Wall Street stocks flourish, oil plunges below $90 after Iran says Strait of Hormuz is open
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NEW YORK/LONDON, April 17 : Wall Street indexes touched fresh record highs and oil prices cratered on Friday after Iran said that the Strait of Hormuz was open for passage during a ceasefire in Lebanon and U.S. President Donald Trump said he expected to reach a deal to end the war soon.
Iranian Foreign Minister Abbas Araqchi said in a post on X that passage for all commercial vessels through the Strait of Hormuz, a key conduit for global energy flows, was declared completely open for the remainder of the 10-day truce brokered by the U.S. that was agreed on Thursday.
President Donald Trump told Reuters the U.S. would work with Iran to recover its enriched uranium - part of a key sticking point in negotiations - and bring it back to the United States.
Benchmark Brent crude futures nosedived and were last trading around $88.90 per barrel, down 10.55 per cent on the day, having hit a session low of $86.09. U.S. crude fell 12.26 per cent to $83.08 a barrel. That is still above pre-war levels that were around $70, but down significantly from late March's highs, which, for Brent, were close to $120 a barrel.
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Stocks marched higher, with the Wall Street benchmark S&P 500 and Nasdaq hitting new record highs and the Dow Jones Industrial Average reaching its highest level in over two months.
The S&P 500 gained 1.49 per cent, to 7,145.87. The Dow Jones Industrial Average rose 2.32 per cent, to 49,708.17, and the Nasdaq added 1.68 per cent, to 24,508.57. [.N] Europe's STOXX 600 also jumped after the news that the waterway would open, climbing more than 1.5 per cent.
"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 that benefit from high oil prices fell. U.S. majors Exxon Mobil and Chevron shed around 4.5 per cent and 3 per cent respectively. European oil and gas names had slid 4 per cent. Airline shares gained, with American Airlines up around 5.6 per cent.
In a different kind of drama, Netflix shares fell more than 9 per cent after the streaming service delivered a downbeat growth forecast and said chairman and co-founder Reed Hastings was leaving the company.
'CHUNKY TAIL RISK'
Government bonds rallied, with the benchmark U.S. 10-year Treasury yield touching its lowest since mid-March and last seen down 7.7 basis points to 4.232 per cent. The 2-year note, which typically tracks expectations of rate moves from the Federal Reserve, fell 8.7 basis points to 3.691 per cent.
Treasuries had held up better than European bonds since the war began because the United States, as a net energy exporter, is relatively insulated against surging energy prices.
Traders pared back bets that those price rises would prompt the European Central Bank and Bank of England to raise rates on Friday, which supported German sovereign debt.
"If we move to a situation where the path is still towards de-escalation - but we now have the bonus of commodity flows through Hormuz getting back to something resembling a normal level that we saw pre-conflict - then that's obviously removing a pretty chunky tail-risk for the economy," said Michael Brown, senior research strategist at Pepperstone.
"I think that's why markets are reacting so positively."
The dollar slid and was on track for a second straight weekly decline as prospects of a resolution to the conflict took the shine off its safe-haven appeal. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.3 per cent to 97.92.
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