Markets Rebound as Ceasefire Hopes Ease Oil Shock and War Fears

Stocks recover late, oil prices tumble below $100, and global markets surge as a potential U.S.?Iran ceasefire and Strait reopening calm investors.

The S&P 500 fell as much as 1.2% but stocks rallied at the end of trading after Pakistan?s prime minister urged Trump to extend his deadline for another two weeks and asked Iran to open up the strait for the same amount of time. The Dow Jones Industrial Average dipped 85 points, or 0.2% and the Nasdaq composite added 0.1%.

Oil prices plunged below $100 a barrel and Asia markets and U.S. stock futures jumped after the U.S. and Iran agreed to a two-week ceasefire that includes the reopening of the Strait of Hormuz. Futures for U.S. crude oil sank 14.3% to $96.83 a barrel and Brent crude oil, the international standard, dropped 13.3% to $94.74. Oil prices had spiked because the war snarled the production and transportation of crude in the Persian Gulf. Much of that oil exits the gulf through the Strait of Hormuz to reach customers around the world, but Iran had blocked it to enemies. The average price for a gallon of regular gasoline across the United States has leaped to $4.14, according to AAA. It was below $3 a couple days before the United States and Israel launched attacks to begin the war in late February.

Oil prices rose after seesawing amid uncertainty over the war with Iran, which threatens global oil and natural gas flows. Iran rejected the latest ceasefire proposal, demanding a permanent end to the war with guarantees against future attacks. Fighting persisted, including an Israeli strike on an Iranian petrochemical plant, as a Trump deadline looms for opening the Strait of Hormuz?a key route for one-fifth of the world's oil.

U.S. stocks reacted positively to stronger-than-expected jobs data, with unemployment improving unexpectedly. Gasoline prices have surged to $4.12 per gallon nationwide, up from below $3 before the late-February war start. Oil-importing nations face even steeper pain due to blockages in Persian Gulf crude exports via the strait.

Asia-Pacific markets rallied overnight while U.S. stock futures jumped on news of the ceasefire. Japan?s benchmark Nikkei 225 rose 4.8% and South Korea?s Kospi gained 5.6%. European stocks are expected to open sharply higher on Wednesday after the U.S. and Iran agreed to a conditional ceasefire deal. The U.K.?s [FTSE 100] index is seen opening 3% higher, with Germany?s [DAX] 5% higher, France?s [CAC 40]?up 4.5% and Italy?s [FTSE MIB] 5.3% higher, according to data from IG.

In the bond market, Treasury yields eased on word of a potential cease-fire. The yield on the 10-year Treasury fell to 4.24% from 4.30% earlier Tuesday. That?s still well above its 3.97% level from before the war and the rise has pushed up rates for mortgages and other loans going to U.S. households and businesses which slows the economy.