Stock Markets Surge as Initial Iran Deal Lifts Global Tensions

Wall Street rallied on Monday, with investors digesting the news of a preliminary peace agreement between the US and Iran.

The Dow Jones Industrial Average (DJINDICES: ^DJI) rose 1.4% before 1 p.m. ET, hitting a new all-time intraday high. The S&P 500 (SNPINDEX: ^GSPC) climbed 1.9%, while the Nasdaq Composite (NASDAQINDEX: ^IXIC) led with a 3% gain. Meanwhile, oil prices fell sharply, and the US Oil Fund (NYSEMKT: USO) dropped 4.5%.

The agreement, announced late Sunday, would extend the US-Iran ceasefire for 60 days, laying the groundwork for final negotiations on Tehran's nuclear program. If all goes as planned, the initial deal is set to be signed on Friday in Geneva, marking a significant step towards ending the conflict.

Caterpillar (NYSE: CAT) led the Dow with a 2.3% gain, contributing 131 points to the index. The construction equipment giant's stock fell 5.9% last Wednesday on geopolitical uncertainty and inflation fears. Today's rally erased about half of that dramatic loss, driven by a reversal of the same factors.

The usual Dow heavyweights played their part in the index boost, but the rally was largely driven by a geopolitical upswing. Financial titans Goldman Sachs (NYSE: GS) and American Express (NYSE: AXP) added gains of 1.5% and 3.6%, respectively, largely based on positive market sentiment.

On the S&P 500 and Nasdaq Composite, tech giants took the lead. Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), Nvidia (NASDAQ: NVDA), and Micron Technology (NASDAQ: MU) contributed significantly to the rally, adding over $300 billion in market cap.

The Invesco S&P 500 Equal Weighted ETF (NYSEMKT: RSP) rose just 1% compared to 1.9% for cap-weighted versions of the S&P 500 index. This indicates that the rally is concentrated among a select few companies, leaving many others behind.

SpaceX, the newly listed stock, saw its market cap increase by $239 billion, driven by Elon Musk's ambitious projections for the company's future growth. SpaceX is up 10.3%, boosting the Nasdaq Composite's fires.

Lower oil prices eased inflation pressures, potentially reducing the need for further Federal Reserve rate hikes. The central bank meets this week; there's a 98% chance it does nothing, per CME FedWatch.

Chevron (NYSE: CVX) was the Dow's largest loser, falling 3.5% as cheaper oil reduced the appeal of the energy sector.

Before celebrating, it's essential to note that the deal text hasn't been released, Israel isn't involved in the upcoming talks, and "preliminary" is doing a lot of work in today's headlines. Friday's signing in Geneva marks the starting line, not the finish line.

The businesses that looked solid during last week's sell-off still appear promising today. The headlines changed, but the fundamentals remain the same.

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Dow Jones Hits Record, Nasdaq Jumps 3% as Iran Deal Lifts Markets was originally published by The Motley Fool.