A deal to reopen the Strait of Hormuz has spurred a significant market rally. US stocks climbed, with the S&P 500 rising 1.7%, the tech-heavy Nasdaq 100 adding 3.1%, and the Dow Jones Industrial Average hitting all-time highs. Cryptocurrencies also saw gains, with Bitcoin topping $66,000.
Oil prices sank on hopes that the conflict affecting markets is nearing an end. US crude settled below $81, easing inflation concerns. This optimism also led to receding bets on Federal Reserve rate hikes, though Treasuries and the dollar experienced little movement.
Separately, news of US-Iran peace talks resuming sent stock futures higher and oil prices lower, with Brent crude falling about 5% to below $83 per barrel and US WTI crude dropping over 5% to around $80 per barrel. This deal, announced by the US on a Sunday, aims to end hostilities in the four-month war and reopen the Strait of Hormuz, a critical maritime chokepoint. The Nasdaq futures surged over 2%, and Russell 2000 futures opened at a record high.
The reopening of the Strait of Hormuz, which has been closed since February 28, is crucial as it facilitates the passage of 20% of the world's oil supply. The closure had driven up costs for oil, gas, fertilizer, and packaging. While President Trump stated the strait would open immediately, experts caution that normalizing flows could take weeks to months. GasBuddy analysts suggest gas prices could fall to $3.75 by July 4, depending on the agreement's stability. Consumer prices in May had risen 4.2% year-over-year from May 2025 and 0.5% monthly, indicating high inflation pressures.
The market reaction favored risk assets, with equity index futures advancing and the implied volatility gauge for US stocks moving lower. Conversely, traditional safe havens like gold eased, and Treasury prices slipped as money rotated into equities, pushing yields higher. Traders quickly priced in a lower probability of supply disruptions in the Middle East and a potentially softer inflation backdrop.
