U.S. And Canadian equity markets climbed on Monday despite continued U.S.–Iran hostilities. The relief came after weekend diplomacy and signs that the worst-case disruptions to global trade may be avoidable.
Markets shrug off earlier war losses
The S&P 500 rose about 1 per cent and moved back within roughly 1.3 per cent of its record high, while the Nasdaq climbed about 1.2 per cent and the Dow added hundreds of points on Monday. In Canada, the S&P/TSX composite index gained 183.48 points to reach 33,879.24.
Investors remain nervous, but many are betting that corporate profits and ongoing U.S.-Iran talks will soften the economic impact of the conflict.
Stocks had sold off sharply following the outbreak of hostilities in late February, when worries about oil supplies and a wider regional war sparked big swings across markets. The rebound this week erased much of those losses as traders received fresh signals that a broader ceasefire, however fragile, might hold for now.
The key is that markets are reacting to short-term changes in risk appetite instead of changing their long-term views on growth and inflation.
Oil volatility eases, bonds follow
Crude prices — a major driver of market sentiment since the conflict began — retreated from earlier spikes. Brent crude, the international benchmark, settled near US$99.36 a barrel after earlier touching roughly US$104 in the morning session. That’s far above pre-war levels near US$70 a barrel, but still below the highs approaching US$119 seen when tensions peaked.
The oil pullback helped calm fixed-income markets. The yield on the 10‑year U.S. Treasury dipped to about 4.29 per cent from 4.31 per cent at the close on Friday, as traders trimmed their inflation and growth risk premiums.
And those moves mattered for equities. When oil jumped, it raised concerns about higher fuel costs feeding through to consumer prices and corporate margins. When oil falls back, it takes some upward pressure off inflation expectations and gives central bank policy a bit more elbow room.
Diplomacy and comments move markets
Markets reacted to diplomacy over the weekend and public statements from U.S. Leaders. After talks failed to produce an immediate end to hostilities, U.S. President Donald Trump said he would consider a blockade of the Strait of Hormuz — comments that briefly pushed oil higher. Later remarks from Mr. Trump suggesting he would postpone planned strikes on Iran’s energy infrastructure — and that the Strait could reopen soon "if this works" — helped ease investor fears.
"Markets are taking some encouragement from the fact that the two sides are talking and that the broader ceasefire seems to be holding, for now," said Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute.
This combination of brinkmanship and talks has caused quick market swings. Traders who were braced for an extended disruption to shipments through the Strait of Hormuz — a key artery for Gulf oil exports — pared positions as the prospect of reopening the strait gained traction.
Earnings season offers another line of support
Another factor underpinning the rally is the start of first-quarter corporate reporting in the U.S. Big firms are filing results that give investors fresh data on demand, pricing power and profit margins. Strong reports could reinforce the recent gains and help markets look past geopolitical headlines.
Some strategists note that stocks tend to track corporate earnings over time, so better-than-expected results may outweigh short-term geopolitical shocks. And with many companies set to report later this week — from retailers to chipmakers and cruise lines — traders are braced for a busy stretch of quarterly numbers.
Bitcoin also gained about 3 per cent, hovering near US$71,000, as digital assets followed the broader risk-on mood alongside stocks.
Global reaction remained mixed
Not all markets joined the rally. Many European and Asian indexes slipped on the day; Hong Kong’s Hang Seng and South Korea’s Kospi each fell by about 0.9 per cent during trading. The divergence reflected the uneven nature of the news — calm in some corridors, fresh risk in others.
In India, equity benchmarks rose strongly on the week as global risk sentiment improved and investors weighed the upcoming U.S.–Iran talks. The BSE Sensex closed at 77,550.25, up 918.60 points, while the NSE Nifty 50 reached 24,050, according to market summaries. Sudeep Shah, head of technical and derivatives research at SBI Securities, said buyers were reclaiming control after recent volatility.
Overall, the market picture remains mixed. Some regions are clearly cheering signs of de-escalation. Others are hanging back, waiting for more durable proof that shipping lanes and supply chains will stay open.
Sector winners and losers
The biggest gains landed in sectors that benefit from lower oil prices and renewed risk appetite. Consumer discretionary, transport and industrial stocks rallied on the view that falling energy costs would ease input prices and boost demand. Nigel Green, chief executive of the financial advisory firm deVere Group, said transport and industrials could see a sharp rebound if oil prices retreat.
Energy and materials names lagged on the day as oil gave back some of its earlier gains. That pattern is normal when geopolitics fuels a sudden commodity spike; profit-seeking flows rotate out of beaten-up cyclicals and into sectors likely to benefit from steadier input costs.
In Canada, the TSX's advance was led by broad-based strength across banks and industrials, offsetting some weakness in resource-linked stocks that track oil and metals.
What traders are watching next
Investors are watching several moving parts: fresh details from ongoing talks between the U.S. And Iran, the path of oil prices, and the next batch of corporate earnings. Bond yields and currency moves will also be on the radar as traders reassess inflation risk.
Markets can flip quickly when headlines change. A renewed escalation, tighter sanctions, or confirmed disruptions to shipping could reverse the day's gains. On the other hand, any tangible progress toward reopening the Strait of Hormuz and cutting off the risk premium on oil would likely support further rallies.
One thing is certain: traders are balancing two stories at once — a geopolitical shock that matters for energy markets, and a corporate-earnings cycle that may keep stocks buoyant if results are strong enough.
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"Markets are taking some encouragement from the fact that the two sides are talking and that the broader ceasefire seems to be holding, for now," said Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute.
This article was created with AI assistance.
