Stocks surge on relief over Hormuz ceasefire as oil plunges below $100

Equity markets surged yesterday as oil prices collapsed below $100 a barrel following a two-week ceasefire agreement between the US and Iran, lifting fears of a prolonged disruption to energy flows through the Strait of Hormuz. The S&P 500 rose 1.92% to 6,744.40, the Nasdaq jumped 2.29% to 22,522.33, and the Dow added 1,017.69 points, as investors rushed back into risk assets. The rally reflected a rapid repricing of geopolitical risk, with market participants interpreting the drop in oil as a signal that the global economy could avoid a near-term energy shock. US crude fell 14.92% to $96.15 a barrel, while Brent crude dropped 12.99% to $95.08—sharp corrections from recent highs, though both remain well above pre-war levels. Lower oil prices eased inflation concerns, which in turn increased the perceived likelihood of future Federal Reserve rate cuts. The yield on the benchmark 10-year Treasury note fell 7.2 basis points to 4.271%, and the 2-year yield, a proxy for rate expectations, declined 6.8 basis points to 3.769%. European bond markets mirrored the move, with traders scaling back bets on further European Central Bank hikes. The dollar index slipped to 98.80, its lowest in weeks, as the currency’s war-driven strength—fueled by the US position as a net energy exporter—began to unwind. The euro rose 0.85% to $1.1691, and the yen gained ground against the dollar. Gold, often a hedge against uncertainty, rose 0.82% to $4,740.92 an ounce, suggesting investors remained cautious despite the relief. The ceasefire’s brevity and conflicting statements from both sides underscore the fragility of the agreement. Gold rose 0.82% to $4,740.92 an ounce as investors balanced relief with ongoing uncertainty about the ceasefire's durability.