Wall Street on Monday reversed course to trade slightly higher, but moves remained small after a fresh diplomatic setback between Washington and Tehran. Investors were also cautious as they geared up for U.S. inflation data later this week that could show a big impact from surging oil prices due to the war.
At 11:03 ET (15:03 GMT), the benchmark S&P 500 index was up 0.3% to 7,417.74 points, while the tech-heavy NASDAQ Composite climbed 0.2% to 26,290.04 points. Both gauges hit a record high. The blue-chip Dow Jones Industrial Average was just above the flat line at 49,624.68 points.
Over the weekend, Iran’s state media said Tehran had formally responded to a U.S. plan to end their more than two-month old conflict. The response called for an end to fighting on all fronts, recognition of Iran’s sovereignty over the critical Strait of Hormuz, and U.S. compensation for war damages.
President Donald Trump weighed in on Iran’s response within hours, writing on social media: "I don’t like it — TOTALLY UNACCEPTABLE." No further details were provided by the president.
An Iranian spokesperson waved away Trump’s seeming rejection, declaring that Tehran was not seeking to secure the "satisfaction of others" and was concerned mainly with "national interests and legitimate rights," the Wall Street Journal reported.
Some of the major sticking points between the U.S. and Iran revolve around Tehran’s nuclear program and control over the Strait of Hormuz. The vital waterway for a fifth of the world’s oil and gas has been effectively shuttered since the end of February, leading to the biggest supply disruption in history.
An unverified headline on Monday also said that Iran had deployed deep roaming submarines in the strait, citing the Tasnim News Agency.
Trump told Fox News that he was considering restarting a U.S. effort called "Project Freedom" to safely help commercial ships transit the strait. The chokepoint has been blockaded by both the U.S. and Iran.
Oil prices ticked up after the latest diplomatic setback, with Brent crude futures expiring in July, the global oil benchmark, last up 2.6% to $103.88 a barrel. U.S. West Texas Intermediate crude futures expiring in June gained 2.4% to $97.70 a barrel.
Eyes will also be on Trump’s trip to China this week, after the Chinese Embassy in the U.S. confirmed that the president would be traveling to the Asian nation at the invitation of leader Xi Jinping from Wednesday to Friday. China has reportedly continued to buy Iranian oil during the ongoing conflict, while also providing diplomatic support, irking the U.S.
Focus on U.S. inflation data
Away from the Middle East, traders were also gearing up for key U.S. inflation data, with the April consumer price index (CPI) and producer price index (PPI) reports scheduled for Tuesday and Wednesday, respectively.
Spiking oil prices due to the Iran war have led to soaring gasoline prices at U.S. pumps, while boosting headline CPI and PPI in March. Core prices, which strip away food and energy, have not seen much of an impact yet.
"The price of one- and two-year inflation swaps implies that investors are underpricing the risk of a second round of price increases linked to the supply shock that is working its way through the economy," Joseph Brusuelas, principal & chief economist at RSM US, said.
"With April’s consumer price index set to be released on Tuesday, one-year swaps were trading at 3.25% and two-year swaps at 2.93% on Friday—a level that we think is not fully pricing in the current geopolitical, economic and financial risks," he said.
"In our view, the buffers that have cushioned the global supply shock will be exhausted over the next three to four months," Brusuelas added.
The Federal Reserve and watchers of monetary policy will be paying close attention to the inflation data, especially after a solid April jobs report last week indicated that the labor market was not much of an issue right now.
Wall Street at record levels
Despite the lack of a resolution to the Middle East conflict, U.S. stocks have marched to record highs on the back of a six-week win streak, its longest such run since mid-October 2024. The rally has been led by a strong earnings season, a resurgence in the artificial intelligence trade, and hopes of a swift end to the war.
"The stock market’s rally is a classic capitulation-to-FOMO dynamic, where money that was quickly removed from markets over Iran fears and spiking oil is racing back in, pushing the S&P 500 to fresh record highs. The best part is that fundamentals are backing up this leg higher with stronger-than-expected earnings, big tech leadership, strong labor market data, and markets pricing in resolution, not crisis," Robert Edwards, chief investment officer at Edwards Asset Management, said.
"Our 2026 year-end target remains 7,700. The economy keeps surprising to the upside, a hot IPO calendar is coming, and nearly $8 trillion in money-market cash is poised to fuel higher highs. The path of least resistance is up, and I’d rather be explaining why I stayed invested than why I sat out," he said.
"It’s important for investors to stay invested and add to quality names on any pullbacks. Sitting on the sidelines while the S&P climbs toward 7,700 is a painful regret. Too much cash is on the sidelines, rates are heading lower, and a record IPO cycle is coming - the setup is too good to miss," Edwards added.
