Stocks are poised for a significant upswing as the trading week begins, following President Trump’s decision to delay a deadline for Iran to reopen the Strait of Hormuz. This move comes amidst what Trump describes as “good and productive” discussions with Tehran.

Futures for the S&P 500 and the Dow Jones Industrial Average indicated a 1.6% increase for Monday’s market opening. Prior to Trump’s announcement on social media, projections had suggested nearly a 1% downturn.

In response, oil prices saw an immediate decline, with Brent crude and West Texas Intermediate—both key benchmarks—dropping by 6.2%.

Initially, Trump had set a Monday night deadline, demanding that Iran resume ship traffic through the Strait of Hormuz, a critical channel for approximately 20% of global oil supply. He had warned of severe consequences, including the potential destruction of Iran’s energy facilities, should they not comply. In retaliation, Iran had threatened to target U.S. and Israeli energy and infrastructure in the area.

On Monday morning, Trump announced a five-day pause on action against Iranian energy infrastructure, which has eased fears among investors about a potential escalation into war, exacerbating the current oil crisis.

“The global economy was teetering on the edge of a precipice the likes of which Trump had never encountered during either of his two terms (worse than COVID and worse than tariffs), and his instinct for self-preservation is too great to deliberately drive off the cliff,” noted Adam Crisafulli, a Wall Street analyst and head of Vital Knowledge, in a research note to investors.

Even with the decline in oil prices, crude is trading about 45% higher than it was before the start of the Iran war in late February. Americans are paying an average of $3.96 for a gallon of gasoline, up more than $1 per gallon from one month ago, according to AAA.

The economic fallout is likely to linger even if fighting ends today, Crisafulli said. “But at least now there is a line of sight toward resolution,” he said.