US open: Stocks surge, oil drops on hopes of de-escalation in Middle East conflict

(Sharecast News) - US stock markets jumped around 2% on Monday morning after president Donald Trump signalled he had held "very good" talks with Iran, raising hopes for an end to the Middle East conflict and prompting a plunge in the price of oil.

Wall Street's three main benchmarks were on track for the highest closes since last Tuesday, with the Dow opening 2.0% higher, the S&P 500 rising 1.9% and the Nasdaq jumping 2.2%. Markets across Europe were also making hefty gains, erasing earlier losses.

"There has been an abrupt change in the direction of markets this afternoon, with President Donald Trump hailing progress in talks with the Iranians to end the conflict in the Middle East," said Kathleen Brooks, research director at XTB.

"Stocks are higher, oil has fallen back to $101 a barrel for Brent crude and bonds are also in recovery mode, as markets price out the prospect of near term escalation in the conflict and instead price in the prospect of peace."

European markets opened firmly lower early on amid concerns of a further escalation in the conflict after Trump warned on Saturday about further attacks to Iranian energy infrastructure if the Straits of Hormuz aren't reopened within 48 hours. Iran also threatened on Sunday to "irreversibly destroy" energy infrastructure across the Middle East.

However, the president said on Monday that the US was postponing "any and all" military strikes against Iranian energy infrastructure following "very good and productive conversations" about a resolution to the hostilities.

Writing on Truth Social, Trump said: "Based on the tenor and tone of these in depth, detailed and constructive conversations, which will continue throughout the week, I have instructed the department of war to postpone any and all military strikes against Iranian power plants and energy infrastructure for a five day period, subject to the success of the ongoing meetings and discussions."

Brent crude was down nearly 10% at $101.11 a barrel, while WTI crude was 9% lower at $89.36 a barrel.

However, reports across Iranian media have suggested that the country's foreign ministry are denying that any talks took place. The state-backed Fars news agency cited an unnamed Iranian security official who said Iran had had "no direct or indirect contact with the US".

In economic news, US construction spending fell 0.3% in January after increasing by 0.8% in December, coming in below the +0.1% consensus forecast, while the Chicago Fed National Activity Index came in at -0.11 in February, down from an 11-month high of +0.20 in January.

In equity news, travel stocks were making strong progress on hopes of lower fuel prices, with airlines American, JetBlue and Delta all up at least 5% and cruise operators Carnival and Norwegian rising nearly 10% apiece.

Banks were also performing well as the macro outlook improved, with Goldman Sachs, Morgan Stanley, Bank of America and JPMorgan Chase & Co all rising between 2-4%.