For most of the past week, markets have traded as though the war with Iran were already over. The S&P 500 just hit its third-straight record high and the Nasdaq Composite is on its longest winning streak since 1992.
The stock market’s exuberance is rooted in optimism about ceasefires in the Middle East and hope that oil might resume flowing through the Strait of Hormuz. There’s an assumption that the worst of the oil disruption might be in the past and the conflict will remain contained, helping lessen the global economic fallout and leaving central banks more equipped to cushion any damage.
Wall Street’s fortunes have changed in recent weeks as the United States and Iran have entered a ceasefire and oil prices have pulled back from trading above $100 per barrel. Oil prices plunged and stocks soared Friday after the Iranian foreign minister announced the Strait of Hormuz would be “completely open” for commercial transit during the remainder of the ceasefire.
Brent crude, the global oil benchmark, fell 9.07% to settle at $90.38 per barrel, its lowest level since March 10. The Dow soared 869 points, or 1.79%, recouping all of its losses since the war with Iran began.
President Donald Trump on Thursday said Israel and Lebanon agreed to a 10-day ceasefire. While uncertainty remains about the duration and outcome of the war, as well as the fate of the Strait of Hormuz, with Trump saying the US naval blockade will remain in place, the stock market is looking past it all.
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