US stocks rallied sharply on Wednesday as investors reacted positively to signs that tensions between the United States and Iran could be easing, boosting hopes for a potential agreement that may bring an end to the conflict.

The benchmark S&P 500 climbed 1.46% to finish at a fresh record close above 7,300, while the Nasdaq Composite surged 2.02% to another all-time high. The Dow Jones Industrial Average also posted strong gains, jumping more than 600 points as risk sentiment returned across global markets.

Investor optimism grew after reports suggested Washington and Tehran were moving closer toward a possible deal that could help de-escalate the ongoing conflict. According to sources cited by Axios, discussions between both sides have included a potential halt to Iran’s nuclear enrichment activities. Iranian officials later confirmed that Tehran was reviewing a proposal from the US aimed at reaching a resolution.

However, uncertainty remained after US President Donald Trump cautioned that an agreement was far from guaranteed. In a post on Truth Social, Trump warned that military action could resume if negotiations fail, causing stocks to pull back slightly from session highs.

Despite the caution, markets largely focused on the possibility that tensions in the Middle East may gradually ease. Traders also reacted to Trump’s decision to pause “Project Freedom,” a US initiative designed to escort ships through the Strait of Hormuz, citing progress in negotiations as the reason behind the move.

Oil prices dropped sharply as fears of major supply disruptions began to fade. US crude futures fell more than 7% to settle near $95 per barrel, while Brent crude also recorded steep losses, ending just above $101. The decline reflected expectations that shipping routes and energy exports in the region could stabilize if diplomacy continues to advance.

Analysts said improving geopolitical conditions could help reduce economic pressure on regions heavily affected by higher energy prices, particularly Europe and parts of Asia. Lower oil prices also helped improve sentiment toward equities, especially growth and technology stocks.

The technology sector led the rally, with chipmakers posting some of the strongest gains of the day. Advanced Micro Devices (AMD) surged nearly 19% after delivering stronger-than-expected earnings results and issuing upbeat guidance for the second quarter. The company’s outlook lifted broader semiconductor sentiment, sending the VanEck Semiconductor ETF (SMH) sharply higher.

Meanwhile, Intel Corporation (INTC) also advanced as investors rotated back into chip-related names amid renewed optimism surrounding AI demand and the broader tech sector.

The latest gains add to the strong momentum already seen earlier this week, as investors continue to monitor geopolitical developments, corporate earnings, and expectations for global economic stability.

Disclaimer: The information contained herein (1) is proprietary to BCR and/or its content providers; (2) may not be copied or distributed; (3) is not warranted to be accurate, complete or timely; and, (4) does not constitute advice or a recommendation by BCR or its content providers in respect of the investment in financial instruments. Neither BCR or its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.