U.S. stocks experienced a notable rally on Thursday, marking their best performance in two months. The S&P 500 increased by 1.8%, while the Dow Jones Industrial Average rose by 929 points, or 1.9%, and the Nasdaq composite climbed 2.5%. This surge followed President Donald Trump's announcement that discussions with Iran had reached the highest levels of leadership, raising expectations for a potential deal that could restore oil flow from the Persian Gulf.
Oil prices also fell, with benchmark U.S. crude decreasing by 2.6% to $87.71 per barrel and Brent crude dropping by 2.9% to $90.38. The recent conflict between the U.S. and Iran had raised concerns over the stability of oil supplies, particularly through the Strait of Hormuz.
In addition to the stock market gains, the European Central Bank raised interest rates in response to inflation driven by high oil prices. This decision could influence global economic conditions, as higher rates tend to slow economic growth. The volatility in the stock market has been particularly pronounced in technology sectors, with significant fluctuations observed in AI-related stocks.
Marvell Technology shares rose 11.1% after a period of extreme price changes. Other chip manufacturers, such as Lam Research and KLA, also saw substantial gains. Meanwhile, Oracle's stock fell 8.5% despite reporting stronger-than-expected profits, as the company indicated plans for significant borrowing to fund AI investments.
In the bond market, Treasury yields decreased, reflecting reduced inflationary pressures due to falling oil prices. The yield on the 10-year Treasury note dropped to 4.45%. A sustained decline in oil prices may influence the Federal Reserve's interest rate policies, potentially allowing for a pause in rate hikes this year. Smaller companies, represented by the Russell 2000 index, benefited the most from these market conditions, rising by 3%.
Internationally, European stock indexes showed modest gains following a mixed performance in Asian markets.