Stocks surge as Iran ceasefire eases oil and rate fears

US mortgage applications declined even as borrowing costs eased, because falling oil prices shifted the inflation calculus just enough to alter the rate outlook. West Texas Intermediate crude plunged 16.41% to $94.41 a barrel after Donald Trump announced a two-week ceasefire with Iran, contingent on Tehran reopening the Strait of Hormuz. Iran’s Supreme National Security Council agreed to reopen the waterway for two weeks if all attacks ceased, pausing a five-week conflict that had disrupted a key global energy corridor. The drop in oil prices reduced immediate inflation risks, countering recent Federal Reserve concerns that Middle East tensions and higher energy costs could force further rate hikes. Minutes from the FOMC’s latest meeting showed members viewed inflation risks as "more skewed to the upside," but with oil retreating, expectations of additional tightening faded. Longer-dated Treasury yields eased, pulling mortgage rates down from their seven-month high—yet applications slipped 0.8% for the week ended 3 April. Refinance demand fell 3%, while purchase applications rose 1% week-over-week but remained 7% below last year, marking the first annual decline since January 2025. Investors priced in a less hawkish Fed, sending the Dow Jones Industrial Average up 2.85% to 47,909.92, the S&P 500 gaining 2.51% to 6,782.81, and the Nasdaq Composite rising 2.80% to 22,635.00.