Oil prices fell to early Iran war levels as U.S. stocks surged to another record on Friday, following Iran’s announcement that the Strait of Hormuz is now open for commercial tankers transporting oil from the Persian Gulf to global customers. The S&P 500 soared 1.2%, reaching a new high and concluding a third consecutive week of substantial gains. This marked the index’s longest winning streak since Halloween. A smoother oil flow would alleviate price pressures not only on gasoline but also on groceries and various other goods transported by vehicles.
The Dow Jones Industrial Average initially surged by up to 1,100 points before settling at an 868-point gain, representing a 1.8% increase. The Nasdaq Composite also climbed by 1.5% during the trading session. The Canadian S&P/TSX Composite Index closed with a gain of 294.06 points at 34,346.29.
Since hitting a low in late March, the U.S. stock market has risen over 12%, fueled by optimism that the U.S. and Iran can navigate a less severe impact on the global economy amid the war. The potential reopening of the Strait of Hormuz, albeit possibly temporary, has provided a clear signal for optimism. President Donald Trump hinted at the conflict’s potential resolution, stating the war “should be ending pretty soon.”
Following Iran’s announcement of the strait’s reopening, the price of U.S. benchmark crude oil plummeted sharply. Iran’s foreign affairs minister, Abbas Araghchi, declared the passage open for all commercial vessels while a 10-day ceasefire held in Lebanon. U.S. oil prices dropped 9.4% to $82.59 per barrel, while Brent crude, the international standard, fell 9.1% to $90.38 per barrel.
Although oil prices remain above pre-war levels, indicating lingering caution in financial markets, positive reactions have been witnessed today. However, concerns persist about the movement through the Strait. Carsten Brzeski, global head of macro at ING, highlighted the potential gradual increase in traffic through the Strait due to hesitance from insurers and shipowners.
Companies heavily reliant on fuel costs saw significant gains, with United Airlines surging by 7.1%. Cruise ship operators like Royal Caribbean Group and Carnival also experienced notable increases. The strong start to the earnings reporting season for major U.S. firms further buoyed the stock market, with companies like State Street and Fifth Third Bancorp reporting better-than-expected results for the latest quarter.
While some companies outperformed expectations, others saw declines. Netflix, for instance, fell 9.7% despite reporting better profits than anticipated but failing to raise its full-year revenue growth forecast. Internationally, European stock indexes surged after Iran’s announcement, with France’s CAC 40 and Germany’s DAX both showing gains. In Asia, stock indexes closed weaker, with Japan’s Nikkei 225 and Hong Kong’s Hang Seng experiencing notable losses.
Treasury yields decreased significantly due to falling oil prices reducing inflation pressure, with the 10-year Treasury yield dropping to 4.24% from 4.32% at the previous close.
