Stocks roared higher on Wednesday, after President Donald Trump announced a two-week ceasefire between the United States and Iran, bringing a pause to the war that started more than a month ago.
Official statements from Washington and Tehran, however, did not offer a clear picture of what the future of shipping traffic in the Strait of Hormuz would look like. Despite the unanswered questions, markets had an overwhelmingly positive response to the news.
The S&P 500 surged 2.3%. The Nasdaq Composite soared 2.8%, the Dow spiked 1,200 points and the Russell 2000 rose 3%.
Strategists on JPMorgan Chase’s trading desk said the S&P 500 could rise even further “as euphoria returns to markets.”
“Assuming that this is not a feint from any of the parties, the market is likely to treat this as a de facto end of the conflict despite the economic damage that is still coming across all regions,” they wrote.
Other experts cautioned that investors and traders could be getting ahead of themselves.
“We are not out of the woods yet,” Krishna Guha, Evercore vice chairman and head of economics, wrote in a memo Wednesday morning. “The ceasefire could fall apart. There will still be an initial inflation shock.”
Not long after trading began on Wednesday, an Iranian semi-official news agency reported that traffic was suspended in the Strait of Hormuz in response to Israel’s attacks on Lebanon. The news did little to slow the drop in oil prices, however.
U.S. crude oil prices had plunged 15% by early afternoon trading Wednesday, to around $95 per barrel. International Brent crude oil also tumbled 13% to around $95. If the move in U.S. crude oil holds through the afternoon, it would mark its biggest one-day percentage drop since 2020.
But whether oil tankers will decide to transit the strait — even if Iran says some are being granted safe passage — is far from assured.
The decision rests in part on whether the ships can secure maritime insurance, a crucial financial hedge for valuable cargo on the high seas.
“Time will tell whether it is a pause or a peace but, in the meantime, it is highly unlikely that trade into the Gulf will simply resume,” wrote Neil Roberts, head of the Lloyd’s Market Association.
“The region remains at heightened risk with none of the underlying tensions resolved,” he added. The Lloyd’s of London market is the global hub for maritime and shipping insurance.
But while oil prices may be falling, gas prices will take longer to reflect the moves.
In some parts of the United States, “these big drops today don’t get locked in until this evening,” GasBuddy analyst Patrick De Haan wrote on X. He predicted that “prices may begin to ease” in the next 36 hours, and the cost of a gallon of gas could fall 1 to 3 cents per day by the weekend.
Since the war started, unleaded gas prices have risen more than $1.20 per gallon, from $2.94 to $4.16 as of Wednesday morning, according to GasBuddy data.
Jet fuel prices have also been soaring. Since the U.S. and Israel launched strikes on Iran on Feb. 28, the costs have nearly doubled, according to data from industry monitor Argus.
Delta Air Lines said Wednesday that it expected to spend an additional $2 billion more on jet fuel in the current quarter than it had previously planned. It also said it would cut its growth plans to stem rising costs.
Exxon Mobil also said Wednesday that about 6% of its global output had been lost as a result of the war. It said two liquefied natural gas facilities in which the company holds an interest were impacted by “attacks.”
“Public reports indicate the damage will take a prolonged period to repair,” Exxon said in a statement. “Pending an on-site evaluation, we are unable to comment on the length of time before the two trains return to normal operations.” A train is a processing unit for liquefied natural gas.
Meanwhile, U.S. Treasury yields of all maturities traded steeply lower on the news of a short-term ceasefire. The 10-year yield, which influences consumer mortgage rates, dropped sharply to 4.23%. Just weeks ago, it was trading at nearly 4.4%.
Stocks around the world also rallied. Japan’s Nikkei 225 soared more than 5%, Korea’s Kospi index surged 7% and the Hang Seng index in Hong Kong was up 3%.
Europe’s Stoxx 600 surged 4.5%. Flagship indexes in France, Italy and the United Kingdom jumped more than 3%. Germany’s DAX stock index jumped more than 5%.
