Stocks romp to records, oil plunges on hopes of US-Iran peace deal

NEW YORK/LONDON – Oil prices cratered, Wall Street indexes scaled record highs and US Treasuries surged on Friday (April 17), after Iran said the Strait of Hormuz was open for passage during a ceasefire in Lebanon and US President Donald Trump said he expected to reach a deal to end the war soon.

Iranian Foreign Minister Abbas Araqchi said on X that passage for all commercial vessels through the strait, a key conduit for global energy flows, was completely open for the remainder of the 10-day truce brokered by the US between Israel and Lebanon that was agreed on Thursday.

Trump told Reuters the US would work with Iran to recover its enriched uranium – part of a key sticking point in negotiations – ​and bring it to the US.

Benchmark Brent crude futures settled nine per cent lower at US$90.38 (S$114.71) per barrel, having hit a session low of US$86.09. US crude settled down 11.45 per cent at US$83.85 a barrel. Those prices remain above pre-war levels around US$70, but are down significantly from late March's highs, which, for Brent, were close to US$120 a barrel.

Stock index set record closes

Stocks marched higher, with the Wall Street benchmark S&P 500 and Nasdaq setting their third straight record closes and the Dow Jones Industrial Average marking its highest finish since late February.

The Dow rose 1.79 per cent, to 49,447.43, the S&P 500 gained 1.2 per cent, to 7,126.06 and the Nasdaq Composite jumped 1.52 per cent, to 24,468.48.

The small-cap Russell 2000 outperformed large-cap gains and also posted a record closing high.

"Energy prices coming down has a bigger impact on small caps because they have tighter margins," said Nick Johnson, chief investment officer at Willis Johnson & Associates, adding, "it's starting to become clear that the US and Iran want to see this behind them."

Large energy stocks that benefit from high oil prices recovered some earlier losses, but US majors Exxon Mobil and Chevron closed down 3.6 per cent and 2.2 per cent respectively. American Airlines and United Airlines advanced sharply.

Netflix provided its own market drama, with shares falling more than nine per cent after the streaming service delivered a downbeat growth forecast and said chairman and co-founder Reed Hastings was leaving the company.

'All the good news'

Optimism that the war might be nearing an end eased concerns about renewed inflation.

Government bonds rallied, with the benchmark US 10-year Treasury yield touching its lowest since mid-March. The yield, which moves inversely to prices, was last seen down 6.5 basis points to 4.246 per cent. The two-year note, which typically tracks expectations of rate moves from the Federal Reserve, fell 7.8 basis points to 3.7 per cent.

The oil price drop was "driving the whole move," said Tom di Galoma, managing director of global rates trading at Mischler Financial Group.

"Do we actually get a prolonged ceasefire and a strait reopening? I don't know. This seems like it's going to take some time to work itself out. But right now, I think that's what's going on ... It's all the good news coming out of the Gulf," di Galoma said.

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 bets that those price rises would prompt the European Central Bank and Bank of England to raise rates on Friday, supporting German sovereign debt.

The dollar dropped to multi-week lows as the shine came off safe-haven assets. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.02 per cent to 98.19, after dropping to 97.632, its lowest in seven weeks.

"The dollar's weakness is mainly about the market unwinding the geopolitical risk premium," said George Vessey, lead FX and macro strategist at Convera in London.

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