S&P 500 Reverses 2026 Loss Amid Optimism Over Iran Nuclear Deal Provisions

Market Rally Continues Amid Ongoing Iran Conflict

Stocks closed at session highs on Monday, marking a return to the green for 2026, as President Donald Trump's comments on Iran's desire to make a deal following a deadlock in peace talks and a US blockade of the Strait of Hormuz sparked a rally. Meanwhile, Goldman Sachs Group Inc. shares dropped in an underwhelming start to the earnings season.

The S&P 500 rose 1% to its highest level since late February, while Brent crude was up 3% at around $98 a barrel, paring earlier gains. Goldman Sachs Group Inc. retreated 1.9% as a revenue miss in fixed-income, currency, and commodities outweighed a record haul from equities.

Equities Extend Rally Amid Ongoing Tensions

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Equities extended their rally after Trump said Iran reached out to his administration over peace negotiations even as the US began a naval blockade of the Strait of Hormuz in the war's seventh week. The oil retracement, in combination with bearish positioning, has fueled the equity rebound.

Investors are eager to hear from executives about risks stemming from the war, the disruptive impact of artificial intelligence, and worries over private credit as earnings season begins. Analysts project S&P 500 earnings will show roughly 12% annual growth for the first quarter.

Earnings Season Outlook

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The question is whether this upcoming earnings season can be enough of a catalyst to dismantle the close link between stocks and oil, as corporate earnings are what traditionally drive stock prices. For Morgan Stanley strategist Mike Wilson, a strong earnings backdrop is protecting the S&P 500 from deeper losses, and he recommends that investors stand ready to add risk even if the Iran conflict continues.

Bond Market Focus Shifts Back to Inflation

The latest spike in crude, coupled with the marked rise in March US consumer prices, is shifting the bond market's focus back to inflation. Japan's 10-year yield climbed to the highest level since 1997 earlier on Monday before paring the move. In the US, money markets pointed to less than a one-in-five chance of a rate cut by December.

"Time is playing against markets as each day that goes by with oil prices this high weighs on global growth and pushes inflation," said Gilles Guibout, head of European equities at BNP Paribas Asset Management. "It's difficult to see how markets could stage a sustainable rebound without a sustainable solution to this crisis."