U.S. stocks surged on Monday, erasing previous losses linked to the U.S. and Israel’s conflict with Iran. Wall Street expressed optimism that the global economy may steer clear of a worst-case scenario.
The S&P 500 climbed by one percent, edging within 1.3 percent of its record high from earlier this year. The Dow Jones Industrial Average rose by 301 points, or 0.6 percent, while the Nasdaq composite advanced by 1.2 percent.
In Canada, the S&P/TSX composite index gained 183.48 points, reaching 33,879.24.
Despite a spike in oil prices to above $100 US per barrel following unsuccessful ceasefire negotiations, prices moderated as the day progressed. The market saw less volatile fluctuations compared to the turbulence witnessed since the conflict began in late February.
After ceasefire talks over the weekend collapsed, U.S. President Donald Trump threatened to enforce a blockade on the Strait of Hormuz.
A potential blockade could further restrict global oil supply, exacerbating the existing price surge due to Iran’s limitations on traffic in the crucial strait. This passage is crucial for shipping oil from the Persian Gulf region to consumers worldwide. In response, Iran issued threats against all ports in the Persian Gulf and the Gulf of Oman.
The price of Brent crude, the global benchmark, increased by 4.4 percent to settle at $99.36 US, significantly higher than its pre-war price around $70 US. However, it remained below the peak of $119 US during heightened Iran war concerns, retracting from its peak of nearly $104 US earlier that Monday.
“Markets are finding some optimism in ongoing dialogue between the involved parties and the apparent stability of the broader ceasefire,” mentioned Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute.
Major U.S. corporations are starting to reveal their first-quarter earnings, with strong performances potentially offsetting concerns surrounding the Strait of Hormuz, as stock prices often align with corporate profit trends in the long run.
In the bond market, Treasury yields dipped as oil prices retreated from their morning highs. The yield on the 10-year U.S. Treasury decreased to 4.29 percent from 4.31 percent at the close of trading on Friday.
While European and Asian stock markets faced declines, the Hang Seng in Hong Kong and South Korea’s Kospi recorded notable drops of 0.9 percent each.
The ongoing conflict between the U.S., Israel, and Iran is anticipated to impact grocery prices, particularly imported produce, meat, and dairy items.