U.S. stocks rallied sharply on Tuesday, delivering their strongest performance since last spring as renewed optimism about a potential end to the Iran war lifted investor sentiment. The Dow Jones Industrial Average surged 1,125 points, reflecting a powerful shift from fear to hope on Wall Street.
The S&P 500 jumped 2.9%, marking its biggest gain since May. Just a day earlier, the index had been more than 9% below its record high reached earlier this year due to escalating war concerns.
The Dow climbed 2.5%, while the Nasdaq Composite led gains with a 3.8% rise.
Markets rebounded after reacting to tentative signs that the conflict could de-escalate. The rally capped off a volatile period of sharp swings driven by ongoing uncertainty around the war and coincided with the close of the first quarter, a time when fund managers often rebalance portfolios.
Investor optimism grew following a Wall Street Journal report indicating that President Donald Trump may be open to ending U.S. military involvement in Iran, even if the Strait of Hormuz remains largely restricted. This critical passage typically handles about one-fifth of the world’s oil supply.
Oil prices initially dropped sharply after comments from Iran’s president, Masoud Pezeshkian, who signaled willingness to end the conflict under certain conditions, including assurances against future aggression.
As a result, Brent crude fell 3.2% to settle at $103.97 per barrel, while U.S. crude declined 1.5% to $101.38 after reversing earlier gains.
Despite the relief, uncertainty remains high. Oil prices could spike again if disruptions persist, especially after Iran’s recent attack on a Kuwaiti oil tanker in the Persian Gulf.
Energy-driven inflation pressures are already building. In Europe, inflation rose to 2.5% in March from 1.9% in February. In the U.S., gasoline prices have exceeded $4 per gallon for the first time since 2022, straining household budgets and corporate margins.
Even with Tuesday’s rally, the S&P 500 posted its worst quarterly decline since mid-2022, down 4.6%. The drop would have been steeper without the late-session easing in oil prices, which helped fuel-dependent stocks rebound. United Airlines rose 8.1%, while Norwegian Cruise Line Holdings gained 5.9%, trimming their year-to-date losses.
