U.S. equities are surging for a second straight day as U.S. President Donald Trump announced a ceasefire between Iran and Israel, marking a significant de-escalation in a conflict that had gripped the Middle East for nearly two weeks.

The agreement, brokered with the assistance of Qatar, followed U.S. military involvement, including strikes on Iranian nuclear sites over the weekend. The moves come after Iran launched missiles at a U.S. military base in Qatar that did no damage and was communicated to the countries prior to the retaliatory strike.

Despite the positive market response, risks remain. Hours after the ceasefire took effect, Israel accused Iran of violating it with missile strikes, prompting Israeli Defense Minister to order new strikes on Tehran. Iran denied the allegations, but the incident raised doubts about the ceasefire’s durability.

Oil Futures (/CL), which had surged during the conflict, fell about 8% on Monday and are down another 3.5% today near $66 a barrel after the ceasefire was announced. Crude prices surged to the $78 a barrel level on Sunday evening after the U.S. strikes on Iran’s nuclear facilities before falling sharply on Monday.

The decline followed a restrained Iranian response to U.S. strikes, easing fears of disruptions in the oil-rich Middle East. The ceasefire reduced the risk of Iran closing the Strait of Hormuz, which could have pushed oil prices above $100 per barrel, according to Goldman Sachs (GS).

The ceasefire has also put pressure on ‘safe haven’ assets. Gold Futures (/GC) are down over 1.5% this morning near $3,335 and are at two-week lows. Bonds are also retreating, and the inverse yields are rising this morning.

Treasuries rallied on Monday as market uncertainty put a bid into the safety of Bonds. Those moves are reversing today with Bonds lower and the benchmark 10-Year Yield near 4.33%. The U.S. Dollar ($DXY) also reversed lower on Monday and are extending those losses today. The ‘Risk-On’ trade is in full force today as optimism for stocks remain.

With the ceasefire on the table, the benchmark S&P 500 (SPX) looks to open Tuesday’s session just 1% below its all-time high from February. What’s next for markets?

Valuations are still elevated for equities despite slowing growth, high interest rates, and geopolitical uncertainties. The ceasefire comes amid broader economic challenges, including Trump’s tariffs, which the Fed stated would lower growth to 1.4% this year from the previous 1.7% expected at March’s meeting. A stable Middle East reduces one source of uncertainty, but markets remain sensitive to trade policy developments.

Fed Chair Powell testifies to Congress over the next two days and the questioning may be a bit more contentious than previous testimony. Over the last few days, Fed Governor’s Waller and Bowman stated that a rate cut in July may be warranted. This goes against what the market is predicting and the comments that Fed Chair Powell gave last week that no rate cuts are warranted at this point. With stocks rallying to near all-time highs, investors should continue to expect added volatility as headwinds remain.

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