Dow Jones Industrial Average soars on Middle East peace deal hopes

• The Dow Jones surged around 500 points on Tuesday, climbing above 35,000.
• Investors are banking on a continued easing of tensions in the Middle East.
• Fed policymakers remain leery of tariff-led inflation and unemployment pressures.

The Dow Jones Industrial Average (DJIA) rallied on Tuesday, with equity markets bolstered across the board as the Israel-US-Iran conflict looks set to continue cooling off. Crude Oil markets are receding, falling into two-week lows and further easing market fears. Despite the overall improvement in general investor sentiment, Federal Reserve (Fed) officials remain uneasy at the prospect of a tariff-led inflation uptick, especially around the Q2-Q3 midpoint.

Israel and Iran appear to be inching toward a ceasefire deal, albeit with some hiccups, sparking a bull run in equity markets. A shaky ceasefire deal, which was largely brokered by US President Donald Trump, helped to bolster market confidence that their bets of a cool-off in tensions would pay off. Reports of missile exchanges between Iran and Israel hours after the start of Trump's phased ceasefire deal sparked a public chastising from President Trump aimed at both Israel and Iran, but markets continue to expect a walkback on tensions between the two Middle East countries.

Fed Chair Jerome Powell kicked off the first half of his two-day testimony before congressional and Senate financial committees on Tuesday. Fed head Powell reaffirmed the Fed's determination to hold off on making any policy rate adjustments until they get a clearer sense of what kind of inflation impact tariffs could bring, with the Fed Chair specifically highlighting concerns of an uptick in inflation pressure heading through the summer months.

Rate traders still have their hopes pinned on a September rate cut, according to the CME's FedWatch Tool. Odds of at least a quarter-point rate trim on September 17 are holding near 80%, with odds of a follow-up cut in October hovering around 60%.

Read more stock news: US stock markets to open higher as shaky ceasefire continues risk-on sentiment

Dow Jones price forecast

The Dow Jones Industrial Average's Tuesday push has knocked intraday bids back above the 43,000 handle, and the DJIA is poised to close above the major psychological level for the first time since early March. The major equity index has fully recovered from its post-tariff announcement rout that kicked off in early April, and bullish momentum is poised to carry the Dow back into all-time highs above 45,000.

Dow Jones daily chart

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