Quick overview

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Investors remain hopeful that recent U.S. strikes in the Middle East will not derail ongoing negotiations with Iran.

Wall Street posted a strong rally on Tuesday, with the S&P 500 and Nasdaq Composite both reaching all-time highs, although the session ended mixed. Gains were driven by a surge in semiconductor stocks, led by Micron Technology, which crossed a $1 trillion market capitalization for the first time.

Initial optimism was fueled by weekend reports suggesting that Washington and Tehran were moving closer to a peace agreement. However, renewed U.S. military activity in the region complicated the diplomatic outlook.

The Dow Jones Industrial Average fell 0.23% to 50,461.68 points, while the S&P 500 rose 0.62% to 7,519.47 points and the Nasdaq Composite gained 1.19% to 26,656.18 points.

U.S. says strikes were “defensive”

Expectations of a potential breakthrough in the nearly three-month conflict in the Middle East increased after U.S. President Donald Trump said over the weekend that a memorandum of understanding on a peace deal with Iran had been “largely negotiated” following talks with regional leaders.

Sentiment, however, weakened after the U.S. military reported what it described as “defensive” strikes in southern Iran, sinking two Islamic Revolutionary Guard Corps vessels allegedly laying mines in the Strait of Hormuz. The attacks triggered Iranian retaliation, including missile fire toward U.S. aircraft. Subsequent strikes reportedly targeted missile launchers near Bandar Abbas, according to The Wall Street Journal citing a U.S. official.

U.S. Secretary of State Marco Rubio said negotiations with Iran could take “a few more days,” adding that the Strait of Hormuz would remain closed, but would eventually reopen “one way or another.”

Oil, bonds, and inflation in focus

Brent crude futures rose 4.3% to $97.42 per barrel, recovering after briefly falling below $100 in the previous session but remaining well above pre-conflict levels. The U.S. dollar edged higher, while gold prices declined.

Bond markets remained in focus following a global selloff driven by rising inflation expectations linked to higher energy prices. The pressure on fixed income eased toward the end of last week and extended into Tuesday.

U.S. Treasury yields fell broadly, with the benchmark 10-year yield dropping 7 basis points to 4.506%. Markets now await Thursday’s release of the core Personal Consumption Expenditures (PCE) index, the Federal Reserve’s preferred inflation gauge.

AI and chip rally drives market strength

The strong rally in artificial intelligence-related stocks has helped Wall Street withstand geopolitical volatility and push to record levels. The Philadelphia Semiconductor Index, a key gauge of chip stocks, also hit an all-time high in April and extended its winning streak, marking its longest run of consecutive gains on record.

Micron Technology was the standout performer of the session, surging 20% and pushing its valuation above $1 trillion for the first time.