On Monday, global financial markets experienced a dramatic shift after US President Donald Trump announced via Truth Social that the US and Iran had held 'very good and productive conversations,' leading him to instruct the Department of War to postpone all military strikes against Iranian power plants and energy infrastructure for five days [1][2][3][4][5]. This announcement triggered a broad risk rally, with the Dow Jones Industrial Average surging more than 600 points, up roughly 1.5% to recapture the 46,000 handle, while the S&P 500 rose around 1.4% and the Nasdaq Composite gained about 1.6% [1]. S&P 500 futures soared more than 2.5% before the opening bell, and West Texas Intermediate (WTI) futures dropped nearly 6% following the announcement [5]. Volume in both stock and oil futures surged minutes before Trump's post, raising questions among traders about the timing, though no official comment was provided by the SEC or CME Group [5].
The US Dollar weakened sharply, with the Dollar Index (DXY) falling 0.54% to 98.97 [2], and risk-sensitive currencies such as GBP/USD and NZD/USD rose, with GBP/USD up more than 0.90% to 1.3459 and NZD/USD up 0.24% to 0.5850 [2][3]. EUR/USD also rebounded, trading around 1.1623 after retreating from an intraday low near 1.1584 [4]. Oil markets saw their most dramatic single-session reversal in weeks: WTI futures tumbled roughly 8% to settle around $91 a barrel after hovering near $100 earlier in the day, and Brent plunged more than 7% to around $101 [1]. However, Source 4 reports WTI trading at $85.75, down nearly 12%, indicating some discrepancy in price reporting [1][4]. Despite the selloff, both benchmarks remain more than a third above their pre-war levels from late February [1].
Cyclical stocks led the rebound, with Caterpillar (CAT) gaining roughly 4%, followed by 3M (MMM) and Home Depot (HD) each up more than 3%. Banks such as JPMorgan (JPM) and Morgan Stanley (MS) climbed, and airline stocks like Delta Air Lines (DAL) and United Airlines (UAL) rallied sharply due to the oil selloff. In the mega-cap tech space, Tesla (TSLA) gained around 3%, with Nvidia (NVDA), Amazon (AMZN), and Apple (AAPL) also advancing [1].
Despite the positive market reaction, uncertainty persists. Iranian state media denied any direct talks with Washington, contradicting Trump's claims [1][2][3][4]. Iran's Foreign Ministry suggested Trump's remarks were aimed at lowering energy prices and buying time for military plans [4]. The International Energy Agency (IEA) signaled readiness for another emergency release from strategic stockpiles if needed [1][2]. Goldman Sachs raised its near-term oil price forecasts, expecting Brent to average above $100 through April due to the ongoing closure of the Strait of Hormuz [1]. Money markets have priced in a 52% chance of a Bank of England rate hike at the June 18 meeting, while the Federal Reserve is not expected to cut rates, with swaps pricing in 5 basis points of tightening for the June 17 meeting [2]. The European Central Bank is fully priced for two rate hikes this year, while Fed rate cuts have been fully priced out for 2026 [4].
Forward-looking statements include Trump's assertion that a deal could be reached within five days or sooner, and that the US and Iran have reached around '15 points of agreement,' including Iran not having a nuclear weapon [4]. Chicago Fed President Austan Goolsbee remains optimistic that rates could move lower by the end of 2026 but needs 'proof on inflation,' while Fed Governor Stephen Miran cautioned against making policy based on short-term headlines [2]. Fitch Ratings recently revised New Zealand’s sovereign outlook to negative, citing risks linked to energy dependence amid the Middle East war [3].
CONCLUSION
Trump's announcement of a pause in US military action against Iran sparked a sharp rally in equities and a steep selloff in oil, with risk assets benefiting from de-escalation hopes. However, conflicting signals from Iran and ongoing uncertainty around the Strait of Hormuz mean volatility and elevated energy prices may persist. Markets are optimistic but remain cautious, with central banks and investors closely watching geopolitical developments and their impact on inflation and monetary policy.