U.S. Stocks Surge 1.1% as Middle East Tensions Ease

U.S. stocks surged on Tuesday, June 24, as tensions in the Middle East eased following the announcement of a ceasefire between Israel and Iran. The Dow Jones Industrial Average rose by 470 points, or 1.1%, reclaiming levels seen before the 12-day conflict began. The S&P 500 index increased by 1.05%, while the tech-focused Nasdaq Composite index gained 1.43%.

The market rally was driven by hopes that the conflict between Iran and Israel would de-escalate, following U.S. President Donald Trump's announcement of a ceasefire. Trump's pressure on Israel to halt its attacks against Iran further fueled optimism for an end to the war. The escalation of the conflict had previously threatened the global oil economy, particularly after the U.S. conducted strikes on Iran’s nuclear facilities. Iran had even threatened to close the Strait of Hormuz, which could have pushed oil prices to historic highs.

With the ceasefire in place, the price of crude oil dropped to $64 per barrel, a decrease of 5.33% in just one day. Oil had traded near $75 at the height of the crisis, the highest price since January. Lower oil prices are seen as positive for the global macro outlook, as they could help cool inflation.

With tensions in the Middle East easing, focus shifted back to the Federal Reserve and interest rates. In his testimony before Congress, Fed Chair Jerome Powell stated that the Fed would wait for more information before making changes to interest rates. Powell expressed concern over the potential effects of Trump’s tariffs, which could both push inflation up and lower growth. The effects on inflation could be either short-lived or persistent, requiring different responses from the Fed.

Powell also noted that rate cuts could come sooner if inflation remains low or if the unemployment rate increases. This statement reflects the Fed's cautious approach to monetary policy, as it seeks to balance the risks of inflation and economic growth.