U.S. stock markets staged a robust rally on Monday, June 16, 2025, as investors breathed a sigh of relief amid signs that the escalating conflict between Israel and Iran might remain contained. The Dow Jones Industrial Average surged by 494 points, or 1.2%, recovering sharply from a steep sell-off the previous Friday. The S&P 500 climbed 1.2%, while the Nasdaq Composite led the gains with a 1.5% jump, signaling renewed optimism among traders.
Last week’s sell-off had rattled investors, with the Dow plunging 565 points on Friday, marking its worst one-day loss since May 21. The S&P 500 and Nasdaq Composite also closed lower, slipping 0.4% and 0.6%, respectively. For the year-to-date, the Dow still lingers slightly in the red, down 0.8%, while the S&P 500 and Nasdaq maintain modest gains of 1.6% and 0.5%, respectively.
Monday’s market rebound was fueled by reports suggesting a possible de-escalation in the Middle East conflict. According to NBC News, Iran reportedly reached out to several countries, including Saudi Arabia, to urge U.S. President Donald Trump to pressure Israel into an immediate ceasefire. This overture came in exchange for Iran’s flexibility on nuclear talks, offering a glimmer of hope that the conflict might not spiral into a larger regional war. As Krishna Guha, vice chairman at Evercore ISI, put it, “The market is taking comfort from the prospect that the conflict could stay in the limited war mode.” However, he cautioned that the conflict could last several weeks with elevated risks of escalation involving energy markets and potentially drawing in the U.S.
Oil prices, which had surged dramatically following Israel’s strike on Iran last Friday, also cooled on Monday. West Texas Intermediate (WTI) crude futures fell more than 1% to settle at $72.22 per barrel, down from a $77 peak in overnight trading. Brent crude similarly dropped nearly 1.4% to $73 per barrel. The easing in oil prices helped alleviate inflation concerns and restored some risk appetite among investors, particularly in high-growth technology stocks.
The conflict remains volatile, though. Iran has threatened to shut down the Strait of Hormuz, a critical chokepoint for global oil shipments, while Israel claimed to have achieved “aerial superiority” over Iranian airspace. Both moves, if pursued aggressively, could disrupt energy supplies and send prices soaring again. The attacks continued into a fourth day on Monday, with both sides targeting each other’s energy infrastructure, underscoring the fragility of the situation.
Despite these tensions, major U.S. tech stocks rallied. The so-called “Magnificent Seven” tech giants led the charge, with Tesla rising over 1% and Meta Platforms climbing nearly 3%, buoyed by news of upcoming ads on WhatsApp. Palantir, often seen as a beneficiary of geopolitical conflicts due to its data analytics services, gained nearly 3%. Chipmaker AMD surged nearly 6%, while Micron Technology and Adobe traded up about 3% each. Information technology and telecom sectors outperformed, while energy stocks declined amid falling oil prices.
Technically, the Nasdaq 100 index is showing promising signs. MarketPulse reports that the Nasdaq is consolidating near 1.5% below its all-time highs from January 2025, with a bullish engulfing daily candle indicating a recovery from last week’s correction. A rise beyond 22,074 points—the post-CPI high from June 11—would create a “Daily Golden Cross,” a bullish signal where the 50-day moving average crosses above the 200-day moving average. The index is closing in on the psychologically significant 22,000 level, less than 50 points away, suggesting momentum could carry it higher if conditions remain favorable.
Investors are also preparing for the Federal Reserve’s two-day policy meeting starting Tuesday, June 17, with a decision expected on Wednesday, June 18. Despite weak manufacturing survey data released Monday morning, Fed funds futures indicate a near 100% probability that the Fed will hold interest rates steady. President Donald Trump has publicly pressured Fed Chair Jerome Powell to cut rates, but the recent spike in oil prices and persistent inflationary pressures make a rate cut unlikely in the near term.
The yield on the 10-year U.S. Treasury bond edged up three basis points to 4.43% on Monday, while the U.S. dollar weakened against major currencies. The dollar index fell 0.4% to 97.80, with the euro and pound gaining 0.4% and 0.2%, respectively. Spot gold prices, often a safe haven in times of uncertainty, declined 0.5% to $1,415.86 an ounce as investors shifted back toward riskier assets.
Looking ahead, the market remains sensitive to developments in the Middle East. Any escalation or de-escalation in military actions, statements from U.S. officials or Iranian intermediaries, and movements in oil and gold prices will be closely watched. The Fed’s policy decision and updated economic projections will also be critical in shaping market momentum heading into the summer.
Monday’s broad market rally, with all major U.S. equity indices gaining over 1.2% and the Nasdaq leading the pack, reflects a cautious optimism that the Israel-Iran conflict could be contained without dragging the U.S. into a wider war. Still, as Guha warned, “we continue to anticipate the conflict will last for a few weeks in the base case and still see elevated risk of escalation.” Until more clarity emerges, investors will be balancing geopolitical risks with economic data and central bank signals in an environment marked by heightened volatility.
