Oil prices fell back to levels seen at the start of the Iran conflict, and U.S. stocks surged to a new peak on Friday after 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 by 1.2%, marking its third consecutive week of substantial gains, the longest streak since Halloween. A resumption of oil flow could alleviate pressure on gasoline, groceries, and various other goods transported by vehicles.
The Dow Jones Industrial Average initially climbed by as much as 1,100 points before settling at an 868-point gain, a 1.8% increase. The Nasdaq Composite also rose by 1.5%. The Canadian S&P/TSX Composite Index closed up by 294.06 points at 34,346.29.
Since reaching a low point in March, the U.S. stock market has surged over 12% amidst hopes that the U.S. and Iran will avoid a worst-case scenario for the global economy amid the conflict. The reopening of the Strait of Hormuz, albeit potentially temporary, indicates a positive outlook. President Donald Trump expressed optimism about the conflict ending soon.
Following Iran’s declaration on social media that the strait is fully open during a 10-day ceasefire in Lebanon, the price of benchmark U.S. crude dropped significantly. U.S. oil plummeted by 9.4% to $82.59 per barrel, while Brent crude, the international standard, fell by 9.1% to $90.38 per barrel, though still above pre-war levels. Despite the positive market response to the news, concerns persist about the actual movement through the Strait.
Financial markets have experienced fluctuations in response to optimism and doubt surrounding the conflict’s resolution. Companies reliant on fuel costs, such as airlines and cruise operators, saw notable gains as oil prices eased. In addition, positive earnings reports from major U.S. corporations have bolstered the stock market.
Stock indexes in Europe surged following Iran’s announcement, with France’s CAC 40 rising by 2.2% and Germany’s DAX by 2.3%. In Asia, indexes closed weaker prior to the news, with Japan’s Nikkei 225 and Hong Kong’s Hang Seng experiencing losses. Treasury yields also decreased significantly due to reduced inflationary pressures from falling oil prices, with the 10-year Treasury yield dropping to 4.24%.