Stocks rallied sharply at the start of the week after President Donald Trump said late Sunday on social media that a deal with Iran was "now complete." The SPDR S&P 500 ETF Trust advanced 1.6% in morning trading to $753.34 as investors priced in a significant reduction in geopolitical risk tied to the Middle East.
The president authorized the toll-free reopening of the Strait of Hormuz and ordered the immediate removal of the U.S. naval blockade of Iranian ports. Those decisions removed a major source of energy supply uncertainty that had been pressuring markets for months, helping to push oil prices lower and alleviate inflation worries tied to energy costs.
Officials from Iran and allied actors described the terms of the agreement in concrete financial and procedural detail. Iran’s Revolutionary Guard said the country would receive half of about $24 billion in long-frozen funds before final negotiations begin under a 60-day ceasefire extension. Iran’s Supreme National Security Council confirmed that the parties had finalized the wording of a memorandum of understanding. Pakistani Prime Minister Shehbaz Sharif, whose government helped broker the arrangement, said an official signing ceremony would be held in Switzerland on Friday.
The drop in oil prices that followed the announcement further eased concerns about energy-driven inflation, a dynamic that supported the bullish case for equities. That sentiment showed up across major benchmarks: the S&P 500 climbed 1.5%, the Dow Jones Industrial Average rose 1.2%, and the NASDAQ surged 2.4%.
Market positioning also reflected evolving expectations about monetary policy. Fed funds futures implied a 77% probability of at least one rate cut in 2026, a stance that historically coincides with a positive backdrop for equities, especially when risk-off selling is absent. Softer-than-expected data reinforced that view: May Industrial Production increased by just 0.1%, short of the 0.3% forecast, and the Empire Manufacturing Index for June came in at 5.7 versus an expected 13.5. Rather than cooling sentiment, those readings bolstered the case for continued Fed accommodation.
Within that context, SPY tracked its underlying index higher and was trading within striking distance of its 52-week high of $760.40, underscoring how decisive the market judged the resolution of the Iran conflict to be for the risk environment. The mix of a landmark geopolitical de-escalation, falling oil prices, and a supportive rate outlook combined to drive broad gains across equity markets.
Summary
The ETF's 1.6% morning advance to $753.34 was led by developments that reduced geopolitical and energy-market uncertainty: an announced U.S.-Iran agreement, the toll-free reopening of the Strait of Hormuz, removal of a U.S. naval blockade of Iranian ports, and a release of frozen funds, coupled with macro data that strengthened expectations for Fed accommodation.
Key points
- SPDR S&P 500 ETF Trust rose 1.6% to $753.34 in morning trading as equities benefitted from a deal announced by President Trump to end U.S.-Iran hostilities.
- Energy markets reacted with a sharp decline in oil prices, reducing inflation concerns tied to energy and supporting broad equity gains across the S&P 500, Dow, and NASDAQ.
- Macro indicators were softer than expected, reinforcing a market-implied 77% probability of at least one 2026 Fed rate cut and supporting risk assets.
Risks and uncertainties
- The final negotiations are scheduled to take place during a 60-day ceasefire extension, indicating there are still further steps before the agreement is fully implemented - a process that could affect markets.
- Oil prices remain a market-sensitive variable; although they dropped on the announcement, energy markets could reprice if conditions change.
- Soft industrial and manufacturing data could alter the trajectory of Fed policy expectations and thereby influence market sentiment and sector performance.