U.S. markets rebounded on Monday after an initial negative opening, erasing initial controlled losses with key Wall Street closing sharply higher as investors bet that the United States and Iran may eventually reach a deal despite disagreements expressed over the weekend after the failed talks.

In this climate, the Dow Jones turned positive after several hours in the red, rising 0.63% to 48,219 points, while the S&P 500 rose 1.02% to 6,886 points and the tech-heavy Nasdaq posted even stronger gains of 1.23% to 23,183 points.

Markets found support after U.S. President Donald Trump said that “the other side has communicated with us” and that he “strongly desires a deal.”

The developments came hours after the announcement of a naval blockade in the Strait of Hormuz, as US-Iran talks over the weekend collapsed without result. The blockade of maritime traffic to and from Iranian ports went into effect on Monday, with CENTCOM clarifying that ships bound for non-Iranian destinations would not be blocked.

The development came after the impasse in negotiations in Islamabad, which revived concerns of a prolonged conflict in the Middle East, with a direct impact on the oil prices initially soaring above $100 a barrel. Eventually, oil prices retreated from intraday highs, with US West Texas Intermediate crude closing at $99.08 a barrel and international Brent at $99.36.

Vice President J.D. Vance left Islamabad without a deal, citing Iran’s refusal to give up its pursuit of nuclear weapons development. However, the disagreements extend beyond that issue, with Tehran demanding control of the Strait of Hormuz, war reparations, and the release of frozen assets.

Mediators from Pakistan, Egypt, and Turkey are reportedly expected to continue contacts in the coming days, while Trump is considering the possibility of resuming military operations, the Wall Street Journal reported.

“Investors are returning to ground zero, trying to reassess fair valuation as no end to the conflict is in sight,” noted Clark Belyn of Bellwether Wealth, highlighting the importance of the Strait of Hormuz for oil prices and investment sentiment.

Goldman Sachs was down around 2% as disappointing revenues from fixed income, currencies and commodities overshadowed strong results in equities, signalling a weak start to the corporate earnings season.

Meanwhile, the investment community is turning its attention to the start of earnings release season, with analysts estimating a first-quarter earnings growth of about 12% year-over-year for the S&P 500.

However, uncertainty surrounding the war, rising inflation and the impact of artificial intelligence on business are creating a complex environment for markets.

“Investors should avoid rash moves based on geopolitics,” noted UBS’s Ulrike Hofmann-Burhardy, highlighting the high level of uncertainty.

At the same time, the bond market is back in the inflation spotlight, with higher oil prices adding to concerns. The yield on the two-year U.S. Treasury bond fell close to 3.77%, while the dollar reversed its initial gains, falling about 0.2%.

Despite the recent rebound, the link between equities and oil prices remains strong, with several analysts pointing out that a sustained uptrend in markets requires a stabilisation of the energy crisis.

Nevertheless, BlackRock upgraded its outlook for US equities, believing that the limited macroeconomic impact of the war combined with strong corporate results, creates a platform for further upside.

On the business front, Apple is garnering interest, as Loop Capital maintained a “buy” recommendation and a target price of $325, following the unveiling of the more affordable MacBook Neo, with a starting price of $599, almost half the level of the company’s more expensive models.

Among the standout stocks, Oracle surged more than 9% after unveiling artificial intelligence applications, Conagra fell more than 5% after a management change, while Allogene Therapeutics surged nearly 30% thanks to positive clinical trial results.