Oil prices retreated to levels seen early in the Iran conflict as U.S. stocks surged to a fresh high on Friday, following Iran’s announcement that the Strait of Hormuz is open for commercial tankers transporting oil from the Persian Gulf. The S&P 500 soared 1.2%, marking its third consecutive week of substantial gains. This surge, the lengthiest since Halloween, is expected to alleviate pricing pressures on gasoline, groceries, and various other goods reliant on vehicular transport.
The Dow Jones Industrial Average initially climbed 1,100 points, eventually settling for an 868-point gain, a 1.8% increase. Concurrently, the Nasdaq Composite advanced by 1.5%. In Canada, the S&P/TSX Composite Index closed with a gain of 294.06 points at 34,346.29.
Since the late March market low, the U.S. stock market has surged over 12%, reflecting hopes for a positive resolution between the U.S. and Iran amidst the conflict. President Donald Trump’s recent remarks hint at a potential end to the war, further bolstering market sentiment.
Following Iran’s declaration of the Strait of Hormuz being fully open to commercial vessels during a ceasefire period, 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 still above pre-war levels, caution persists in financial markets.
Market optimism has oscillated between hope and doubt throughout the conflict, leading to erratic price fluctuations across various asset classes. Despite the positive market response to the recent developments, uncertainties surrounding vessel movement in the Strait persist.
Notwithstanding these uncertainties, companies with significant fuel expenses witnessed notable stock gains. Airlines such as United Airlines surged by 7.1%, while cruise operators like Royal Caribbean Group and Carnival saw increases of 7.3% and 7%, respectively. The upbeat start to the earnings season for major U.S. corporations has further buoyed market confidence.
Additionally, European stock markets saw significant gains post Iran’s announcement, with France’s CAC 40 rising by 2.2% and Germany’s DAX by 2.3%. Conversely, Asian markets closed weaker prior to the news, with Japan’s Nikkei 225 and Hong Kong’s Hang Seng experiencing losses. In the bond market, Treasury yields declined as oil price drops alleviated inflation concerns, with the 10-year Treasury yield falling to 4.24%.
The ongoing market response reflects a delicate balance of optimism and caution, with the global economic landscape closely tied to developments in the Iran conflict and the Strait of Hormuz situation.