The S&P 500 and Dow Jones Industrial Average closed at fresh records on Tuesday, while Brent crude tumbled below $80 a barrel, after US Treasury Secretary Scott Bessent said a deal to reopen the Strait of Hormuz could be reached within two days. The S&P 500 gained 1.79% to 7,736.52, the Dow added 1.71% to 54,085.94, and the Nasdaq Composite surged 2.59% to 26,584.99, extending a rally that has now run for four sessions. Oil’s 4.9% drop to $79.64 reflected a rapid repricing of geopolitical risk, pulling the 10-year Treasury yield down to 4.63% from 4.70% a day earlier.

The advance was also powered by a series of forecast-beating corporate results, particularly from firms tied to artificial-intelligence spending. Palantir Technologies jumped nearly 30% after reporting a 93% leap in overall revenue and raising its full-year forecast; chief executive Alex Karp called the quarter “otherworldly.” Heavy-equipment maker Caterpillar, seen as a bellwether for global industry, rose about 6% after posting its first quarter with more than $20bn in sales and revenue, partly driven by orders for turbines to power AI data centres. The earnings season has been unusually strong: of the 304 S&P 500 companies that had reported by Friday, 85.2% exceeded estimates, well above the long-term average of 67.5%.

Viewed from trading floors in New York, the twin drivers of cheaper energy and robust profits eased immediate fears of stagflation, though analysts cautioned that the Hormuz opening remains uncertain. “The market is now trying to price a more nuanced geopolitical path: lower risk of immediate military escalation, but no guarantee yet that the Strait of Hormuz returns to normal functioning,” said Patrick Munnelly, market strategist at Tickmill Group. Jack Ablin of Cresset Capital Management noted that “I’m not sure a handful of earnings reports justifies new records in the S&P.” The fragility of the situation was underlined by reports that one crew member was missing after a merchant ship was hit by a projectile in the strait.

Investors now turn to after-hours earnings from SpaceX and Advanced Micro Devices, which could revive the volatility that battered chip stocks in July. Later this week, the US government’s monthly payrolls data will offer a clearer read on labour-market resilience, while traders assign a 63.4% probability to a Federal Reserve rate hike of at least 25 basis points at its next meeting.