Oil prices retreated to levels seen at the start of the Iran conflict as U.S. stocks surged to a new high on Friday, following Iran’s announcement that the Strait of Hormuz is now open for commercial tankers transporting oil from the Persian Gulf. The S&P 500 hit a record high, marking its third consecutive week of significant gains. This surge in oil flow is expected to alleviate pressure on prices for gasoline, groceries, and other goods transported by vehicles.
The Dow Jones Industrial Average initially soared by 1,100 points but eventually settled for an 868-point gain, representing a 1.8% increase, while the Nasdaq composite also climbed by 1.5%. Meanwhile, the Canadian S&P/TSX composite index closed with a 294.06-point increase at 34,346.29.
Since hitting a low point in late March, the U.S. stock market has risen over 12% amid hopes of a favorable resolution between the United States and Iran despite the ongoing conflict. President Donald Trump expressed optimism regarding the situation, suggesting a potential end to hostilities.
Following Iran’s declaration on social media that the Strait of Hormuz is fully open during a 10-day ceasefire in Lebanon, the price of U.S. crude oil 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-conflict levels, indicating some market caution, the reopening of the strait has been received positively.
Despite the positive market response, uncertainties persist regarding the actual movement of vessels through the strait. Market experts, such as Carsten Brzeski from ING, have highlighted potential hesitance from insurers and shipowners, which could slow down the traffic flow through the strait.
Companies heavily reliant on fuel, such as airlines and cruise operators, saw significant stock boosts following the oil price decrease. United Airlines surged by 7.1%, while Royal Caribbean Group and Carnival rose by 7.3% and 7% respectively. Additionally, positive earnings reports from major U.S. companies have contributed to the market’s upward trend.
In international markets, European stocks experienced gains after Iran’s strait announcement, with France’s CAC 40 rising by 2.2% and Germany’s DAX by 2.3%. However, Asian markets closed lower, with Japan’s Nikkei 225 dropping by 1.8% and Hong Kong’s Hang Seng by 0.9%.
As oil prices fell, Treasury yields also decreased, reflecting reduced inflation pressure. The 10-year Treasury yield dropped to 4.24% from 4.32% on the previous trading day.