U.S. stock index futures rose sharply early Monday after Washington and Tehran confirmed they had reached a preliminary peace deal to end their war and reopen key shipping lanes in the Middle East. 

S&P 500 Futures jumped by 89 points, or 1.2%, by 05:56 ET (09:56 GMT). Nasdaq 100 Futures surged 582 points, or 2%, while Dow Jones Futures 418 points, or 0.8%.

Wall Street was set for a strong open on Monday after positive, tech-fueled rallies in European and Asian markets. 

The main averages advanced to finish the prior week, buoyed by the hopes of an imminent agreement between Washington and Tehran as well as a spike in shares of SpaceX after their record-setting public debut. Even as some analysts highlighted worries around SpaceX’s fundamentals, the stock jumped above its IPO price of $135 a share, giving Elon Musk’s reusable rocket group a value of more than $2 trillion and making it one of the largest publicly listed U.S. firms.

Other space-industry names, such as Rocket Lab and Planet Labs, rallied in the wake of the flotation.

U.S.-Iran peace deal confirmed, to be signed on Friday 

The U.S. and Iran have reached an interim peace deal which would end a war that has dragged on for more than three months, threatening the global economy in the process.

A memorandum of understanding is due to be signed in Switzerland on Friday, according to Pakistan, which has served as a frequent mediator during the conflict.

Pakistani Prime Minister Shehbaz Sharif said the two nations have "declared the immediate and permanent termination of military operations on all fronts." That includes Lebanon, Sharif said. Concerns had surrounded the outlook for the deal after U.S.-allied Israel carried out attacks on Iran-backed Hezbollah militia in Lebanon over the weekend, leading to a stern rebuke of Israeli Prime Minister Benjamin Netanyahu by President Donald Trump.

Neither the U.S. nor Iran has offered specific details, while Tehran has indicated that the deal will not be implemented until it is signed.

Trump said that the agreement would halt hostilities and unblock the Strait of Hormuz, a vital waterway off Iran’s southern coast through which roughly a fifth of the world’s oil flowed prior to the outbreak of the war in late February. 

In a social media post, Trump claimed the strait would be reopened on Friday, saying the delay was due to mine-clearing operations. He added that a longstanding American naval blockade of Iranian ports would be lifted as well.

Brent crude futures, the global oil benchmark, fell in the wake of the announcement, easing some worries over a prolonged energy-induced inflation spike fueling a hawkist pivot by global central banks. Gold prices, which tend to perform better in low-rate environments gained, while the U.S. dollar weakened against a basket of currency peers. 

U.S. government bond yields, which typically move inversely to prices, dropped, further bolstering equities.  

Fed decision later this week 

Investors are now focused an upcoming two-day Federal Reserve policy meeting, which is due to conclude on Wednesday.

Bets have grown that the Fed will keep rates steady after the gathering, and possibly opt to lift borrowing costs later in 2026. Meanwhile, wagers at the beginning of the year that the Fed would roll out rate cuts in 2026 have been all but eliminated, especially after recent data points showed an acceleration in inflation.

"[I]t’s still very likely that the easing bias will be removed from the FOMC statement," analysts at Vital Knowledge said in a note, referring to the rate-setting Federal Open Market Committee.

But they argued that new Fed Chair Kevin Warsh, who is stuck between faster price growth and Trump’s insistence of aggressive rate cuts, "could put his thumb on the scale during the [post-decision] press conference and tip things in a dovish direction by reiterating" that several Fed members have indicated rate reductions would be warranted should the Iran conflict be resolved soon.