Relief is returning to financial markets after U.S. President Donald Trump suggested on Monday that Washington has talked with Iran about a possible end to their war, despite Iran's denials.
Oil prices are falling sharply, and stock prices are jumping on Wall Street following severe losses elsewhere in the world before Trump's announcement.
The S&P 500 leaped 1.4% toward its best day since well before the war began. The Dow Jones Industrial Average also rose 832 points, and the Nasdaq composite rose 1.7%. Crude oil prices plunged almost 8%. Asian markets closed lower overnight, and European markets were higher.
Oil prices quickly plunged and European stocks rebounded on Monday after Trump ordered a halt to strikes on Iranian energy infrastructure after claiming "very good" talks with Tehran.
Trump's comments sparked a sharp reversal in markets. Around 11:45 a.m. GMT, international benchmark Brent North Sea crude was down 6.7% at $104.70 per barrel and was edging even lower after touching close to $113 earlier in the day.
The main U.S. oil contract, West Texas Intermediate (WTI), also slumped 6.9% to $91.41 per barrel, having earlier topped $100.
European stocks turned higher following earlier declines of about 2.5% that had been triggered by Trump and Iranian leaders trading threats over the key Strait of Hormuz.
Frankfurt's stock market went on to rebound 1.5%, nearing midday, while Paris rose 1%.
London's FTSE 100 index, weighed by sharp losses for energy heavyweights BP and Shell, was flat.
The United States and Iran "have had, over the last two days, very good and productive conversations regarding a complete and total resolution of our hostilities in the Middle East", Trump wrote, in all capitals, on his Truth Social platform.
Trump told Agence France-Presse (AFP) on Monday that "things are going very well" regarding Iran, shortly after announcing talks with Tehran and a five-day pause on targeting the Islamic republic's power plants.
Trump's abrupt shift on Iran came hours before the expiration of a two-day ultimatum under which he threatened to attack Iranian power plants if Tehran did not reopen the strategic Strait of Hormuz.
"Things are going very well," Trump said in brief comments by telephone to AFP when asked about Iran, following his earlier Truth Social post on the negotiations that immediately sent oil prices tumbling.
In his post, Trump made the surprise announcement, backed by little detail, that diplomacy was underway. This came after he earlier shunned talks with Tehran in the fourth week of the joint U.S.-Israeli military campaign.
"Based on the tenor and tone" of the talks, "which will continue throughout the week, I have instructed the Department of War to postpone any and all military strikes against Iranian power plants and energy infrastructure for a five-day period, subject to the success of the ongoing meetings and discussions," Trump wrote.
The U.S. president did not give further details on the talks in his comments to AFP, which he made from his Mar-a-Lago residence in Palm Beach, Florida, where he spent the weekend.
Iranian media, however, said on Monday that there were no negotiations underway towards ending the war.
