U.S. President Donald Trump said he will soon sign a peace deal to end the war with Iran, sending all three major U.S. stock indexes sharply higher. With signs that the Middle East geopolitical crisis that had unnerved investors is easing, pent-up risk appetite burst forth, analysts said.
On the 11th (local time), the large-cap-focused Standard & Poor's (S&P) 500 index rose 1.75% from the prior transaction to finish at 7,394.30. The tech-heavy Nasdaq index also jumped 2.54% to 25,809.66. The Dow Jones Industrial Average surged 929.97 points (1.86%) to end at 50,848.75, vaulting past the 50,000 mark.
The stock market swung widely that day. Earlier, President Trump threatened on social media to seize Kharg Island, a core Iranian oil infrastructure hub, and to bomb it heavily. Kharg Island is the vital heart through which 90% of Iran's oil exports pass. Immediately after the remarks, international oil prices spiked, stoking extreme anxiety in the global energy market.
But a few hours later, President Trump completely reversed course. He abruptly canceled the planned strikes on Iran and said he would soon sign a peace deal to ensure Iran never possesses nuclear weapons. He said the paperwork was in its final coordination stage, suggesting the end of the war was imminent.
As war fears receded, surging international oil prices quickly turned lower. West Texas Intermediate (WTI), the global oil benchmark, fell 2.58% to $87.71 a barrel. Brent crude also dropped 2.92% to $90.38 at the close. With oil, which adds to corporations and consumer expense burdens, stabilizing, inflation worries eased, Government Bonds yields fell, and the stock market began a strong rebound.
Market experts called the turn of events a very positive signal for the economy. Ulrike Hoffmann-Burghardi at financial corporations UBS said, "Diplomatic resolution will ultimately prevail," adding, "Investors can refocus on solid economic fundamentals and corporations earnings growth." Thomas Martin at Globallt Investment also said, "The Middle East conflict is failing to deliver a major shock to the market," and noted, "Looking at price indicators, rising oil prices have not spread significantly to other institutional sector, so the economy remains strong." Kyle Rodda at capital-markets analytics firm Capital.com said, "President Trump sent a clear signal he does not want escalation, and that ignited risk asset appetite."
Economic data released that day were somewhat mixed, but they did not stop the market's advance. The U.S. Bureau of Labor Statistics released that the May producer price index rose 1.1% from the prior month. The producer price index is a figure that shows the expense corporations incur to make goods and serves as a compass for where consumer prices may head. The reading far exceeded the market forecast of 0.7%. However, the core inflation rate, which excludes volatile food and energy prices, came in at 0.4%, below the 0.5% consensus. Clark Bellin at advisory firm Bellwether Wealth said, "All inflation gauges are flashing warning lights, but if the Iran war ends completely, this surge in prices will cool quickly."
A rebound in semiconductors and big tech leading the artificial intelligence (AI) boom also powered the market's surge. The iShares Semiconductor ETF, an exchange-traded fund (ETF) of major U.S. semiconductor corporations, jumped more than 8%. Intel, a semiconductor corporations that Bank of America, a major bank, upgraded to a buy while lauding its prospects in the AI era, rose 9%. Shares of other key semiconductor corporations such as Micron and AMD also leapt across the board.
Anticipation around SpaceX, a space exploration corporations set to list on the stock market the next day, also fired up the broader market. SpaceX raised a whopping $75 billion by pricing its IPO at $135, marking the largest initial public offering (IPO) in history. It is a mega-event valuing the company at $1.8 trillion. Veteran stock strategist Louis Navellier said such an enormous IPO would greatly boost investor confidence and provide powerful momentum to lift the entire stock market.
However, software giant Oracle tumbled 11% after saying it would raise an additional $20 billion to build AI infrastructure. Fears spread rapidly among investors that the massive investment expense could severely damage the corporations' profitability going forward.