U.S. markets opened sharply higher on Wednesday, with the Dow Jones Industrial Average soaring over 1,300 points. Crude oil futures plummeted as a two-week ceasefire agreement between the United States and Iran boosted risk appetite, prompting traders to rush into equities.
The Dow climbed 1,312.35 points, or 2.82%, to 47,896.81. The S&P 500 advanced 173.69 points, or 2.62%, to 6,790.54. The Nasdaq Composite jumped 762.75 points, or 3.46%, to 22,780.60.
The surge followed an announcement by former U.S. President Donald Trump on the 7th, agreeing to suspend bombing and attacks on Iran for two weeks, provided Iran agrees to "fully, immediately, and safely" reopen the Strait of Hormuz. He described the arrangement as a "two-way ceasefire."
Trump made the announcement via social media around 6:30 PM ET on April 7, less than two hours before a previously set deadline for airstrikes on Iranian bridges and power plants, which was scheduled for 8:00 PM ET that Tuesday.
Trump stated that he had spoken with Pakistani Prime Minister Shehbaz Sharif and Army Chief General Asim Munir, who requested a delay in the U.S. strikes.
The decision was attributed to the U.S. having "achieved and exceeded" all military objectives and making significant progress toward a final agreement concerning long-term peace and stability in the Middle East.
Trump revealed that the U.S. had received a 10-point proposal from Iran, which he viewed as a viable basis for negotiations. He noted that consensus had been reached on most previously contentious issues, and the two-week period would allow for finalizing the agreement.
This development came after Trump issued an ultimatum to Iran on March 21, demanding the reopening of the Strait of Hormuz. The deadline was extended three times, initially set for 48 hours, then pushed to 8:00 PM ET on April 6, and further delayed to 8:00 PM ET on April 7.
Earlier on April 7, Trump had posted on social media threatening Iran, stating, "Tonight, the whole civilization will perish. I don't want that to happen, but it might."
Following Trump's statement, West Texas Intermediate crude futures plunged over 16% to $94.41 per barrel. The international benchmark Brent crude June contract fell more than 14% to $93.67.
According to a statement from the Iranian Foreign Minister, Iran's Supreme National Security Council agreed to reopen the Strait of Hormuz for two weeks, conditional on a halt to all attacks. The statement indicated that transit would need to be coordinated with Iranian armed forces. Media reports also suggested Israel had agreed to the ceasefire.
Jay Woods, Chief Market Strategist at Freedom Capital Markets, commented, "The announcement of a temporary de-escalation in the Iran conflict isn't entirely surprising. Markets have become more adept at anticipating Trump's next moves. The concern now is whether this familiar 'two-week' framework will lead to a resolution."
Trump posted on Wednesday morning stating that the U.S. would cooperate with Iran on removing nuclear materials from the country and that the two nations were discussing import tariff and sanction relief.
Stocks that had been under pressure this year broadly advanced. Large-cap stocks like NVIDIA and Amazon rose more than 3% and 4%, respectively. Tesla shares gained over 4%. JPMorgan Chase and Boeing saw increases of more than 2% and 3%.
Conversely, energy stocks, which had surged since the conflict began, mostly declined. ExxonMobil fell over 6%, while Chevron dropped more than 4%.
Investors experienced a mixed trading session on Tuesday, with the S&P 500 edging up 0.08% as traders bet on a potential ceasefire. The Nasdaq Composite rose 0.10%, while the Dow declined by 85.42 points.
Markets recovered from session lows in the final hour of Tuesday's trading after Pakistani Prime Minister Shehbaz Sharif requested Trump extend the deadline for attacking Iranian infrastructure by two weeks. Sharif also called on Tehran to reopen the Strait of Hormuz for two weeks as a "goodwill gesture."
Trump had previously set 8:00 PM ET on Tuesday as the deadline for Iran to reach a deal with the U.S. to reopen the critical waterway, threatening attacks on power plants and bridges, and even the destruction of Iran's "entire civilization" if terms were not met.
At Tuesday's close, the S&P 500 remained 5.5% below its record high set earlier in the year. The benchmark index had neared a 10% correction in March before rebounding on optimism that Trump would find a path to mitigate the market-disrupting conflict.
The closure of the Strait of Hormuz had driven crude prices up more than 70% this year, pushing the national average gasoline price tracked by AAA above $4 per gallon for the first time since 2022.
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