Stocks rally and oil sinks after Trump hints at a possible end to war, even as Iran denies talks

Aman Patel works on the floor at the New York Stock Exchange in New York. (AP Photo/Seth Wenig)

NEW YORK (AP) — A cautious relief swept through financial markets Monday after President Donald Trump said the United States has talked with Iran about a possible end to their war.

Oil prices eased, and stock prices rose on Wall Street following severe losses taken elsewhere in the world before Trump’s announcement.

The price for a barrel of Brent crude fell 10.9 per cent to settle at US$99.94, down from nearly US$120 at one point last week, after Trump said the United States and Iran held productive talks the last two days “regarding a complete and total resolution of our hostilities in the Middle East.” The S&P 500 climbed 1.1 per cent for its best day since the war began.

The market’s moves were tentative, though, after Iran denied such talks took place and Iranian parliament speaker Mohammad Bagher Qalibaf said that “fakenews is used to manipulate the financial and oil markets” in a posting on X. The Dow Jones Industrial Average went from a surge of nearly 1,135 points during the morning to a more modest gain of 540 before accelerating to finish with a climb of 631.

Over the weekend, Trump had threatened to “obliterate” Iran’s power plants if it doesn’t open up the Strait of Hormuz within 48 hours. The narrow waterway off Iran’s coast has become a sore point for Trump and the economy because a sharp slowdown in traffic is preventing oil tankers from leaving the Persian Gulf to supply customers around the world.

Trump said Monday that he is postponing attacks on Iranian power plants for five days to allow talks to continue. Quickly afterward, though, came the denials from Iran about talks, while Iran’s semiofficial Fars and Tasnim news agencies portrayed the American president as backing down.

Turkey and Egypt, meanwhile, said they had spoken to the warring parties, the first sign of coordinated mediation, which could be an encouraging signal.

Amid all the developments, the price of Brent crude fell as low as US$96 immediately after Trump announced the postponement but quickly recovered a chunk of that loss. Benchmark U.S. crude had a similar reaction, immediately dropping toward US$84 per barrel before yo-yoing back above US$92 and then settling at US$88.13, down 10.3 per cent from Friday.

Financial markets have had vicious swings, both up and down, since the war began because of uncertainty about how long it may last. The fear is that a long-term disruption could keep so much oil and natural gas off global markets that it creates a punishing wave of inflation for the global economy.

The swings of the past few weeks are similar to, but not as dramatic as, those that hit last year when Trump shocked the global economy on “Liberation Day.” Many of his worldwide tariffs ended up being milder than he initially threatened, and the back-and-forth in negotiations led to historic moves up and down.

Monday’s overriding reaction in financial markets was nevertheless one of relief. The S&P 500 rose 74.52 points to 6,581.00. The Dow climbed 631.00, or 1.4 per cent, to 46,208.47, and the Nasdaq composite jumped 299.15, or 1.4 per cent, to 21,946.76.

In Europe, stock indexes immediately flipped from losses to gains following Trump’s announcement. France’s CAC 40 rose 0.8 per cent, and Germany’s DAX returned 1.2 per cent.

That compares with sharp drops for Asian stock markets, which finished trading before Trump made his announcement. South Korea’s Kospi careened 6.5 per cent lower, Japan’s Nikkei 225 dropped 3.5 per cent and Hong Kong’s Hang Seng fell 3.5 per cent.

Treasury yields also eased in the bond market following Trump’s announcement. High Treasury yields and disruption in the bond market were factors that Trump named a year ago when he backed off his initial threats for global tariffs. The moves caused critics to allege Trump always chickens out, or “TACO,” if financial markets show enough pain.

Like oil prices, Treasury yields still remain well above where they were before the war began, even after Monday’s drop. The worry is that high oil prices could keep the Federal Reserve and other central banks from cutting interest rates, which would give the global economy and prices for investments a boost.

The yield on the 10-year Treasury fell to 4.35 per cent from 4.39 per cent late Friday. But it remains solidly above its 3.97 per cent level from just before the war.

On Wall Street, companies with big fuel bills that will benefit from any easing of oil prices led the market. Norwegian Cruise Line Holdings surged 6.2 per cent, while United Airlines climbed 4.5 per cent, and American Airlines rose 3.6 per cent. All, though, are still down for the year so far.

Stocks of smaller companies were also particularly strong, and the Russell 2000 index of smaller stocks jumped a market-leading 2.3 per cent. It had dropped last week to 10 per cent below its record, a sharp enough fall that professional investors have a name for it: a “correction.”

The S&P 500, which is the main measure of the U.S. stock market’s strength, pulled back within 5.7 per cent of its own all-time high set early this year.

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Stan Choe, The Associated Press. AP Business Writers Yuri Kageyama, Matt Ott and Chan Ho-him contributed.