Markets rally after Iran ceasefire
Global markets jumped after a ceasefire with Iran eased fears of a prolonged energy shock, sending the Dow up about 1,300 points while oil prices fell below $95. Treasury yields dropped and the dollar weakened as investors rotated back into risk assets, reflecting a rapid re-pricing of inflation and growth expectations. (apnews.com (cnbc.com))
Wall Street had been bracing for oil above $110 and a blocked Strait of Hormuz. Then a two-week ceasefire was announced, and by the close on Wednesday, April 8, the Dow Jones Industrial Average had jumped 1,325 points while West Texas Intermediate crude had crashed to $94.41 a barrel. (cnbc.com) The move in bonds was just as sharp. The yield on the 10-year United States Treasury note fell to about 4.301%, the 2-year note dropped to 3.79%, and traders suddenly raised the odds of a Federal Reserve rate cut by year-end to above 43% from 14% earlier that day. (cnbc.com) That swing started with one chokepoint. The Strait of Hormuz is the narrow waterway between Iran and Oman that carries a huge share of the world’s seaborne oil, so even a short disruption can push up gasoline, shipping, and inflation expectations almost everywhere. (cnbc.com) For five weeks, markets had been trading as if that chokepoint might stay closed or become a battlefield. On Tuesday, April 7, Brent crude still settled at $109.62 and West Texas Intermediate at $112.95 after threats that Iranian infrastructure could be bombed if the strait did not reopen. (cnbc.com) The ceasefire changed the price of that risk in a few hours. President Donald Trump said he would suspend attacks on Iranian infrastructure for two weeks, and Iranian Foreign Minister Abbas Araghchi said safe passage through the strait was possible during that window in coordination with Iran’s armed forces. (cnbc.com) Once traders believed oil tankers might move again, the sectors hit hardest by an energy shock snapped back first. Semiconductor shares rose fast, with the VanEck Semiconductor exchange-traded fund up more than 5%, Broadcom up nearly 5%, and Micron Technology up more than 7%. (cnbc.com) The rebound was even bigger in places that import most of their fuel. South Korea’s Kospi rose more than 5%, Japan’s Nikkei 225 gained 4%, and Europe’s Stoxx 600 was up 3.6% as traders bet that lower oil would ease pressure on factories, freight, and household bills. (cnbc.com) But the market was not acting like the danger had vanished. Gold still climbed above $4,800 an ounce, Treasury prices still rose, and CNBC reported fresh doubts about tanker traffic after Iranian state media said movement through the strait had stopped again following an Israeli attack on Lebanon. (cnbc.com 1) (cnbc.com 2) That is why the rally looked so violent. Investors were not celebrating peace so much as deleting the most extreme version of the previous day’s panic, where expensive oil keeps inflation high, delays Federal Reserve cuts, and drags down growth at the same time. (cnbc.com 1) (cnbc.com 2) If the two-week pause holds, Wednesday’s move could look like the first day of a broader reset in oil, bonds, and stocks. If shipping through the Strait of Hormuz is disrupted again, the same prices that fell in one session can snap back just as fast. (cnbc.com 1) (cnbc.com 2)
