Chip stocks surge in volatile AI-driven session
US stocks surged to their strongest single-day performance in two months Thursday after president Donald Trump said he had called off planned strikes against Iran and signalled a peace agreement was close, easing fears of oil supply disruptions that have rattled global markets for weeks.
The S&P 500 jumped 1.8%, rebounding from back-to-back losses that had pulled it back to levels last seen in early May, The Associated Press reported. The Dow Jones Industrial Average leapt 929 points, or 1.9%, and the Nasdaq composite rallied 2.5%.
All three indexes closed solidly higher. The S&P 500 gained 1.75% to settle at 7,394.30, the Nasdaq Composite added 2.54% to 25,809.66, and the Dow Jones Industrial Average rose 929.97 points, or 1.86%, to 50,848.75, CNBC reported.
Trump’s announcement
Stocks moved higher in midday trading after Trump posted on his social media network that “discussions with the Islamic Republic of Iran have been brought to the highest level of Iranian leadership and approved” and that the time and place of a signing will “be announced shortly.”
Trump later told reporters in the Oval Office that “we have a deal that Iran will never have a nuclear weapon,” adding, “We have a signing soon, and the documents are in pretty final shape. It should be done and it should be done pretty quickly.”
Oil prices ease
The prospect of a deal raised hopes that the Strait of Hormuz — a chokepoint for roughly a fifth of global crude flows — could reopen to tanker traffic. US benchmark crude fell 2.6% to US$87.71. Brent crude declined 2.9% to US$90.38, though it remained well above pre-conflict levels near US$70.
Bonds and the Fed
In the bond market, Treasury yields eased sharply as lower oil prices signalled reduced inflation pressure. The yield on the 10-year Treasury fell to 4.45% from 4.55% late Wednesday.
Following Trump’s announcement, traders scaled back expectations for a possible interest rate increase this year, according to CME Group data. A sustained drop in oil prices could allow the Federal Reserve to keep rates steady rather than tighten further amid elevated inflation and a solid US labour market.
The development comes ahead of the Fed’s first rate-setting meeting under new chair Kevin Warsh, appointed by Trump and confirmed in May. Warsh is set to chair his first policy meeting next week, with inflation at a three-year high and the administration pressing for lower borrowing costs. Market expectations overwhelmingly favour the Fed holding its benchmark rate at 3.5%–3.75%, unchanged since December.
ECB raises rates
Thursday’s session also coincided with a move by European policymakers. The European Central Bank raised its key interest rate by a quarter-point to 2.25% as the Iran conflict continued to pressure inflation higher.
The ECB Governing Council said the decision aimed to counter inflationary pressures linked to the US-Iran war, stating: “The war in the Middle East is generating inflation pressures, and the decision to raise rates is robust across a range of scenarios mapping out how the shock might evolve and affect the medium-term outlook for the euro area.”
The increase marked the ECB’s first hike in nearly three years, with its deposit facility rate last raised in September 2023 during the post-pandemic tightening cycle. The central bank also lifted inflation forecasts, expecting eurozone headline inflation to average 3% in 2026 before easing to 2.3% in 2027 and 2% in 2028, citing higher energy costs feeding into goods and services prices. Growth projections were lowered to 0.8% for the bloc this year.
AI stocks and chips
Technology shares tied to artificial intelligence showed broad but uneven strength, with gains concentrated in semiconductor names after several volatile sessions.
Chipmakers led the advance:
- Lam Research rose 12.7%
- KLA climbed 12.9%
- A semiconductor industry index gained nearly 8%, its strongest move in weeks
Individual AI-linked names were mixed:
- Marvell Technology advanced 11.1%, rebounding from a volatile stretch that included a 16.7% drop and multiple swings exceeding 5%
- Oracle fell 8.5% despite stronger-than-expected quarterly profit, after outlining plans to raise US$40 billion in new financing to support AI-related spending, following US$48 billion raised in the prior fiscal year
The divergence highlighted ongoing rotation within AI-related trades, as investors reassessed financing intensity and earnings durability across the sector.
Smaller stocks and global markets
The Russell 2000 index of small-cap stocks rose 3%, leading major benchmarks as smaller firms are more sensitive to interest rate expectations due to higher reliance on borrowing.
In overseas markets, European indexes rose modestly after a mixed session in Asia. London’s FTSE 100 added 0.5%, while Hong Kong’s Hang Seng fell 0.7%.
