US Stocks Rally as Trump Pauses Military Strikes Against Iran

Wall Street spent July in a state of high anxiety, with the S&P 500 oscillating as the war with Iran drove oil prices upward. That volatility broke on Monday.

Trump’s Pause on Iran Strikes Triggers Oil Slide

The catalyst for the rally was a shift in geopolitical tension. President Donald Trump announced over the weekend that he would hold off on new military strikes against Iran, a move prompted by the urging of regional allies. This decision ended a 13-day bombing campaign to facilitate diplomatic negotiations.

Energy markets reacted instantly. The price of a barrel of Brent crude, which had careened between $72 and $102 last month, sank 4.7% to $83.77. Other reports placed the drop as high as 5.4%, with prices hitting $83.70 or $83.52 depending on the reporting window.

This price drop directly calmed fears that inflation would worsen, which in turn pushed Treasury yields lower. The yield on the 10-year Treasury fell to 4.68% from 4.75% late Friday. While this is a relief for borrowers and households facing record-high long-term mortgage rates, the yield remains significantly higher than the 3.97% level seen before the war with Iran began.

Corporate Earnings and the 737 MAX-7 Certification

Beyond oil, specific corporate wins provided a floor for the market. Boeing shares jumped 8% after U.S. regulators certified its 737 MAX-7 planes for commercial service. This follows years of efforts to improve pilot warnings and information systems.

Tyson Foods also beat expectations, reporting a stronger-than-anticipated profit for the spring. CEO Donnie King attributed this to continued strength in prepared foods and the company’s chicken business, including brands like Hillshire Farm and Jimmy Dean.

Tyson is part of a broader trend of corporate resilience. According to FactSet, companies in the S&P 500 are on track to deliver earnings per share for the spring that are 47% higher than a year ago. If this holds, it will mark the strongest growth since the spring of 2021. This earnings strength is bolstered by U.S. manufacturing growth, which accelerated to its strongest level since 2022.

The AI Volatility: Meta, Nvidia, and Micron

While the broader market climbed, the artificial intelligence sector remained a source of friction. Investors are increasingly questioning whether the massive spending on data centers will actually generate sustainable profits. This uncertainty caused computer chip stocks to veer wildly throughout the day.

Meta Platforms jumped 2.3% following reports that the company plans to shrink its workforce by at least 20%. This move is intended to offset the high costs of AI infrastructure and lean into the efficiency of AI-assisted workers. Nvidia also ended the day 1.6% higher.

Micron Technology served as the day’s primary example of AI-driven instability.

Global Echoes in South Korea and Japan

The “manic swings” of AI stocks were most visible in Seoul. South Korea’s Kospi index, which is heavily weighted toward Samsung Electronics and SK Hynix, fell 5.1% on Monday. This followed a historic 17.9% surge on Friday, the best single day in the index’s history.

In Japan, the Nikkei 225 fell 0.9%. This decline followed a coordinated effort between the U.S. and Japan to prop up the value of the Japanese yen against the dollar. While a stronger yen is intended to curb inflation in Japan, it creates a headwind for the country’s exporters.

Critical Watchpoints: The Fed and Big Tech

The market’s current optimism faces a gauntlet of events this week. Investors are now shifting their focus toward the Federal Reserve’s two-day policy meeting, which concludes Wednesday. While rates are expected to remain unchanged, the market is hunting for signals from Fed Chair Kevin Warsh regarding future rate cuts and the inflation outlook.

Finally, the release of second-quarter U.S. GDP figures and the Personal Consumption Expenditures (PCE) Price Index—the Fed’s preferred inflation metric—will determine if the relief felt on Monday is a temporary bounce or a sustainable trend.