S&P 500 Rallies on Trump Iran De-escalation Signal

Summary

The S&P 500 rallied as investors responded to signals from Donald Trump that US military action against Iran could end within weeks. Global equities followed higher, with Asian markets surging and European futures pointing to strong gains. Oil prices edged up but remained relatively contained despite geopolitical tensions. Broader sentiment improved as markets largely ignored escalation risks involving the UAE and NATO uncertainty.

Equities

The FTSE 100 rose modestly on Tuesday, closing 0.5% higher, but still recorded its worst monthly performance since 2020 as rising oil prices linked to the Middle East conflict weighed on sentiment. The FTSE 250 also gained on the day, though it ended a three-month streak of advances. Data showing weak UK growth and rising shop price inflation has sharpened expectations that the Bank of England may raise interest rates multiple times this year.

Among UK stocks, Raspberry Pi surged 47% on Tuesday after reporting stronger-than-expected annual earnings. In contrast, Unilever fell 7.2%, marking its worst session since 2008, after confirming advanced talks to merge its food division with McCormick in a deal valuing the business at $44.8 billion. Precious metals miners also moved higher during the session, supported by firm gold prices.

In the United States, the S&P 500 surged 2.91% on Tuesday, recording its strongest one-day gain since May 2025 as investors responded to signals that the conflict with Iran could de-escalate. The Nasdaq Composite jumped 3.83%, while the Dow Jones Industrial Average rose 2.49%. The rally followed reports that President Donald Trump may seek to end the military campaign even without reopening key oil shipping routes.

Large-cap technology stocks led gains. Nvidia rose 5.6%, Alphabet added 5.1%, and Meta Platforms climbed 6.7% by the close on Tuesday. The semiconductor sector advanced strongly, with the PHLX chip index posting its best session in nearly a year.

Marvell Technology rallied 12% after securing a $2 billion investment from Nvidia, while CoreWeave gained 12% following an $8.5 billion loan to expand AI infrastructure. Constellation Energy fell 6.5% after issuing a weaker profit outlook.

US economic data released on Tuesday showed job openings declined more than expected in February, with hiring dropping to its lowest level in nearly six years. The figures have reinforced expectations that the Federal Reserve may keep interest rates higher for longer, particularly as elevated oil prices continue to influence inflation expectations.

Forex & Commodities

The US Dollar Index held broadly steady early this morning, trading near 99.70, as cautious optimism over a potential Middle East ceasefire tempered recent safe-haven demand. The Japanese yen strengthened slightly to around 158.6 per dollar, recovering from recent lows, while the euro edged higher to 1.157 and British pound sterling rose to 1.326 against the dollar. The shift reflects a partial unwinding of long dollar positions, though markets remain wary of conflicting geopolitical signals.

Central bank expectations remain finely balanced. Investors are closely watching the upcoming US labour market report, which could influence the Federal Reserve policy outlook after rate cut expectations were largely priced out in recent weeks. At the same time, the Bank of Japan is expected to consider a rate increase in April, supporting the yen, although forward-looking business sentiment has softened slightly.

In commodities, gold traded near $4678 per ounce early this morning after touching a two-week high of $4723, supported by lingering geopolitical uncertainty despite signs of de-escalation. The metal had previously fallen sharply through March as higher oil prices pushed inflation expectations upwards and reduced the likelihood of looser monetary policy.

Oil markets were more volatile. Brent crude dropped to around $100.6 per barrel and West Texas Intermediate fell to $98.04 early today, reversing earlier gains as traders locked in profits. Despite talk of a potential end to the conflict within weeks, supply concerns persist due to infrastructure damage and disruption to tanker routes through the Strait of Hormuz.

OPEC output data released on Tuesday showed a sharp decline in March production, reflecting constrained exports linked to the conflict. Meanwhile, US crude production also fell significantly earlier this year severe weather disruption, adding another layer of uncertainty to the near-term supply outlook.