U.S. stocks advanced in late trading on Monday, with the S&P 500 index turning positive after earlier losses. The move higher was driven by investor speculation that former President Donald Trump would successfully negotiate a peace agreement with Iran.

The Dow Jones Industrial Average climbed 116.04 points, or 0.24%, to close at 48,032.61. The Nasdaq Composite gained 183.78 points, or 0.80%, finishing at 23,086.67. The S&P 500 rose 39.39 points, or 0.58%, to end the session at 6,856.28.

Gains in the technology sector provided a significant boost to the broader market. Software companies such as Oracle and Palantir Technologies saw their shares rise by 11% and 4%, respectively.

Market sentiment improved further after Trump stated, "We got a call from the other side," adding, "They are very eager to make a deal."

This development followed Trump's announcement of a blockade of the Strait of Hormuz, which came after weekend peace talks between the US and Iran failed to produce an agreement. The blockade on all maritime traffic to and from Iranian ports took effect on Monday. However, the U.S. Central Command clarified that vessels using the strait to reach non-Iranian ports would not be blocked.

The breakdown of talks in Islamabad reignited concerns that the conflict with Iran could last longer than initially anticipated, potentially leading to higher oil prices and continued pressure on the global economy. West Texas Intermediate crude jumped 3%, surpassing $99 per barrel, while international benchmark Brent crude rose 4%, also breaking above $99 per barrel.

U.S. Vice President JD Vance left Islamabad without securing a deal with his Iranian counterparts, citing their unwillingness to halt their pursuit of nuclear weapons. The disagreements between the two nations appeared to extend beyond this single issue, with Iran also demanding control over the Strait of Hormuz, war reparations, and the unfreezing of its assets.

According to a report from Axios citing a regional source and a U.S. official, mediators from Pakistan, Egypt, and Turkey are scheduled to continue discussions with both countries in the coming days.

Following the collapse of negotiations, Trump, who announced the maritime blockade, is reportedly weighing whether to resume military strikes, according to a U.S. government official familiar with the matter.

"Investors are back to square one, trying to re-assess fair value for equities because it's now clear there is no end in sight for the Middle East conflict," said Clark Bellin, President and Chief Investment Officer at Bellwether Wealth. "The Strait of Hormuz is critical for oil prices and overall market sentiment, and it's evident we will see more threats of force from the U.S. and Iran over this waterway this week."

Hopes for a swift end to the war had previously helped the three major indexes post their best weekly performance since November, after a two-week ceasefire was announced. The S&P 500 gained 3.6% last week, the Nasdaq rose approximately 4.7%, and the Dow advanced 3%.

BlackRock has since upgraded its outlook for U.S. equities, suggesting that the "manageable" macroeconomic impact of the war, coupled with solid corporate earnings, could create favorable conditions for future gains.