Quick overview

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U.S. equities closed higher on Tuesday, with both the S&P 500 and the Nasdaq Composite reaching new all-time highs. Gains in materials and technology stocks, combined with a strong corporate earnings season, helped restore investor optimism following renewed tensions with Iran.

The Dow Jones Industrial Average rose 0.73% to 49,298.34 points. The S&P 500 gained 0.81% to 7,259.23 points, while the Nasdaq Composite advanced 1.03% to 25,326.13 points.

U.S. Tries to Calm Middle East Tensions

Geopolitical developments in the Middle East escalated over the weekend and into Monday, after President Donald Trump announced a U.S. initiative dubbed “Operation Freedom Project” aimed at reopening disrupted maritime traffic through the Strait of Hormuz.

Iran responded with missile launches targeting U.S. destroyers near the strait, claiming it had struck one of them. The U.S. Central Command denied the report, stating that no vessels were hit and that two American merchant ships successfully transited the passage.

The United Arab Emirates later reported intercepting missile and drone attacks allegedly launched from Iran, with explosions causing a fire in the Fujairah Oil Industrial Zone—an important regional hub for crude storage and trade.

On Tuesday, Washington sought to ease concerns. Secretary of Defense Pete Hegseth said the initiative was “defensive in nature, limited in scope, and temporary,” aimed solely at ensuring safe passage for commercial shipping.

President Trump, meanwhile, downplayed the escalation but warned that Iran “knows what to do—and what not to do,” adding that Tehran is interested in reaching an agreement.

In a separate interview, Trump suggested the conflict could continue for up to three more weeks, despite claiming the U.S. had already prevailed.

Iran Signals Openness as Oil Pulls Back

Sentiment improved further after Iranian Foreign Minister Abbas Araghchi struck a more conciliatory tone, stating that developments in Hormuz demonstrate “there is no military solution to a political crisis.”

He added that ongoing diplomatic discussions—facilitated in part by Pakistan—are progressing, urging the U.S. and regional partners to avoid further escalation.

Oil prices retreated sharply after the previous session’s gains, as easing geopolitical fears weighed on the market. July Brent crude fell 3.4% to $110.60 per barrel, while June West Texas Intermediate (WTI) dropped 3.9% to $102.28 per barrel.

Labor Market Shows Mixed Signals Ahead of Jobs Report

Beyond geopolitics, investors also digested fresh U.S. labor market data ahead of Friday’s closely watched nonfarm payrolls report.

The Job Openings and Labor Turnover Survey (JOLTS) showed 6.866 million job openings in March, slightly above expectations of 6.85 million but down from 6.922 million in February. Hiring, however, rose to 5.554 million, pushing the hiring rate up to 3.5%.

Meanwhile, the Institute for Supply Management (ISM) reported that U.S. services sector activity expanded in April, with its headline index at 53.6—just below both consensus estimates (53.7) and March’s reading of 54.0.

Notably, the ISM price index for services inputs remained unchanged at 70.7 in April, coming in well below expectations for a sharper increase amid rising oil prices.