The S&P 500 closed up 1.4% at 7,363.68 on May 5-6, 2026, hitting a record high as investors bet that a potential US-Iran diplomatic breakthrough could reshape the geopolitical landscape. The Nasdaq did even better, gaining 2% to reach 25,838.94, also a record.

Meanwhile, West Texas Intermediate crude futures dropped more than 6% to roughly $95 per barrel.

What’s driving the rally

US and Iranian officials are reportedly finalizing a 14-point memorandum of understanding aimed at ending hostilities and reopening the Strait of Hormuz. The proposed memorandum would also set the stage for follow-up discussions on nuclear matters and asset unfreezing in the months ahead.

Bonds rallied alongside equities, which is a somewhat unusual pairing. Normally, a strong risk-on move in stocks pulls money out of bonds. The fact that both rose simultaneously suggests investors are reading this as broadly deflationary: cheaper energy, lower input costs, and reduced tail risk all at once.

The crypto angle

Bitcoin approached $82,000 on May 6, 2026, riding the same wave of optimism that lifted traditional markets. Market indicators suggested a greater than 99% probability of Bitcoin maintaining a price above $66,000 through May 7.

What this means for investors

The sharp decline in oil prices has second-order effects that extend well beyond energy stocks. Cheaper crude acts like a tax cut for consumers and businesses alike. Airlines, shipping companies, and manufacturers with heavy fuel costs all benefit directly.

One underappreciated risk: if a deal does materialize and Iranian oil re-enters global markets at scale, the supply shock could push crude even lower. That’s great for consumers but potentially destabilizing for US shale producers who need higher prices to justify drilling costs.