The S&P 500 closed above 7,100 for the first time on Friday, while the Nasdaq Composite extended its longest winning streak since 1992, after Iran declared the Strait of Hormuz open to commercial shipping. WTI crude plunged 12% in response — but confusion quickly emerged over whether the critical waterway is actually open for transit.
U.S. Markets Surge to New Records
All three major U.S. indexes posted strong gains on Friday, wrapping up a week dominated by Middle East developments and the earnings season.
- S&P 500: 7,126.06 (+84.78, +1.20%) — third consecutive record close and first finish above 7,100
- Nasdaq Composite: 24,468.48 (+365.78, +1.52%) — third straight record close, extending the longest consecutive winning run since 1992
- Dow Jones: 49,447.43 (+868.71, +1.79%) — highest close since late February
- Russell 2000: 2,776.9 (+57.30, +2.11%)
The rally was broad-based. Small caps led the charge as the Russell 2000 gained over 2%, signaling that the risk-on mood extended well beyond mega-cap tech. The plunge in crude oil prices provided immediate relief for companies facing elevated input costs, benefiting airlines, logistics, and consumer discretionary names in particular.
Oil Prices Crash on Hormuz Announcement — But Confusion Remains
The session’s primary catalyst was Iran’s declaration that the Strait of Hormuz — the narrow waterway through which roughly a fifth of the world’s crude oil supply passes — was “completely open” for all commercial vessels during the ceasefire between Israel and Lebanon.
WTI crude futures settled down 12% at $83.85 per barrel, while Brent crude finished the day down roughly 9%.
However, the situation on the ground was far more ambiguous. Video footage from ship-tracking firm Kpler showed tankers and cargo ships attempting to exit the strait through the route designated by Iran around Larak Island — only to turn back.
“They’ve clearly not been given approval to pass through,” Matt Smith, director of commodity research at Kpler, told CNBC. Fellow analyst Matthew Wright called the announcement “a false dawn,” adding that the strait remains “functionally closed.”
President Trump thanked Iran for opening the strait but said the U.S. naval blockade of Iran remains in effect. Iran’s parliamentary speaker quickly responded that with the blockade continuing, the strait “will not remain open.”
The world’s largest shipping association, BIMCO, advised vessels to avoid the strait due to the threat of mines, stating the area is “not declared safe for transit.”
European Stocks Rally as Travel and Luxury Lead, Energy Sinks
European equities jumped across the board as the Hormuz announcement fueled hopes that the worst of the energy supply disruption may be nearing an end.
- STOXX Europe 600: 626.58 (+9.62, +1.56%) — fourth consecutive weekly gain
- DAX (Germany): +2.27%
- IBEX 35 (Spain): +2.18%
- CAC 40 (France): approximately +2%
- FTSE 100 (UK): 10,667.63 (+0.73%)
“The way the market is reacting, there are signs that this could be something more meaningful and hopefully sustainable,” said Ciaran Callaghan, head of European equity research at Amundi, speaking to Reuters.
Travel and luxury stocks were the biggest winners, gaining over 4% each. Airlines including Ryanair, Lufthansa (+6.9%), and easyJet (+6.1%) surged as lower oil prices eased fuel cost concerns. LVMH (+3.2%), Hermès (+5.2%), and Kering (+3.0%) all rose sharply. Euro zone banks climbed 3.3%, and the aerospace and defense index gained 3.1%.
Energy shares, however, slid 4.2% as the oil crash dragged heavyweights lower. BP fell 7.4% and Shell dropped 5.6%. Utilities lost 1.4%.
In corporate news, French train maker Alstom plunged 27% after pulling its three-year cash flow forecast — its second major cash warning since late 2023. On the positive side, Delivery Hero gained 5.2% after Uber raised its stake in the company.
Bonds and Volatility: Risk Appetite Returns
The U.S. 10-year Treasury yield fell to 4.248%, down 6.1 basis points, as the Hormuz news eased inflation fears embedded in energy prices. Euro zone short-dated government bond yields dropped sharply to one-month lows, while money markets scaled back bets on future ECB rate hikes.
The VIX, Wall Street’s fear gauge, fell 2.6% to 17.48 — a level consistent with subdued near-term volatility expectations.
On the policy front, the Fed’s Miran may scale back the rate-cut outlook citing “less favorable” inflation data. Meanwhile, ECB President Christine Lagarde warned that the ECB needs to remain vigilant, as the ongoing conflict could drag euro zone growth lower and push inflation above already elevated projections.
What Asian Investors Should Watch
While Friday’s market reaction was overwhelmingly positive, several factors deserve close attention heading into the new week:
- Hormuz reality check: The strait is functionally still closed. If weekend U.S.-Iran negotiations in Pakistan fail to produce a concrete agreement, oil prices could reverse sharply.
- Asia oil supply crunch: Kpler analysts warned that Asian refineries, heavily dependent on Middle Eastern crude, have already significantly drawn down onshore inventories. “The supply crunch in Asia is bigger than anywhere else,” said freight analyst Matthew Wright.
- Central bank divergence: The Fed remains cautious on rate cuts due to sticky inflation, while the ECB faces a different dilemma — growth headwinds from the conflict versus energy-driven price pressures.
- Ceasefire durability: The 10-day Israel-Lebanon ceasefire that began April 16 underpins the current détente. Any escalation would immediately hit risk assets and push oil higher again.
Analysts say it will take months for traffic through the Strait of Hormuz to return to normal even once it fully reopens. Major shipping companies will likely observe from the sidelines before committing vessels. The disconnect between the oil futures market’s optimism and the physical reality on the water is the key tension to monitor.
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