U.S. stocks closed slightly higher on Monday, with the S&P 500 extending its gains from the previous week. Market participants continued to focus on developments in the Middle East. Reports indicated that Iran and the United States are exploring a ceasefire, though former President Donald Trump stated that Iran could be eliminated by Tuesday, and the U.S. Defense Secretary previewed a large-scale strike against Iran.
The Dow Jones Industrial Average rose by 165.21 points, or 0.36%, to close at 46,669.88. The Nasdaq Composite gained 117.16 points, or 0.54%, finishing at 21,996.34. The S&P 500 increased by 29.33 points, or 0.45%, settling at 6,612.02.
Reports suggest that the U.S., Iran, and regional mediators are discussing terms for a potential 45-day ceasefire agreement that could ultimately end the war. However, the likelihood of reaching a partial agreement before Tuesday's deadline is considered low.
Mediators from Pakistan, Egypt, and Turkey have reportedly proposed a 45-day ceasefire between the U.S. and Iran. On Monday, Donald Trump stated that the proposal was insufficient but acknowledged it as a significant step. He mentioned that negotiations are ongoing and indicated that the outcome remains to be seen.
An official previously indicated that the proposal had not been approved and was merely one of several ideas under consideration. The proposal was first reported by Axios.
Additional reports suggested that Iran and the U.S. have received a plan to end hostilities. If an agreement is reached, an immediate ceasefire would be implemented, and the Strait of Hormuz would be reopened. An anonymous source indicated that this framework agreement, proposed by Pakistan, could take effect as early as Monday.
However, Donald Trump told reporters on Monday that Iran could be eliminated overnight, potentially as soon as Tuesday night. He warned Tehran that it must reach a deal by Tuesday evening or face consequences. He stated that the entire country could be wiped out swiftly.
The U.S. Defense Secretary stated during a briefing that the largest strike since the initiation of action against Iran would commence on Monday, with a warning that Tuesday's strikes would be even more significant.
A deadline has been set for Iran to reopen the Strait of Hormuz by Tuesday; failure to comply would result in strikes targeting its power plants and bridges. In a social media post on Sunday, a warning was issued that Iran would "live in hell" if it did not open the strait.
A subsequent post referenced "8 p.m. Eastern Time on Tuesday!" without further elaboration.
Iran has effectively kept the strait closed through attacks on oil tankers. This maritime route connects the Persian Gulf with global markets. Before the conflict, approximately 20% of global oil supplies transited through this strait.
The closure has triggered the largest disruption to oil supplies in history. Since the war began, prices for crude oil, jet fuel, diesel, and gasoline have surged significantly.
It was previously stated that the war is expected to last two to three weeks.
According to TD Securities, nearly one billion barrels of oil could be lost by the end of the month, including up to 600 million barrels of crude and approximately 350 million barrels of refined products.
U.S. stocks performed strongly last week. The S&P 500 rose 3.4%, ending a five-week losing streak and posting its best weekly performance since late November. The Dow and Nasdaq also ended their respective five-week declines, with the Dow up 3% and the Nasdaq gaining 4.4% for the week.
These gains were hard-won. Major indexes experienced significant volatility last week as traders assessed the latest developments in the U.S.-Iran conflict and tried to gauge when it might conclude.
A warning was issued on Sunday that if the Strait of Hormuz was not reopened by Tuesday, the U.S. would strike Iranian power plants and bridges. Later on Monday, a statement was made expressing a desire to seize Iran's oil but indicating no further action would be taken beyond that.
Oil prices experienced sharp swings in volatile trading at the start of the week. The U.S. West Texas Intermediate crude contract for May delivery was last up 1%, trading above $112 per barrel. The international benchmark Brent crude also rose 1%, trading above $109 per barrel.
Michael Rosen, Chief Investment Officer at Angeles Investments, commented, "The market may be underestimating the level of disruption to the world economy. I believe the immediate and medium-term impacts of the energy disruption are potentially underestimated by the market, suggesting that energy prices could remain elevated for a longer period."
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