responded immediately. Brent crude oil fell $4.24, or 4.86%, to $83.09 a barrel as traders reassessed worst-case supply disruption scenarios. At the same time, the CBOE Volatility Index, or VIX, dropped 7.29% to 16.39, signaling a sharp reduction in investor demand for downside protection.
The rally was reinforced by growing expectations that lower energy prices could accelerate the decline in inflation. AInvest reported that investors are entering what could be a pivotal week for markets as geopolitical risks ease and attention returns to inflation and monetary policy.
Infrastructure Capital Advisors CEO and CIO Jay Hatfield said that the anticipated reopening of the Strait of Hormuz prompted him to raise his S&P 500 target to 9,000. Hatfield argued that oil prices could fall below $70 per barrel as OPEC producers increase output, helping drive inflation lower and potentially leading markets to price in three Federal Reserve rate cuts over the next year. He also pointed to a 12% increase in 2027 earnings estimates since late 2025, citing continued strength from the AI-driven earnings cycle.
Investors will now watch developments surrounding the expected June 19 peace agreement, along with upcoming economic data and Federal Reserve commentary, as members of the FOMC meet in Washington Tuesday and Wednesday for their first meeting since Kevin Warsh became Fed Chair.
