US stocks rallied Tuesday, approaching record highs as oil prices tumbled and global markets responded optimistically to news of a ceasefire between Israel and Iran. The market’s momentum was fueled by easing geopolitical tensions, falling energy costs, and renewed speculation that the Federal Reserve may soon cut interest rates.
Oil prices dropped sharply for the second consecutive day, bringing relief to investors concerned about potential supply disruptions. The price of U.S. benchmark crude plunged 6.1% to $64.33 a barrel, while Brent crude fell by the same margin to $66.21. These levels are now below where oil traded before the recent flare-up in West Asia.
The market’s fears that Iran might retaliate against Israel by targeting oil production or obstructing the Strait of Hormuz, through which a fifth of global oil supply travels, have not materialised. President Donald Trump announced late Monday that Israel and Iran had agreed to a “complete and total ceasefire,” leading to optimism that the war will not impact global energy flows. According to analysts, with OPEC+ nations increasing production and the market still well-supplied, oil prices could fall further if the ceasefire holds.
Stocks rebound due to global optimism
The S&P 500 rose 1.1% by early afternoon, bringing it within 1% of its all-time high set in February. The Dow Jones Industrial Average jumped 517 points (1.2%), and the tech-heavy Nasdaq climbed 1.5%. The rally extended worldwide. Major indices across Europe and Asia posted strong gains, with South Korea’s KOSPI rising 3% and Hong Kong’s Hang Seng climbing 2.1%, reflecting the global relief over reduced conflict risks.
Wall Street was also buoyed by strong corporate performances. Carnival Corp. soared 6.8% after reporting better-than-expected quarterly earnings and raising its full-year profit forecast. Uber Technologies rose 8.2% after announcing the rollout of autonomous vehicle rides in Atlanta through its partnership with Waymo. Meanwhile, Coinbase jumped 10.7% alongside a surge in Bitcoin, which pushed above $105,000.
Lower oil prices may ease inflationary pressure, potentially giving the Federal Reserve more room to cut interest rates. While Trump has been pushing for rate cuts, the Fed has remained cautious. Chair Jerome Powell reiterated Tuesday that the central bank will take a patient, data-driven approach, saying the Fed is “well positioned to wait” before changing policy.
Two Fed officials recently hinted that rate cuts could come as early as the next meeting, but Powell suggested no rush, noting the economy remains strong. Mixed signals from the Fed led to fluctuating bond yields. The 10-year treasury yield slipped to 4.29% from 4.34%, while the 2-year yield dipped to 3.81%. While consumer confidence data showed slight weakness, inflation remains close to the Fed’s 2% target, keeping the door open to potential cuts if the economic picture changes.