Hopes for diplomatic efforts to revive energy flows through the Strait of Hormuz led to lower oil prices, which in turn eased inflation concerns and kept stocks near their all-time highs. The S&P 500 was largely unchanged but traded within striking distance of a record set the previous month. Brent crude dropped to around $98 a barrel, while Treasuries and the dollar fluctuated. Tom Essaye of The Sevens Report noted that if progress is confirmed towards a ceasefire between the US and Iran, oil and yields would likely fall further, and stocks would rally.
Oil prices have seen a significant increase of over 60% this year due to the Middle East conflict disrupting shipments through the Strait of Hormuz, a critical energy chokepoint. While millions of barrels per day are still moving through the strait, flows remain below pre-war levels. The Nasdaq 100 saw a rise of 0.4%, the Dow Jones Industrial Average was largely unchanged, the Stoxx Europe 600 increased by 0.4%, and the MSCI World Index rose by 0.1%. West Texas Intermediate crude fell by 1.5% to $94.36 a barrel, and spot gold dropped by 0.2% to $4,336.87 an ounce.
The yield on 10-year Treasuries was mostly unchanged at 4.95%. Germany's 10-year yield declined two basis points to 3.44%, and Britain's 10-year yield fell one basis point to 5.20%. Lower oil prices were seen as a positive for companies with high fuel bills, such as cruise operator Carnival, which climbed 4%, and American Airlines, which added 2.2%. The overall market sentiment was buoyed by easing energy costs and hopes for geopolitical de-escalation.
