By Mike Murphy

Vessels transiting through the Gulf of Oman are seen off the coast of Muscat, Oman, on Saturday.

U.S. stock-index futures rallied and oil prices tumbled on Sunday as the U.S. and Iran took a pause from fighting, and as Wall Street gears up for the Fed's meeting and key earnings reports from Big Tech companies.

Dow Jones Industrial Average futures (YM00) surged about 300 points, or 0.6%, late Sunday. S&P 500 futures (ES00) rose 0.7% and Nasdaq-100 futures (NQ00) jumped 1.2%. Bitcoin (BTCUSD) was trading above $65,000.

West Texas Intermediate crude (CL.1), the U.S. benchmark, fell 5% on Sunday, below $85 a barrel, after settling Friday $89.31 a barrel, up nearly 10% last week. Both the U.S. and Iran paused their daily, tit-for-tat attacks over the weekend for the first time in about two weeks, raising hopes that mediation efforts could push both sides back to the negotiating table. The Associated Press reported that an unnamed regional official involved in the mediation said both sides are seeking a return to the interim ceasefire deal that fell apart earlier this month.

Mike Waltz, the U.S. Ambassador to the United Nations, told Fox News on Sunday that President Donald Trump has put new attacks on hold to give "talks some space, he's giving it a little bit of room." He provided no other details.

"Washington appears to have reached the point where more of the same was producing diminishing returns," Stephen Innes, managing partner at SPI Asset Management, wrote in a weekend note. "Giving diplomacy some room now may therefore be less about a sudden outbreak of restraint than an effort to prevent the war premium from becoming a domestic liability."

Oil prices have shot higher as fighting resumed this month, and as Iranian-backed Houthi rebels in Yemen threatened to attack tankers in the Red Sea, potentially closing off a key detour route for oil with the Strait of Hormuz effectively shut. Still, oil traders are holding out hope that the hostilities are a short-term disruption rather than a long-term shock.

Meanwhile on Wall Street, investors are awaiting this week's Fed meeting on interest rates and a busy week of corporate earnings.

The Fed's interest-rate-setting committee will meet Tuesday and Wednesday, with Fed Chair Kevin Warsh scheduled to speak after its conclusion. Warsh has been tight-lipped about the central bank's path, leaving many Fed-watchers unusually uncertain about what the Fed will do next. CME's FedWatch tool is giving a 38% chance of a rate hike this week, though most experts believe a hike is more likely in September.

Also: Investors are in the dark about the Fed's decision this week - and that's just how Warsh wants it

Inflation has been well above the Fed's 2% target for years, and has picked up in the wake of the Iran war, which has driven fuel prices higher. The benchmark 10-year Treasury rate BX:TMUBMUSD10Y is near a decade high, driven by worries that higher energy costs will continue to push inflation higher, potentially forcing the Fed to act sooner than it may want.

Stocks were mixed Friday, as the Dow DJIA fell for the third consecutive week and the S&P 500 SPX and Nasdaq Composite COMP both declined for the second week in a row.

On the earnings front, it'll be the busiest week of the season, with 177 S&P 500 companies reporting in the coming days. That will include Big Tech leaders Apple (AAPL), Microsoft (MSFT), Amazon (AMZN) and Meta Platforms (META) - where much of the focus will be on AI spending. Starbucks (SBUX), Chipotle (CMG), UPS (UPS), Visa (V) and Boeing (BA) are among other big names reporting this week.

-Mike Murphy

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(END) Dow Jones Newswires

07-26-26 1816ET