Oil prices retreated to levels seen at the beginning of the Iran conflict, while U.S. stocks surged to a new high on Friday following Iran’s announcement that the Strait of Hormuz is now open for commercial oil tankers from the Persian Gulf. The S&P 500 soared 1.2%, marking its third consecutive week of significant gains. This surge in oil flow is expected to alleviate pricing pressures not only on gasoline but also on various goods transported by vehicles.
The Dow Jones Industrial Average initially surged by 1,100 points before settling at an 868-point increase, or 1.8%. Meanwhile, the Nasdaq Composite rose by 1.5%. The Canadian S&P/TSX Composite Index closed with a gain of 294.06 points at 34,346.29.
Since hitting a low point in late March, the U.S. stock market has climbed over 12%, fueled by hopes of a favorable outcome between the United States and Iran despite the ongoing conflict. President Donald Trump’s recent statement expressing optimism about the war’s resolution further bolstered market sentiment.
Following Iran’s confirmation of the Strait of Hormuz’s reopening, U.S. crude oil prices plummeted by 9.4% to $82.59 per barrel, while Brent crude dropped by 9.1% to $90.38 per barrel. Although oil prices remain above pre-war levels, signaling cautiousness in financial markets, the positive news has provided relief to investors amid the uncertainty surrounding the conflict’s resolution.
Market optimism has fluctuated several times during the conflict, causing abrupt price swings across various asset classes. Despite the positive market reaction to the recent developments, concerns persist about the movement of vessels through the Strait of Hormuz.
Carsten Brzeski, global head of macro at ING, emphasized the significance of the Strait’s reopening for oil prices and consumers, but he raised doubts about the willingness of vessels to transit the area due to potential safety concerns. Companies heavily reliant on fuel, such as airlines and cruise operators, experienced significant gains as oil prices eased.
The strong start to the earnings season for major U.S. companies, coupled with positive financial results, has contributed to the market’s resilience. State Street and Fifth Third Bancorp reported better-than-expected results for the latest quarter, offsetting Netflix’s decline despite exceeding profit expectations.
Global stock markets responded positively to Iran’s announcement, with European indexes surging. In Asia, markets closed weaker, with Japan’s Nikkei 225 and Hong Kong’s Hang Seng experiencing losses. Treasury yields also decreased significantly as falling oil prices alleviated inflation concerns, with the 10-year Treasury yield dropping to 4.24%.
