U.S. stocks surged to record territory after President Trump announced a preliminary peace agreement with Iran that includes reopening the Strait of Hormuz, a critical global shipping route for energy supplies. The S&P 500 climbed 1.7% to close at 7,554.29, a fresh all-time high, while the Nasdaq Composite jumped 3.1%, or 795.10 points, to finish at 26,683.94. The Dow Jones Industrial Average added 469 points, or 0.9%, to close at 51,671, also a record.
The rally was broad but uneven across sectors. Of the 30 Dow components, eighteen ended in positive territory while twelve declined. Within the S&P 500, seven of eleven broad sectors finished higher, led by the Information Technology Select Sector SPDR fund, which rose 3.4%, followed by Communication Services, up 2.4%, and Consumer Discretionary, up 1.9%. The notable exception was energy, with the Energy Select Sector SPDR fund falling 3.6% as crude oil prices tumbled on prospects of restored supply.
Investor anxiety eased sharply alongside the rally. The CBOE Volatility Index, Wall Street's primary fear gauge, fell 8.4% to 16.20, reflecting reduced demand for downside protection as geopolitical risk premia were unwound from asset prices. The move in the VIX was among the more pronounced single-day declines for the index in recent months.
Economic data released alongside the market action offered a mixed signal on the health of the domestic economy. The New York Federal Reserve's Empire State Manufacturing Index for June fell to 5.7, well below the consensus estimate of 13.9 and down from May's reading of 19.6, pointing to a deceleration in regional factory activity. Separately, industrial production rose 0.1% in May, while the prior month's figure was revised upward to a 0.9% gain from an originally reported 0.7% increase. Capacity utilization came in at 76.2% for May, marginally below the consensus estimate of 76.3%.
The market's reaction underscores how heavily geopolitical risk had been weighing on sentiment in recent months, with the de-escalation triggering not just a relief rally in equities but a broader unwind of hedges across asset classes. Treasury yields, which had spiked on inflation concerns tied to the conflict, also pulled back as energy-driven inflation fears eased.
The rally arrives just as the Federal Reserve begins a closely watched two-day policy meeting, the first chaired by Kevin Warsh, adding another variable for investors to weigh against the geopolitical relief trade in the sessions ahead. Strategists noted that the durability of Monday's gains will likely depend on whether the ceasefire holds and whether the Fed's tone reinforces or complicates the market's current optimism.