Dow Jones Hits Record, Nasdaq Jumps 3% as Iran Deal Lifts Markets

Wall Street rallied Monday as investors digested news of a preliminary peace agreement between the U.S. and Iran.

The Dow Jones Industrial Average (DJINDICES: ^DJI) rose 1.4% just before 1 p.m. ET, hitting a fresh all-time intraday high. The S&P 500 (SNPINDEX: ^GSPC) climbed 1.9%, while the Nasdaq Composite (NASDAQINDEX: ^IXIC) led with a 3% gain. Meanwhile, oil prices fell sharply and the United States Oil Fund (NYSEMKT: USO) dropped 4.5%.

The agreement, announced late Sunday, would extend the U.S.-Iran ceasefire for 60 days. It would also lay the groundwork for final negotiations on Tehran's nuclear program. If all goes as planned, this initial deal is set to be signed on Friday in Geneva, setting the stage for the conflict's endgame.

^IXIC data by YCharts

Tech leads, SpaceX soars

Caterpillar (NYSE: CAT) led the Dow with a 2.3% gain, contributing 131 points to the index. The construction equipment giant's stock fell 5.9% last Wednesday on geopolitical uncertainty and inflation fears. Today's rally erased about half of that dramatic loss. The reasons were all the same, but in reverse.

The usual Dow heavyweights did their part in the index boost, and again, it was more of a geopolitical upswing than a bunch of company-specific surges. Financial titans Goldman Sachs (NYSE: GS) and American Express (NYSE: AXP) added gains of 1.5% and 3.6%, respectively, for reasons best described as "vibes."

Over on the S&P 500 and Nasdaq Composite, tech giants led the rally. Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), Nvidia (NASDAQ: NVDA), and Micron Technology (NASDAQ: MU) combined to add over $300 billion in market cap. The Invesco S&P 500 Equal Weighted ETF (NYSEMKT: RSP) rose just 1% versus 1.9% for cap-weighted versions of the S&P 500 index. Translation: this rally has a VIP section, and most stocks aren't in it.

Image source: The Motley Fool.

And the only major index that includes Space Exploration Technologies (NASDAQ: SPCX) benefits from the freshly launched stock's massive momentum. SpaceX is up 10.3%, increasing its market cap by $239 billion. That's more fuel for the Nasdaq Composite's fires.

Elon Musk spent Sunday posting ambitious projections on X. He suggested SpaceX could hit $1 trillion in annual revenue by 2030 or 2031. That would require roughly 50x growth from 2025's $18.7 billion.

Oil traders finally exhaled. West Texas Intermediate crude fell to around $80 per barrel after President Trump declared on Truth Social: "Ships of the World, start your engines. Let the oil flow!" The Strait of Hormuz is set to reopen on Friday, assuming the Geneva signing goes as planned.

Lower energy prices could ease inflation pressures, potentially reducing the need for further Federal Reserve rate hikes. The central bank meets this week; there's a 98% chance it does nothing, per CME FedWatch. That would still be better news for risky investments than the rate increase that seemed certain as recently as last week.

With oil prices down, Chevron (NYSE: CVX) was the Dow's largest loser, falling 3.5% as cheaper oil cut into the energy sector's appeal.

Caveats apply

Before getting too comfortable: the deal text hasn't been released, Israel isn't involved in the upcoming talks, and "preliminary" is doing a lot of work in today's headlines. Friday's signing in Geneva isn't the checkered flag; it's the starting line.

The same companies that looked good during last week's sell-off still look good today. The headlines changed, but the businesses didn't.

American Express is an advertising partner of Motley Fool Money. Anders Bylund has positions in Alphabet, Invesco S&P 500 Equal Weight ETF, Micron Technology, and Nvidia. The Motley Fool has positions in and recommends Alphabet, American Express, Caterpillar, Chevron, Goldman Sachs Group, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy.