US Stock Market Surges as Oil Prices Drop Following Iran De-escalation

Market Rally on De-escalation

Stocks rose after President Donald Trump called off planned strikes against Iran, sending oil prices lower, in the first trading day of the new month. The Dow settled at 53,178.41, advancing 693.38 points, or 1.32%, on the day. The S&P 500 gained 1.48% to end at 7,600.50, while the Nasdaq Composite finished 2.1% higher at 25,913.9.

Oil and Energy Relief

Crude oil prices took a sharp dive—Brent dropped over 5% toward $83 a barrel and WTI fell over 6% under $80—providing relief to broader markets. Energy costs affect nearly every sector of the economy, including manufacturing, transportation, retail, airlines, and consumer spending. As oil prices fell, investors shifted money into sectors that generally benefit from lower fuel costs.

Manufacturing Strength

August data showed unexpected economic resilience on the production side. The ISM Manufacturing PMI posted a 55.6 reading, up 2.3 points from June and the best since May 2022. Economists surveyed by Dow Jones had been expecting a 54.0 level. New export orders and backlog orders both rose 4.5 points to respective readings of 53.0 and 55.0, while production jumped to 58.5, up 6.3 points. Employment climbed to 52.8, up 3.1 points to hits highest since August 2022 and in expansion for the first time in 33 months.

Earnings and Tech Momentum

Investors returned to growth and technology shares as geopolitical concerns eased and another strong earnings season reinforced confidence in the economic outlook. Approximately 86% of S&P 500 companies reporting results have exceeded earnings expectations, while continued strength in cloud-computing revenue reinforced demand for mega-cap technology stocks. AI and megacap technology stocks posted gains with the rebound in risk demand, with Amazon (+4.6%) surpassing a $3 trillion market value, alongside advances in Alphabet (+4.9%), Microsoft (+4.9%), and Meta (+6%).