The Dow Jones Industrial Average surged almost 1,000 points in early trading on Monday after President Trump postponed an ultimatum for Iran to reopen the Strait of Hormuz, saying that the U.S. is engaged in “good and productive” negotiations with Tehran. 

The blue-chip index jumped 996 points, or 2.2%, to 46,573. Other indices also climbed, with the S&P 500 climbing 113 points, or 1.7% and the tech-heavy Nasdaq Composite index gaining 2%.

Before Mr. Trump announced the delay on social media, futures had pointed to an almost 1% decline in stocks. 

Oil price decline

Oil prices also immediately retreated, with Brent crude, the international benchmark, tumbling almost 10% and West Texas Intermediate, the U.S. benchmark, falling 9%.

Mr. Trump had earlier set a deadline of Monday night for Iran to reopen ship traffic in the Strait of Hormuz, which carries about 20% of the world’s oil supply, threatening to “obliterate” Iran’s power plants if it didn’t concede. Iran responded by threatening to attack U.S. and Israeli energy and infrastructure assets in the region.

On Monday morning, Mr. Trump said the U.S. would hold off on strikes against Iranian power plants and other energy infrastructure for five days. That is easing investor concerns that the Iran war could escalate, worsening the growing oil crisis.

“The global economy was teetering on the edge of a precipice the likes of which Trump had never encountered during either of his two terms (worse than COVID and worse than tariffs), and his instinct for self-preservation is too great to drive off the cliff deliberately,” Wall Street analyst Adam Crisafulli, head of Vital Knowledge, told investors in a research note. 

Status of talks unclear

However, the Iranian Foreign Ministry issued a statement that contradicted Mr. Trump’s post.

“We deny what US President Donald Trump said regarding negotiations taking place between the United States of America and the Islamic Republic of Iran,” the statement said.

Even with Monday’s decline in oil prices, crude is trading about 45% higher than it was before the start of the Iran war in late February. Americans are paying an average of $3.96 for a gallon of gasoline, up more than $1 per gallon from one month ago, according to AAA.

The economic fallout is likely to linger even if fighting ends today, Crisafulli said. “But at least now there is a line of sight toward resolution,” he said.

At the same time, investors will want to see tangible proof that there’s progress to maintain market gains, noted Chris Larkin, managing director of trading and investing at E*TRADE from Morgan Stanley, in an email.

“With stocks challenging the boundary between consolidation and a larger downturn, the market woke up to some potentially good news out of the Middle East on Monday,” he said. “But follow-through on any relief rally will likely require tangible follow-through on the geopolitical front.”