U.S. stock markets reached new highs on Tuesday as investors reacted positively to indications that a deal with Iran to reopen the Strait of Hormuz could be imminent. The Dow Jones Industrial Average climbed 907 points, or 1.7%, marking its second consecutive record close. The S&P 500 rose 1.8%, its first record since June, while the Nasdaq gained 2.6%, buoyed by strong performance in the technology sector.
The market rally was driven in part by remarks from Treasury Secretary Scott Bessent, who said negotiations with Iran were progressing and suggested a deal might come within a day or two. He emphasized that any agreement would restore freedom of movement through the Strait of Hormuz, a critical shipping lane that handles about 20% of the world’s oil supply. Bessent also indicated that Iran would likely be barred from charging ships for safe passage, a significant development after months of tensions disrupting the region.
Oil prices dropped sharply following Bessent’s comments, with Brent crude falling 5.3% to $79.30 a barrel and West Texas Intermediate crude dipping 5.4% to $76.04. Bessent forecasted further declines as ships that have been stranded in the Persian Gulf begin to move freely again. He noted that the easing of restrictions would not only impact energy markets but also reduce costs for fertilizers, refined products, and industrial gases, potentially triggering a wider relief rally.
Tech stocks were a major driver behind Tuesday’s gains, highlighted by a surge in shares of Palantir, which jumped nearly 30% after reporting strong quarterly results. The enterprise software company posted 93% revenue growth to $1.94 billion, with a 149% increase in commercial revenue to $764 million. CEO Alex Karp described the quarter as “otherworldly” and expressed optimism about the future, citing the ongoing “sovereign AI revolution.” Palantir projected full-year revenues exceeding $8 billion.
Other technology firms with exposure to artificial intelligence also saw significant gains, including Marvell Technology (+13%), Micron (+8%), Microsoft (+5%), and Nvidia (+3%). Caterpillar shares rose 5.6% following better-than-expected earnings and an upwardly revised revenue forecast, driven by strong demand for construction equipment amid efforts to build AI data centers. The company said it expected tariff costs to remain at the lower end of previous estimates.
Despite the upbeat mood, some caution remained. The head of Schneider National, a large trucking company, warned that transportation costs are likely to continue rising. Meanwhile, SpaceX, which has made significant AI investments, reported quarterly revenue that beat expectations but also posted a net loss of $500 million.
With over 84% of S&P 500 companies surpassing earnings forecasts this season, investor sentiment appears buoyed by both strong corporate results and hopes for de-escalation in the Iranian conflict. However, uncertainties around inflationary pressures and AI sector profitability persist as key factors to watch going forward.