This article first appeared on GuruFocus.
U.S. stocks rallied sharply on Monday after the United States and Iran reached a preliminary agreement aimed at ending more than three months of conflict and restoring shipping activity through key Middle East trade routes.
The S&P 500 rose about 1.5%, while the Nasdaq Composite climbed more than 2% and the Dow Jones Industrial Average advanced about 1%. Investor sentiment improved as markets assessed the potential economic impact of reduced geopolitical tensions.
The agreement is expected to be formalized through a memorandum of understanding scheduled to be signed in Switzerland on Friday. Pakistan, which helped facilitate discussions between the two sides, said the arrangement includes an immediate halt to military operations. Iranian officials indicated implementation will begin after the document is signed.
Market participants also focused on plans to reopen the Strait of Hormuz, a major global oil transit route. Oil prices moved lower following the development, while U.S. Treasury yields eased and the dollar weakened against a basket of major currencies.
Attention is now shifting to the Federal Reserve’s policy meeting later this week, where policymakers are widely expected to leave interest rates unchanged while providing updated guidance on the inflation outlook.
