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Stock markets rallied worldwide Monday, and oil prices eased after the United States and Iran reached a tentative deal to extend their ceasefire and reopen the Strait of Hormuz to get the global flow of crude going again. The S&P 500 rose 1.7% on hopes that this time, the announcement of an Iran-U.S. agreement will mean a long-term fix to a conflict that has worsened inflation around the world. The Dow Jones Industrial Average climbed 468 points (0.9%) to a record, and the Nasdaq composite jumped 3.1%. Europe's central bank last week became the first major one in the world to raise interest rates because of the war with Iran. High interest rates can keep a lid on inflation, but they also slow economies and undercut prices for all kinds of investments, including stocks and cryptocurrencies. They hit investments seen as the most expensive in particular and some critics are calling the AI industry a bubble where investment inflated too far. The Fed will announce its latest decision on interest rates later this week, which will be the first under its new chair, Kevin Warsh. Traders see it as a near certainty that the Fed will leave its main interest rate steady after its two-day meeting ends Wednesday. Traders had been raising bets that the Fed may have to raise interest rates this year because of how much inflation has accelerated and how solid the U.S. job market remains. But the tentative deal between the United States and Iran means traders are now betting on only a 57% chance of a hike this year, down from 71% a week ago, according to data from CME Group. Oil prices fell 4.8% to $83.17 a barrel, back to early-March levels and well below the $100-plus seen weeks ago, though still above the pre-war price of roughly $70. The drop fueled hopes that households and businesses will see relief from elevated costs across food, fuel, and fertilizer tied to the Iran conflict. Iran confirmed the deal, but talks on issues like its nuclear program will continue for 60 days, leaving room for setbacks, and even a full reopening of the Strait of Hormuz would take months to fully restore energy supply. AI-related stocks also rallied, though they've been volatile in recent weeks, swinging from record highs to sharp declines and sometimes reversing course within hours. The concern is that AI mania may have driven these stocks up too far, too fast. Micron Technology rallied 10.8%, and Advanced Micro Devices rose 7%. Nvidia's climb of 3.5% was the strongest force pushing the S&P 500 upward because the AI chip company is Wall Street's most valuable company, giving it more weight on the index than any other. SpaceX, Elon Musk's rocket company that also owns the AI company xAI, rose 19.6% in its second day of trading on Wall Street. Roku fell 1.9% after the company announced that Fox Corp. is buying the streaming pioneer in a cash-and-stock deal valued at approximately $22 billion. In stock markets abroad, indexes climbed in Asia and Europe. Japan's Nikkei 225 leaped 5% for one of the world's biggest gains and finished at a record. South Korea's Kospi soared even more 5.2%, in part to continued rallies for AI winners like Samsung Electronics. In the bond market, Treasury yields eased on hopes that lower oil prices will remove pressure on central banks to raise interest rates. The yield on the 10-year Treasury slipped to 4.47% from 4.48% late Friday. Powered by Capital Market - Live News
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