After President Donald Trump said talks with Iran were approved at the highest level, U.S. stocks rallied to their best day in two months while oil prices slid, reviving hopes for a deal that could restart global crude flows. The moves also shifted expectation
NEW YORK — By midday Thursday, the mood on Wall Street had flipped. After President Donald Trump posted that his threat to bomb Iran was called off, investors sent U.S. stocks soaring to their best day in two months, while oil prices fell sharply.
The S&P 500 jumped 1.8%, snapping a back-to-back drop that had pulled it back to levels it hadn’t seen since early May. The Dow Jones Industrial Average surged 929 points, or 1.9%, and the Nasdaq composite rallied 2.5%.
Trading moved higher quickly after Trump said on his social media network that “discussions with the Islamic Republic of Iran have been brought to the highest level of Iranian leadership and approved.” He added that the time and place of a signing would “be announced shortly.”
Markets had been braced for escalation. Over the past several days. the United States and Iran launched attacks that threatened to break a more than monthlong tenuous ceasefire. A deal to end the war with Iran. traders are betting. could reopen the Strait of Hormuz and allow oil tankers to carry crude again from the Persian Gulf to customers worldwide.
Oil prices reflected the shift in expectations. The price for a barrel of benchmark U.S. crude fell 2.6% to $87.71. Brent crude, the international benchmark, dropped 2.9% to $90.38, though it still sits above its roughly $70 level before the war.
The day’s broader market story was tied to inflation pressure and interest-rate expectations. Higher oil prices from the Iran war have pushed inflation upward, and a report Thursday showed U.S. wholesale prices increased by more in May than economists expected. The effect is worldwide. and the European Central Bank became the first major central bank to raise interest rates in response.
Higher rates can help cool inflation. but they also slow economies and weigh on investment across the board. including stocks and cryptocurrencies. They hit the most expensive investments hardest—an argument that some critics have used to describe the artificial-intelligence industry as a bubble. inflated beyond fundamentals.
Big swings in AI-related stocks have already been jerking the market around over the past week. Shares surged to records and then slid, sometimes reversing direction by the hour. AI stocks had been rolling back up their roller coaster early Thursday before Trump’s Iran announcement.
Marvell Technology climbed 11.1%. after a stretch that included a 16.7% plunge. a 9.6% rise. and drops of more than 5% for two straight days. Before that. it posted a one-day surge of 32.5%—its best in history—after Nvidia CEO Jensen Huang suggested it could be “the next trillion-dollar company.” At the time. it was worth a bit more than $190 billion.
Other chipmakers helped lift the market. Lam Research jumped 12.7%, and KLA rose 12.9%, offsetting an 8.5% drop for Oracle. Oracle reported a stronger profit for the latest quarter than analysts expected. but also said it expects to raise $40 billion in cash this fiscal year through borrowing and stock sales. That came after it raised $48 billion last fiscal year to help pay for AI investments.
Bigger and smaller companies alike are watching the same question: whether heavy AI spending will translate into the profits and productivity AI backers promise.
Taken together, the moves were also visible in the bond market. Treasury yields eased sharply as falling oil prices reduced pressure on inflation. The yield on the 10-year Treasury dropped to 4.45% from 4.55% late Wednesday.
A sustained drop in oil prices could also shift the Federal Reserve’s path. Traders had suspected the Fed might need to hike because of high inflation and a solid U.S. job market. but following Trump’s announcement. expectations for a federal funds rate increase this year were scaled back. according to data from CME Group. The Fed could even resume cuts under its new chair, Kevin Warsh, if inflation pressures fade enough. Trump appointed Warsh, and Trump has been publicly calling for lower interest rates.
Smaller companies can feel the effects first. The Russell 2000 index of the smallest U.S. stocks jumped a market-leading 3%, a sign that easier interest-rate conditions can benefit businesses that often need borrowing to grow.
Overseas, markets were less dramatic. In Europe, indexes rose modestly after a mixed finish in Asia. London’s FTSE 100 climbed 0.5%, while Hong Kong’s Hang Seng fell 0.7% for two of the world’s bigger moves.
For Thursday, at least, the sequence was clear: Trump’s post about Iran shifted oil lower, and with oil lower, markets began pricing a different inflation and rate outlook—just as Wall Street watched AI stocks swinging above and below the line.
US stocks S&P 500 Dow Jones Nasdaq oil prices Iran Strait of Hormuz inflation Federal Reserve Kevin Warsh AI stocks Marvell Technology Lam Research KLA Oracle Treasury yields