- Stock indices hit highs as Iran opens Strait of Hormuz.
- Oil prices fell sharply, easing inflation concerns and boosting airlines.
- Market optimism grew regarding a potential US-Iran peace agreement.
The benchmark S&P 500 and the tech-heavy Nasdaq touched all-time highs on Friday, while the Dow Jones Industrial Average climbed to its highest level in over two months, as investors reacted positively to Iran’s decision to keep the Strait of Hormuz open.
Iran’s Foreign Minister Abbas Araqchi said in a post on X that passage for all commercial vessels through the Strait of Hormuz was “completely open” for the remainder of the 10-day truce between Israeli forces and Iran-backed Hezbollah agreed to in Lebanon.
The development followed US President Donald Trump indicating that Washington could soon secure a peace agreement to end the war with Iran.
Oil Slides, Easing Inflation Concerns
With growing confidence that the conflict may be nearing an end, oil prices fell more than 11%, easing inflation worries. The Strait of Hormuz remains a crucial artery for global oil shipments.
“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 Fall, Airlines And Cruises Surge
The S&P 500 energy sector slipped 4.8%, with Exxon Mobil and Chevron declining 5.7% and 4.5%, respectively.
In contrast, airline stocks rallied sharply, with American Airlines and United Airlines jumping more than 7%.
Cruise operators Carnival and Norwegian Cruise Line rose 8.7% and 7.5%, respectively.
Key Indices Extend Gains
At 11:31 a.m. ET, the Dow Jones Industrial Average rose 958.20 points, or 1.97%, to 49,537.12. The S&P 500 gained 90.30 points, or 1.28%, to 7,131.58, while the Nasdaq Composite advanced 391.43 points, or 1.62%, to 24,494.14.
All three indices were on track for a third consecutive week of gains. The Nasdaq was set to extend its winning streak to 13 days, its longest since January 1992.
The small-cap Russell 2000 also touched its first intraday record high since the US-Iran conflict began.
The CBOE volatility index hit a two-month low and was last down 0.97 points at 16.97.
Caution Over Risks In Hormuz Transit
Despite the optimism, analysts flagged ongoing challenges for maritime traffic in the region.
“Ship operators still face astronomical war-risk insurance premiums, potential mine hazards, and uncertainty about enforcement,” said Erik Bethel, general partner at Mare Liberum.
Stock-Specific Moves And Earnings Impact
Netflix dropped 9.6% after forecasting current-quarter earnings below expectations, with the decline coming as co-founder and longtime chairman Reed Hastings stepped down after a 29-year tenure.
Alcoa fell 7.9% after reporting first-quarter profit and revenue below analysts’ estimates, citing elevated costs and weakening demand.
Fifth Third Bancorp rose 1.2% following its first-quarter earnings report.
Rate Cut Expectations Shift Sharply
Markets are now pricing in a 50% chance of a central bank rate cut in December, up from 20% earlier in the session, according to LSEG-compiled data.
Advancing stocks outnumbered decliners by a 4.38-to-1 ratio on the NYSE and 3.62-to-1 on the Nasdaq.
The S&P 500 recorded 38 new 52-week highs and no new lows, while the Nasdaq Composite posted 188 new highs against 22 new lows.
