The Dow surges 587 points, or 1.1 percent, on Monday as markets responded to news that President Donald Trump had called off planned military strikes against Iran, sending oil prices sharply lower on the first trading day of August.

The rally was broad. The S&P 500 also added 1.1 percent, while the Nasdaq Composite led with a 1.6 percent gain, driven by strength in communications services and software names. Meta climbed more than 6 percent on the session.

What Triggered the Move

Trump announced on Sunday that a planned attack on Iran had been cancelled, adding that negotiations between the two countries would resume on Monday.

The reversal caught markets by surprise. US media reports on Friday had indicated the president was preparing a fresh wave of strikes, as prospects for a negotiated settlement faded and energy prices climbed.

Oil Tumbles

Crude markets reacted immediately and dramatically.

Brent futures dropped close to 6 percent to trade at 83.03 dollars a barrel. West Texas Intermediate fell more than 7 percent to 78.59 dollars.

The scale of the decline reflects how much geopolitical risk premium had been priced into energy markets over the preceding days. Remove the threat of strikes in the region, and that premium disappears quickly.

Bond Yields Follow

Treasury yields eased as inflation concerns softened slightly. The benchmark 10-year yield fell 7 basis points to roughly 4.67 percent.

The logic is straightforward. Cheaper oil feeds through to lower transport and production costs, which reduces inflationary pressure across the economy.

A Note of Caution

Not everyone is convinced the relief will last.

Vital Knowledge founder Adam Crisafulli observed that investors are restraining their enthusiasm, noting that markets have been through similar episodes before and that the conflict likely has further to run before reaching any resolution, if one arrives at all.

That scepticism is reasonable. A cancelled strike is not a settlement, and talks resuming is not talks concluding.

Manufacturing Data Adds to the Good News

Monday also brought a genuinely strong economic reading.

The ISM Manufacturing PMI came in at 55.6, an increase of 2.3 points from June and the strongest reading since May 2022. Economists surveyed by Dow Jones had anticipated 54.0.

Since the index measures the proportion of firms reporting growth, anything above 50 signals expansion.

The details were encouraging across the board. New export orders and backlog orders each rose 4.5 points, reaching 53.0 and 55.0 respectively. Production jumped 6.3 points to 58.5.

Most notably, employment climbed 3.1 points to 52.8, the highest since August 2022 and the first expansionary reading in 33 months. After nearly three years of contraction, factory hiring has turned positive.

The prices index remained elevated at 71.1, though it eased 1.9 points from June.

Amazon Joins the Three Trillion Club

Amazon’s market capitalisation touched 3 trillion dollars for the first time on Monday.

Shares rose nearly 5 percent during the session, extending an extraordinary run. The stock surged 17 percent last week, its strongest weekly performance since 2015, following second-quarter earnings that beat expectations.

Global Markets

European equities pushed higher. The Stoxx 600 added 0.3 percent, with carmakers advancing almost 2.3 percent. Germany’s DAX led regional gains at 1.3 percent, while France’s CAC 40 rose close to 1 percent.

Asia-Pacific trading was mixed. South Korea’s Kospi fell more than 5 percent, surrendering part of the gains from Friday’s record-setting session. Japan’s Nikkei 225 slipped 0.94 percent and mainland China’s CSI 300 declined 0.98 percent. Australia’s S&P/ASX 200 closed 0.47 percent higher.

The Week Ahead: Jobs Data

Attention now turns to labour market figures, culminating in Friday’s nonfarm payrolls and unemployment release.

FactSet consensus estimates point to 87,500 jobs added in July, an improvement on the 57,000 recorded the previous month. The unemployment rate is expected to tick up to 4.3 percent from 4.2 percent.

SpaceX Faces Its First Earnings Test

Elsewhere, SpaceX has shed more than 500 billion dollars in market value since its IPO, setting a tense backdrop for its first earnings report on 4 August. Wall Street remains broadly constructive on the long-term story, with attention fixed on Starship.

Deutsche Bank held its buy rating and 255 dollar price target, implying 135 percent upside from Friday’s close of 108.37. Analyst Edison Yu expects revenue of 6.67 billion dollars and adjusted EBITDA of 2.16 billion, and anticipates focus on the timing of upcoming launches given the intention to attempt a second tower catch. The bank also flagged that a major government or sovereign AI deal would be received positively.

RBC maintained an outperform rating with a 225 dollar target, though analyst Ken Herbert cautioned that the lock-up expiration represents a material overhang, with technical factors and macro sentiment likely to persist as headwinds.

Bernstein rates the stock outperform with a 239 dollar target, implying 120 percent upside. Analyst Douglas Harned estimates staggered expirations could lift the free float to as much as 40 percent by December. His central concern is the path toward fully reusable Starship launches, which would underpin orbital data centre ambitions. Near-term numbers and Starlink performance are interesting, he noted, but they are not what ultimately delivers the value.

Susquehanna is more cautious, holding a neutral rating and 170 dollar target. Analyst Charles Minervino said investors need greater confidence in future estimates before the valuation can settle, and flagged the trajectory of launch services revenue, which came in at 330 million dollars in the first quarter of 2026 against 566 million a year earlier.