US stocks staged a significant rebound on Monday, with major indices shaking off recent declines driven by geopolitical tensions. Investors responded positively to signs of potential de-escalation in the Middle East, providing a lift after a volatile trading period.
The Dow Jones Industrial Average surged more than 300 points, recouping a substantial portion of losses from the previous session. The S&P 500 and Nasdaq Composite also posted strong gains, rising nearly 1% and 1.5% respectively, as risk sentiment improved. This bounce came after a sharp downturn on Friday, when markets reacted negatively to reports of direct exchanges of strikes between Israel and Iran, sending the Dow plunging nearly 800 points. Adding to the week’s volatility, markets had also slid on Thursday amid a public spat between President Trump and Elon Musk, which saw Tesla’s stock drop over 14%.
Geopolitical Shifts Drive Market Sentiment
The primary catalyst for Monday’s market rally was a noticeable shift in the outlook regarding the conflict between Israel and Iran. Hopes grew that the situation might remain contained rather than escalating into a broader regional crisis. Reports suggesting Iran could be open to resuming nuclear talks were seen as a potential avenue for de-escalation, easing fears that had previously boosted safe-haven assets like gold and pressured stocks.
In parallel with the stock market recovery, oil prices, which had surged sharply on Friday due to supply disruption fears, slid significantly on Monday. Brent crude fell below $73 a barrel, while WTI crude settled under $72, dropping over 4% as concerns about the impact on oil supply from OPEC’s third-largest producer eased.
Focus Turns to the Federal Reserve
Beyond geopolitical factors, market participants are keenly awaiting the Federal Reserve’s upcoming policy meeting and decision later in the week. While expectations are high that the Fed will hold interest rates steady, investors will be scrutinizing policymakers’ statements and projections for any clues about the future path of interest rates. This comes amidst ongoing political pressure for rate cuts and recent economic data, such as unemployment claims hitting an eight-month high in the last full week of May, signaling some potential cooling in the labor market.
Key Movers and Sector Trends
Amidst the broader market movements, several sectors and individual stocks saw notable activity:
AI and Tech: The AI boom continued to influence markets, particularly boosting uranium-related stocks to 52-week highs on optimism about nuclear energy’s role in powering AI infrastructure. Companies like Cameco and NexGen Energy benefited, supported by recent executive actions. Nvidia also saw gains, moving closer to its record high.
Streaming & Advertising: Roku shares jumped significantly after announcing a partnership with Amazon Ads aimed at creating a large Connected TV (CTV) advertising footprint.
Crypto: Companies tied to the cryptocurrency market remained in focus. MicroStrategy (MSTR), a major Bitcoin holder, reported a substantial purchase of the digital asset. Stablecoin issuer Circle (CRCL) continued its post-IPO surge, reaching new highs and reflecting strong investor interest in the stablecoin sector.
Healthcare: Sarepta (SRPT) experienced a sharp decline following a reported patient death in a clinical trial for its experimental gene therapy, leading to a trial pause.
Defense: Defense stocks, which had rallied on Friday amidst heightened conflict fears, traded relatively flat early Monday as de-escalation hopes surfaced.
Trade & Tariffs: While overshadowed by other events, trade discussions, including US talks with the EU and Canada and anticipation regarding potential tariff actions, remained background factors for investors.
Overall, Monday’s market session saw a strong recovery driven by optimism surrounding the Israel-Iran situation, allowing investors to regain their footing while also looking ahead to the Federal Reserve’s monetary policy decision.
