Kamal Ghorui
Wall Street benchmarks closed at record highs on Friday, as easing geopolitical tensions in West Asia fuelled a broad risk rally across global markets, sending equities higher and oil lower.The S&P 500 and Nasdaq Composite notched their third straight record closes, while the Dow Jones Industrial Average posted its strongest finish since late February. Gains were led by small-cap stocks, with the Russell 2000 outperforming to end at a record high.The S&P 500 rose 1.2% to a fresh all-time high, marking its third straight record close and capping its longest weekly winning streak since late October. The Nasdaq Composite gained 1.5%, also logging a third consecutive record finish.The Dow Jones Industrial Average surged as much as 1,100 points during the session before trimming gains to close up 868 points, or 1.8%, its strongest finish since late February.Gains were broad-based, with the Russell 2000 outperforming large caps to end at a record high, as cooling energy prices lifted margin-sensitive smaller companies.The rally has been sharp: the broader US market has climbed more than 12% since bottoming out in late March, driven by expectations that the United States and Iran may avoid a worst-case economic fallout from the conflict.That optimism strengthened after Iran signalled the reopening of the Strait of Hormuz during a temporary ceasefire. US President Donald Trump said the war “should be ending pretty soon.”The rally was underpinned by a sharp fall in oil prices after Iran FM Abbas Araqchi said the Strait of Hormuz would remain open to commercial shipping during a 10-day ceasefire between Israel and Lebanon brokered by the United States; a development also claimed by Trump. The waterway is a vital conduit for global crude flows, and assurances of uninterrupted passage eased fears of supply disruption. However, Iran Parliament Speaker later (after US markets closed for the session) claimed the Hormuz is not open and ships will pass through US President Donald Trump added to the optimism, saying Washington expected to reach a deal to end the conflict and would work with Iran on recovering its enriched uranium, a key sticking point in negotiations.Oil markets reacted swiftly. Brent crude fell 9% to settle at $90.38 per barrel after hitting a session low of $86.09, while West Texas Intermediate dropped 11.45% to $83.85. Prices, though still above pre-war levels near $70, have retreated significantly from late-March highs close to $120.“Energy prices coming down has a bigger impact on small caps because they have tighter margins,” said Nick Johnson, as quoted by Reuters, adding, “it’s starting to become clear that the US and Iran want to see this behind them.”Sectoral moves reflected the shift. Energy majors such as Exxon Mobil and Chevron declined, while airlines including American Airlines and United Airlines surged on expectations of lower fuel costs.Among individual stocks, Netflix fell more than 9% after issuing a weak growth forecast and announcing the departure of chairman and co-founder Reed Hastings.Bond markets also rallied, with US Treasury yields falling as inflation concerns eased alongside declining energy prices. The benchmark 10-year yield touched its lowest level since mid-March, while the 2-year yield—sensitive to Federal Reserve policy expectations—also moved lower.“The oil price drop was “driving the whole move,” said Tom di Galoma. “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.”The US dollar weakened to multi-week lows as investors unwound safe-haven positions.“The dollar’s weakness is mainly about the market unwinding the geopolitical risk premium,” said George Vessey.In Europe, traders pared expectations of aggressive rate hikes from the European Central Bank and the Bank of England, supporting sovereign bond markets across the region.
