Oil prices returned to levels seen early in the Iran war, while U.S. stocks surged to another high on Friday following Iran’s announcement that the Strait of Hormuz has reopened for commercial oil tankers from the Persian Gulf to global customers.
The S&P 500 soared 1.2%, hitting a record high and marking its third straight week of significant gains. The Dow Jones Industrial Average initially surged 1,100 points, later settling at an 868-point gain, or 1.8%. The Nasdaq Composite also climbed by 1.5%.
Meanwhile, the Canadian S&P/TSX Composite Index closed up 294.06 points at 34,346.29.
Since hitting a low in late March, the U.S. stock market has risen over 12%, with optimism surrounding the potential resolution between the United States and Iran amidst the ongoing war.
The reopening of the Strait of Hormuz, albeit possibly temporary, signals a ray of hope. President Donald Trump hinted at a potential end to the conflict, stating that the war “should be ending pretty soon.”
After Iran’s announcement on social media declaring the strait completely open during a 10-day ceasefire in Lebanon, the price of U.S. oil plummeted by 9.4% to $82.59 per barrel, while Brent crude dropped by 9.1% to $90.38 per barrel.
Despite the decline, oil prices remain above pre-war levels, reflecting caution in the financial markets. Market optimism has fluctuated during the war, impacting prices of stocks, bonds, and oil.
Although market reactions have been positive, uncertainties persist regarding vessel movements in the Strait. Carsten Brzeski from ING highlighted that while the strait is theoretically open, concerns about vessel traffic linger due to hesitancy from insurers and shipowners.
Following the drop in oil prices, companies heavily reliant on fuel experienced significant gains on Wall Street. United Airlines surged by 7.1%, while cruise operators like Royal Caribbean Group and Carnival also saw notable increases.
The strong start to the earnings reporting season for major U.S. companies further bolstered the stock market. State Street and Fifth Third Bancorp reported better-than-expected results for the latest quarter, helping offset Netflix’s 9.7% decline despite an exceeded profit forecast.
Global stock markets, particularly in Europe, rallied after Iran’s announcement, with France’s CAC 40 and Germany’s DAX each gaining over 2%. In Asia, indexes closed weaker, with Japan’s Nikkei 225 and Hong Kong’s Hang Seng experiencing losses.
In the bond market, Treasury yields decreased significantly as lower oil prices alleviated inflation concerns. The yield on the 10-year Treasury dropped to 4.24% from 4.32%.
The news of the Strait of Hormuz reopening has brought a sense of relief to markets and consumers, with the potential for gradual recovery in vessel traffic through the crucial waterway.