US sharemarkets rallied on Monday as oil prices fell sharply and investors responded to signs of potential de-escalation in the conflict with Iran. The S&P 500 rose 1.15% to close at 6,581.00, while the Nasdaq Composite gained 1.38% to 21,946.76. The Dow Jones Industrial Average jumped 631 points, or 1.38%, to finish at 46,208.47.
Markets surged after comments from President Donald Trump suggesting the United States and Iran had held constructive discussions and that planned strikes on Iranian energy infrastructure would be postponed.
Oil plunges on hopes of de-escalation
Energy markets reversed sharply, with oil prices falling as hopes grew for a potential easing in tensions. West Texas Intermediate crude dropped 10.28% to settle at US$88.13 a barrel, while Brent crude fell 10.92% to US$99.94.
The decline followed last week’s surge in oil prices, which had been driven by disruptions to shipping through the Strait of Hormuz after US-Israeli strikes on Iran in late February.
Broad-based gains across sectors
The rally was broad-based, with cyclical sectors leading gains. Financials, industrials and technology stocks all advanced, while airline stocks outperformed as lower oil prices improved the outlook for fuel costs.
Despite the rebound, markets remain sensitive to geopolitical headlines, with conflicting reports about whether formal negotiations between the US and Iran are underway.
Australian market outlook
Australian shares are expected to open sharply higher, following the strong lead from Wall Street and the pullback in oil prices. ASX 200 futures were up 151 points, or 1.8%, to 8,567 after earlier gains above 2%.
Investors will be watching upcoming domestic inflation data due Wednesday, which will provide insight into price pressures prior to the escalation in the Middle East.
Overseas, attention will turn to preliminary PMI data from the US, Europe and Japan, as markets assess the broader economic impact of the conflict.
