Wall Street extended its recent rally on Friday as investors balanced cautious optimism surrounding U.S.-Iran peace talks with continued strength in artificial intelligence-driven equities and improving corporate earnings momentum.

The Dow Jones Industrial Average climbed to a fresh intraday record high, becoming the final major U.S. index to recover losses tied to the geopolitical shock that erupted earlier this year following escalating tensions in the Middle East.

Markets have remained highly sensitive to every development surrounding the nearly three-month-long conflict, particularly due to concerns over oil supply disruptions through the Strait of Hormuz and the broader inflationary impact of elevated energy prices.

Diplomatic Progress Supports Investor Sentiment

Investor confidence improved after reports indicated Iran’s foreign minister met with Pakistan’s interior minister to discuss possible frameworks for ending the conflict. While significant disagreements remain between Tehran and Washington regarding uranium stockpiles and maritime control in the Strait of Hormuz, investors appeared encouraged that negotiations continue moving forward.

Peter Cardillo, chief market economist at Spartan Capital Securities, said the continuation of peace discussions remains supportive for markets even as core geopolitical issues remain unresolved.

The recent stabilization in energy markets has also helped ease fears of an immediate inflation shock that previously pressured both equities and global bond markets.

Treasury yields moved lower on Friday, with the benchmark 10-year U.S. Treasury yield slipping to a one-week low near 4.54%, helping provide additional support for growth and technology shares.

AI Optimism and Earnings Strength Drive Stocks Higher

Artificial intelligence-related momentum continued to serve as a major driver behind the broader market rally.

UBS Global Wealth Management raised its year-end 2026 target for the S&P 500 to 7,900 from 7,500, citing resilient consumer spending and what it described as “insatiable” demand for data center infrastructure tied to the expanding AI ecosystem.

The S&P 500 moved closer toward securing its eighth consecutive weekly gain, potentially marking its strongest winning streak since late 2023.

Technology and semiconductor stocks once again contributed significantly to market performance. The Philadelphia Semiconductor Index rose roughly 1.5%, while Nvidia edged higher one day after posting another strong revenue forecast despite modest post-earnings profit-taking.

Corporate earnings also continued supporting sentiment across several sectors. Salesforce gained more than 3%, while IBM rose nearly 3%, helping push the Dow to record territory.

Elsewhere, Workday surged more than 9% after reporting quarterly revenue and profit that exceeded Wall Street expectations, helping calm concerns that AI-native competitors may rapidly disrupt traditional enterprise software companies.

Volatility Eases Ahead of Holiday Weekend

Market volatility declined noticeably heading into the long U.S. Memorial Day weekend.

The CBOE Volatility Index, often referred to as Wall Street’s fear gauge, hovered near a two-week low around 16.6 as traders reduced hedging activity amid improving sentiment.

At the same time, investors continued monitoring broader macroeconomic risks, including elevated oil prices, central bank policy uncertainty, and leadership changes at the Federal Reserve.

Later Friday, Kevin Warsh was scheduled to be sworn in as the new Federal Reserve leader, succeeding Jerome Powell during a period of heightened inflation sensitivity and increasing geopolitical uncertainty.

Despite the recent rebound in stocks, investors remain aware that markets are still highly vulnerable to unexpected developments surrounding Iran negotiations, energy supply disruptions, and inflation pressures tied to global commodity markets.

Looking ahead, market participants will likely remain focused on whether diplomatic progress can continue stabilizing energy prices while corporate earnings and AI-driven growth themes maintain support for equity valuations. Any deterioration in Middle East negotiations or renewed spikes in oil prices could quickly reintroduce volatility into global markets.