Stocks Surge, Oil Crashes as US-Iran Deal Reopens Hormuz

U.S. stocks surged and crude oil prices collapsed Monday after the United States and Iran announced a deal to end hostilities and reopen the Strait of Hormuz. The S&P 500 rose 2.3% in afternoon trading. WTI crude fell more than 8% to near $80 a barrel, its biggest single-day drop in two years.

The joint statement, released simultaneously in Washington and Tehran, calls for an immediate ceasefire and the resumption of tanker traffic through the strait within 48 hours. The closure had blocked roughly 20% of global oil supply since late last week, sending Brent crude above $95 and stoking inflation fears across developed markets.

Monday's rally was broad. Every S&P 500 sector finished higher, led by consumer discretionary and technology stocks. Energy was the only laggard, with Exxon Mobil and Chevron each down more than 3% on the oil price collapse. The Dow Jones Industrial Average added 680 points.

The dollar index slipped 0.4% as traders rotated out of safe havens. The Canadian dollar and Norwegian krone gained against the greenback, reflecting the drop in crude prices that benefits net importers but pressures oil-linked currencies. The euro rose to $1.0950, its highest in a week.

Traders said the deal removes a key source of uncertainty that had kept risk appetite suppressed. "The market was pricing in a prolonged disruption," one New York-based macro fund manager said. "Now that the strait is reopening, the inflation premium in oil is gone, and that opens the door for equities to catch up."

The reopening, scheduled for Friday, mirrors the scenario outlined in AlphaScala's earlier analysis of the Strait of Hormuz reopening. Tanker traffic is expected to resume within 48 hours, according to the joint statement. The next scheduled data point is Wednesday's U.S. crude inventory report from the Energy Information Administration.