Oil drops, stocks gain amid Iran peace hopes; yen firms as investors watch for further intervention

By Caroline Valetkevitch and Nell Mackenzie

NEW YORK/LONDON, Aug 3 (Reuters) - Oil prices dropped and major stock indexes gained on Monday on signs that U.S.-Iran tensions were easing again, while the yen strengthened after the U.S. and Japan confirmed joint intervention to support the currency and investors watched for signs of further intervention. 

U.S. President Donald Trump over the weekend held off on a fresh attack on Iran.

Trump said on Monday that talks with Iran were under way, warning that it was a "last chance" for Tehran to sign a good deal to end the five-month-old war, but Iran denied that any negotiations were being held or planned.

Front-month Brent futures fell $6.35, or 7.0%, to settle at $83.77 a barrel, while U.S. West Texas Intermediate (WTI) crude fell $4.33, or 5.1%, to settle at $80.34.

The Dow registered a record closing high, with optimism over earnings also helping to underpin equities. 

"The sharp drop in oil prices, due to Trump's cancelling severe attacks against Iran and hopes of a diplomatic resolution, set the ball rolling this morning," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Also a plus, "so far most of the earnings have beat expectations," and guidance has been upbeat, he said. More than 300 of the S&P 500 component companies have reported earnings so far, with roughly 85% of firms beating expectations, according to LSEG data.

Amazon's market value topped $3 trillion for the first time on Monday, helped by a sharp rally following its recent strong earnings and signs that the AI boom is driving fresh demand for its cloud-computing services. Amazon shares ended 4.6% higher on the day.

The Dow Jones Industrial Average rose 693.38 points, or 1.32%, to 53,178.41, the S&P 500 rose 110.78 points, or 1.48%, to 7,600.50 and the Nasdaq Composite rose 540.04 points, or 2.13%, to 25,913.90.

MSCI's gauge of stocks across the globe rose 10.50 points, or 0.94%, to 1,131.01. The pan-European STOXX 600 index gained 0.45%.

AstraZeneca investors punished the pharmaceutical firm over reports of merger talks with U.S. rival Bristol Myers Squibb that could make it one of the world's biggest drugmakers with a combined value of nearly $400 billion.

Investors were watching for further yen intervention after Japan's finance ministry said on Monday that Japan and the U.S. conducted coordinated yen-buying intervention and will not hesitate to take further action. The intervention on Friday underscored both countries' resolve to prevent a selloff in the yen and Japanese government bonds from causing global spillovers.

Trump said on Sunday that the U.S. was helping Japan prop up the yen as a sign of friendship and to help the world economy. 

The Japanese currency strengthened to its strongest level against the dollar in about three months.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro,rose 0.26% to 99.97, with the euro down 0.17% at $1.1507.

Tokyo's solo intervention conducted between late April and early May caused only a brief yen rebound, while a rate hike in June by the Bank of Japan provided little support, underscoring the challenge policymakers face of rising oil prices and a wide interest-rate differential against other major economies.

 Elsewhere, U.S. Treasury yields retreated as oil prices fell, even as traders continued to weigh the odds of a Federal Reserve rate hike should the war drag on.

The yield on benchmark U.S. 10-year notes fell 6.13 basis points to 4.684%. It reached 4.747% on Friday, the highest since January 2025.

The 30-year bond yield fell 4.76 basis points to 5.2274% after peaking at 5.2811% on Friday, the highest since 2007.

Spot gold rose 0.33% to $4,054.44 an ounce.

(Reporting by Caroline Valetkevitch in New York and Nell Mackenzie in London; Additional reporting by Ankur Banerjee in Singapore; Editing by Barbara Lewis and Kevin Liffey)