Wall Street rallies, oil prices slide on renewed US-Iran dialogue hopes

Wall Street stock indexes climbed higher while oil prices fell and the dollar weakened on Tuesday as the United States signaled potential resumption of peace talks with Iran, despite ongoing port blockades. Major indices extended gains, with tech stocks leading the S&P 500 back to pre-conflict levels.

The Dow Jones Industrial Average rose 0.63% to 48,522.30, the S&P 500 advanced 1.11% to 6,962.85, and the Nasdaq Composite strengthened 1.84% to 23,611.10. "The shift in the U.S.-Iran conflict from missiles to words leaves markets hoping for a beginning to the end of the war," said Bob Savage, head of markets macro strategy at BNY.

U.S. President Donald Trump indicated talks could resume in Pakistan within two days after negotiations broke down over the weekend. Pakistani and Iranian officials confirmed discussions might restart, with the agenda including transit through the vital Strait of Hormuz, Iran's nuclear activities, and international sanctions.

Europe's STOXX 600 recovered ground, rising 0.99% on the day but remaining below its February 27 close, the day before U.S. and Israel launched strikes on Iran. Saxo's chief investment strategist Charu Chanana cautioned that markets were "trading hope, not resolution."

The International Monetary Fund cut its global growth outlook. Financial firms' earnings reports included $14 trillion asset manager BlackRock, which reported rising first-quarter profit that pushed its stock up 3.5%, reversing some of its losses so far this year. Citigroup beat first-quarter profit estimates and its shares rose more than 3%, while JPMorgan also beat expectations but its stock lost 0.6%.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, has fallen to within striking distance of its late February levels, sliding 0.26% on Tuesday to 98.09. The dollar's safe-haven status had been pushing the currency higher since hostilities began. It dropped as low as 97.978 earlier in the session, its weakest since the first trading day after the war began.

Inflation data from the U.S. Labor Department weighed further on the dollar, with the Producer Price Index (PPI) for final demand showing a 0.5% rise last month, below the 1.1% increase forecast in a Reuters poll of economists.

Oil prices fell as expectations for further dialogue to end the war outweighed concerns over supply disruptions. Brent dropped to $95.02 per barrel, down 4.37% on the day, while U.S. crude lost 7.27% to trade at $91.88 a barrel. Both benchmarks had been trading above $100 a barrel just a day earlier when the U.S. began a blockade of Iran's ports, angering Tehran and adding uncertainty about flows through the Strait of Hormuz.

A Bank of America survey of global fund managers conducted in the first week of April showed investors expect oil to be priced at $84 by the end of the year.

U.S. Treasury yields drifted lower, with the two-year yield last down 2.6 basis points at 3.755% and the benchmark 10-year yield 3.7 basis points lower at 4.26%. Two-year Treasury yields, which typically move in step with expectations for interest rate cuts from the Federal Reserve, are nevertheless nearly 40 basis points higher than their late February levels, as rising energy prices fuel inflation concerns.

Those concerns have prompted investors to prepare for the possibility that major central banks reverse their previously expected course toward cuts or pauses this year, and instead tilt toward hikes.