Wall Street indexes touched fresh record highs and oil prices cratered yesterday after Iran said that the Strait of Hormuz was open for passage during a ceasefire in Lebanon and US President Donald Trump said he expected to reach a deal to end the war soon.
Iranian Foreign Minister Abbas Araqchi said in a post on X that passage for all commercial vessels through the Strait of Hormuz, a key conduit for global energy flows, was declared completely open for the remainder of the 10-day truce brokered by the US that was agreed on Thursday.
President Donald Trump told Reuters the US would work with Iran to recover its enriched uranium – part of a key sticking point in negotiations – and bring it back to the United States. Benchmark Brent crude futures nosedived and were last trading around $88.90 per barrel, down 10.55 per cent on the day, having hit a session low of $86.09.
US crude fell 12.26pc to $83.08 a barrel .That is still above pre-war levels that were around $70, but down significantly from late March’s highs, which, for Brent, were close to $120 a barrel. Stocks marched higher, with the Wall Street benchmark S&P 500 and Nasdaq hitting new record highs and the Dow Jones Industrial Average reaching its highest level in over two months.
The S&P 500 gained 1.49pc, to 7,145.87. The Dow Jones Industrial Average rose 2.32pc, to 49,708.17, and the Nasdaq added 1.68pc, to 24,508.57. Europe’s STOXX 600 also jumped after the news that the waterway would open, climbing more than 1.5pc.
“The opening of the Strait of Hormuz is a critical step towards normalizing transit through the waterway. But the reopening is limited in scope,” said James Reilly, senior markets economist at Capital Economics. “That all being said, this is a significant and necessary step towards potentially ending the war.”
Energy stocks that benefit from high oil prices fell. US majors Exxon Mobil and Chevron shed around 4.5pc and 3pc respectively. European oil and gas names had slid 4pc.
Airline shares gained, with American Airlines up around 5.6pc. In a different kind of drama, Netflix shares fell more than 9pc after the streaming service delivered a downbeat growth forecast and said chairman and co-founder Reed Hastings was leaving the company.
Government bonds rallied, with the benchmark US 10-year Treasury yield touching its lowest since mid-March and last seen down 7.7 basis points to 4.232pc. The 2-year note, which typically tracks expectations of rate moves from the Federal Reserve, fell 8.7 basis points to 3.691pc.
Treasuries had held up better than European bonds since the war began because the United States, as a net energy exporter, is relatively insulated against surging energy prices. Traders pared back bets that those price rises would prompt the European Central Bank and Bank of England to raise rates yesterday, which supported German sovereign debt.
The dollar slid and was on track for a second straight weekly decline as prospects of a resolution to the conflict took the shine off its safe-haven appeal. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.3pc to 97.92.
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