S&P 500, Dow hit records as Iran deal hopes send oil below $80

Stocks Hit Records as Iran Deal Hopes Send Oil Tumbling

US stocks returned to record territory on Tuesday, with the Dow Jones Industrial Average climbing roughly 900 points and the S&P 500 breaking to a fresh all-time high, as investors bet on a diplomatic breakthrough that could reopen the Strait of Hormuz.

Treasury Secretary Scott Bessent told CNBC that the US and Iran could reach a deal to reopen the vital shipping lane as soon as Tuesday or Wednesday, with the two countries moving “towards a more normalized position” amid the ongoing war. The comments triggered a fresh slide in crude prices: Brent fell another 5% to trade below the $80 mark, while West Texas Intermediate dropped about 5% to around $75 a barrel.

The Nasdaq 100 climbed nearly 3% by midday, powered by rebounding AI and chip stocks that had wobbled through a volatile July. Palantir jumped 27% after reporting commercial revenue that beat expectations, and Caterpillar — a supplier of data center equipment — rose 6% after topping earnings estimates. Amazon, which crossed the $3 trillion valuation mark for the first time this week, slipped 2%.

Investors are also bracing for SpaceX’s first-ever earnings report after Tuesday’s closing bell. The space exploration firm was not profitable last year, and its first wave of insider shares is set to unlock on Thursday, leaving room for choppy trading in the days ahead.

What a Hormuz Deal and the AI Rotation Mean for the Rally

Why a Strait of Hormuz deal moves the whole market

The shipping lane matters far beyond energy prices: roughly a fifth of the world’s oil passes through the Strait of Hormuz, so even the prospect of reopening it removes a significant geopolitical risk premium that had been built into crude. That is a double tailwind for markets — cheaper fuel acts like a tax cut for consumers and manufacturers, while de-escalation encourages risk-taking across equities.

The catch is timing. Bessent’s Tuesday or Wednesday window is a negotiating signal, not a signed agreement. If talks slip, oil’s slide could reverse just as quickly as it started.

The AI trade is rebalancing, not collapsing

July’s rotation out of mega-cap tech looked like the end of the AI trade. Tuesday’s session suggests the opposite: money is flowing back in, but with more discrimination. Palantir’s 27% surge on “otherworldly” commercial revenue and Caterpillar’s 6% gain show investors are rewarding companies where AI investment is showing up in revenue rather than just in spending plans.

Bret Kenwell, a US investment analyst at eToro, frames it as a “long-overdue rebalancing”: with valuations compressed, sentiment bruised and massive AI investments beginning to translate into tangible growth, Wall Street may be rethinking its retreat from mega-cap tech. Amazon’s 2% dip even as it reached its first $3 trillion valuation is a reminder that the trade is now selective, not automatic.

Breadth and SpaceX: what could break the rally

Record highs built on a handful of names are fragile. Piper Sandler strategists caution that “supportive evidence of improving market breadth is needed for short-term momentum to become a sustainable uptrend” — in plain terms, more stocks need to participate before the rally earns its keep.

SpaceX adds a company-specific wildcard. Its first earnings report lands after the bell, followed by the unlocking of insider shares on Thursday, which can add supply and volatility. For a firm that was unprofitable last year, the combination makes this a potentially turbulent week for sentiment around the new highs.

What to Watch After Tuesday's Record Run

• Track whether the US-Iran deal actually closes this week: a signed agreement would likely keep Brent below $80, while a breakdown could snap oil back above it within a session or two.
• Read the AI rotation signals from Palantir and Caterpillar: both suggest capital is flowing toward companies converting AI spending into revenue, a useful gauge of which names fund managers favor next.
• Take Piper Sandler’s breadth warning seriously: if record highs are not accompanied by broader participation across the market, treat the momentum as short-term rather than a durable trend.
• Expect elevated volatility around SpaceX: the company’s first earnings report on Tuesday evening and the insider share unlock on Thursday could move sentiment in tech and related sectors.
• For businesses with meaningful fuel or shipping costs, Tuesday’s oil slide is a near-term tailwind — but only for as long as the diplomatic optimism holds.