Stocks gain, yields dip as investors focus on US-Iran talks

Investors expect energy disruptions to push up consumer prices

Major stock indexes rose and Treasury yields eased on Friday as investors weighed the likelihood of a near-term deal to end the US and Israeli war on Iran.

Oil prices gained as much uncertainty surrounding the Iran talks remained.

US Secretary of State Marco Rubio said that the United States has seen some progress towards a deal with Iran but more work is required. Diplomatic efforts intensified to find an end to a conflict that began in late February.

Iran's foreign minister met Pakistan's interior minister on Friday to discuss proposals to end the US-Israeli war, Iranian media reported.

On Wall Street, the Dow hit a record high for the first time since the Iran war began, and the S&P 500 was on track for its eighth straight weekly gain. Stocks have been driven higher by booming demand for AI-related stocks even as concerns about economic fallout from the war remained.

European shares finished at their highest level in more than a month and logged their biggest weekly gain in seven.

While gaps have been narrowed between Iran and the United States, there are still sticking points over Iran's enriched uranium and control over the Strait of Hormuz.

Investors are worried that ongoing energy disruptions will filter through to core consumer prices, potentially forcing a tighter monetary policy response.

"There's a lot of waiting on geopolitical issues. That is keeping some people on the sidelines, but overall the market believes it's all going to be resolved eventually," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.

"Toward the end of the day, you might see some selling pressure" ahead of the long US weekend, he said. US stock and bond markets will be closed Monday in observance of Memorial Day.

The Dow Jones Industrial Average rose 365.00 points, or 0.73 percent, to 50,653.60, the S&P 500 rose 35.06 points, or 0.47 percent, to 7,480.98 and the Nasdaq Composite rose 76.05 points, or 0.29 percent, to 26,369.15.

MSCI's gauge of stocks across the globe .MIWD00000PUS rose 6.60 points, or 0.60 percent, to 1,113.49.The pan-European STOXX 600 index rose 0.73 percent, helped by technology stocks.

The yield on benchmark US 10-year notes US10YT=RR fell 2.6 basis points to 4.558 percent, from 4.584 percent late on Thursday. A selloff early in the week led yields to hit months- or years-long highs, with the 10-year yield on Tuesday reaching its highest level since January 2025.

Turkey's financial markets rebounded after being rattled this week by political moves against the country's main opposition party. The benchmark BIST 100 index rose 4.5 percent in Istanbul, recovering from a 6 percent plunge on Thursday that had triggered a suspension of trading after a top court moved to effectively oust main opposition leader Ozgur Ozel.

Oil Up, US Consumer Sentiment Down

Investors also digested a survey showing US consumer sentiment plunged to a record low in May as surging gasoline prices fuelled anxiety over worsening affordability.

Oil prices finished higher. US crude CLc1 rose 25 cents to settle at $96.50 a barrel and Brent LCOc1 gained 96 cents to settle at $103.54.

The dollar held higher as traders monitored talks on the war and assessed whether the Federal Reserve would raise interest rates if inflation continued to accelerate.

Kevin Warsh was sworn in as Fed chair on Friday.

The dollar index =USD, which measures the greenback against a basket of currencies, including the yen and the euro rose 0.07 percent to 99.27, with the euro EUR= down 0.09 percent at $1.1608.

Against the Japanese yen JPY=, the dollar strengthened 0.11 percent to 159.13.

Data on Friday showed Japan's core inflation slowed to a four-year low in April, complicating the outlook for Bank of Japan policy.

Spot gold XAU= fell 0.73 percent to $4,508.44 an ounce.