US Stocks Gain Ahead of Sino-American Talks; Oil Prices Surge Amid US-Iran Diplomatic Impasse

U.S. Equities and Dollar Rise Amid Trump-Xi Meeting Expectations

U.S. equity indexes inched ahead to record closing highs on Monday, as investors awaited a meeting between U.S. President Donald Trump and Chinese President Xi Jinping. Meanwhile, the dollar edged higher as investors cautiously hoped for some progress toward peace in the Middle East, which is expected to be a key part of the agenda at Trump and Xi's first face-to-face talks in more than six months.

Market Reaction to Trump's Comments on Iran

Oil prices rallied after Trump said the U.S. ceasefire with Iran was "on life support," dismissing Tehran's response to a U.S. peace proposal as "stupid." His remarks stoked worries that the 10-week-old conflict will drag on, paralyzing shipping through the Strait of Hormuz. Iran's response had focused on ending the war on all fronts and demanded compensation for war damage, emphasized its sovereignty over the Strait of Hormuz, and called on the U.S. to end its naval blockade, guarantee no further attacks, lift sanctions, and remove a ban on Iranian oil sales.

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Global Market Reaction

On Wall Street, the S&P 500 rose 13.91 points, or 0.19%, to 7,412.84, and the Nasdaq Composite rose 27.05 points, or 0.10%, to 26,274.13, record closing highs for both. The Dow Jones Industrial Average rose 95.31 points, or 0.19%, to 49,704.47, still shy of its February 10 record close. MSCI's gauge of stocks across the globe rose 2.38 points, or 0.22%, to 1,108.01. The pan-European STOXX 600 index closed up 0.11%.

Currency Markets

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The dollar retreated from session highs after Trump's rebuff of Iran's response kept concerns about an extended war intact. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.05% to 97.96, with the euro down 0.06% at $1.1777. Against the Japanese yen, the dollar strengthened 0.37% to 157.23. Sterling weakened 0.16% to $1.361 as British Prime Minister Keir Starmer attempted to quell a rebellion within his ruling Labour party following a mauling in last week's local elections.

Energy and Treasury Markets

In energy markets, oil prices settled up nearly 3% after Trump's comments fueled supply fears as the Strait of Hormuz stayed largely closed with no clear end in sight for the war. U.S. crude settled up 2.78%, or $2.65 at $98.07 a barrel. Brent rose to $104.21 per barrel, up 2.88%, or $2.92 for the day. U.S. Treasury yields rose as rising oil prices stoked inflation worries. The yield on benchmark U.S. 10-year notes rose 4.6 basis points to 4.41%, from 4.364% late on Friday. The 30-year bond yield rose 3.6 basis points to 4.9835%.

Gold Prices

Gold prices reversed course to rise in volatile trading on Monday, as investors assessed developments in U.S.-Iran diplomacy and waited for key U.S. inflation data due later this week. Spot gold rose 0.44% to $4,735.39 an ounce. U.S. gold futures rose 0.15% to $4,727.70 an ounce.