U.S. stocks advanced further during Friday's early session. The Dow Jones Industrial Average surged more than 800 points, while the Nasdaq and S&P 500 indexes reached new record highs. The rally followed announcements of a ceasefire between Israel and Lebanon and Iran's declaration that the Strait of Hormuz is fully open. Crude oil prices fell sharply.
The Dow climbed 830.61 points, or 1.71%, to 49,409.33; the Nasdaq gained 293.88 points, or 1.22%, to 24,396.58; and the S&P 500 rose 72.81 points, or 1.03%, to 7,114.09.
Iranian Foreign Minister Seyyed Abbas Araghchi stated on a social media platform that, in coordination with the Lebanon ceasefire, all commercial vessels are permitted full passage through the Strait of Hormuz using the coordinated routes previously announced by Iran's Ports and Maritime Organization.
In response, the U.S. President expressed gratitude for Iran's decision to open the strait, writing on social media: "Iran has just announced the Strait is fully open for complete passage. Thank you!"
This development came after the President announced on Thursday that Israeli and Lebanese leaders had agreed to a 10-day ceasefire, effective 5 p.m. Eastern Time that day.
The President also remarked that the conflict with Iran "should be over very shortly," commenting during an event in Las Vegas that the situation was "going along pretty well."
Earlier in the week, the President had indicated that Middle East tensions were "very close to ending," adding that Tehran was "very eager to make a deal."
Expectations for a peace agreement have driven stock markets to recent record highs, with all three major indexes poised for solid weekly gains. The blue-chip Dow is up 1.4% for the week, while the S&P 500 and Nasdaq have climbed 3.3% and 5.2%, respectively.
However, Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, cautioned that the limited breadth of the current market rally may not indicate a sustainable upward trend.
Sonders noted, "It's only been 11 days since we hit new highs. That's fine by itself, but I think we need to see more participation beneath the surface to feel confident about any lasting strength here."
She added, "I just think there are still a lot of unresolved questions. In this environment, I believe investors should return to the discipline of diversification within and across asset classes. Don't make big bets here; use volatility to your advantage, perhaps by increasing rebalancing frequency, especially if you are an investor who rebalances purely based on the calendar."
Analysts pointed to several key factors supporting market optimism: investors' tendency to buy on dips, enthusiasm for artificial intelligence investments, and consistently robust corporate earnings.
A surge in capital expenditure by major technology companies has also provided strong support. During the first-quarter earnings season, several tech firms announced significant increases in capital spending, boosting shares of emerging market tech hardware and semiconductor companies. Although U.S. hardware stocks have not fully benefited, overall risk appetite remains elevated.
Some asset managers believe current market pricing aligns with equity performance, maintaining an "overweight risk" stance. However, analysts also warn that investors who have not yet closed out hedge positions may still have opportunities to act at more favorable price levels, as the Middle East situation is unlikely to evolve smoothly—the possibility of failed negotiations and resumed hostilities cannot be ruled out.
Ultimately, this period of market volatility suggests that equities are becoming more resilient to shocks. But the same cautionary note applies: "More events will occur."
The prospect of de-escalation has encouraged investors to return to risk assets, including previously hard-hit technology and software stocks. Analysts suggest that even if an immediate peace deal is not reached, a broader rise in risk appetite could persist as long as investors believe the conflict will eventually be resolved. Analysts at Deutsche Bank indicated that while the path may not be smooth, a resolution is likely within the coming weeks.
In individual stock news, Netflix was in focus. The company reported first-quarter earnings after Thursday's close, showing revenue grew 16% year-over-year to $122.5 billion, beating expectations. Net profit nearly doubled, boosted by a $2.8 billion termination fee from Warner Bros. Discovery. However, the company's profit guidance for the second quarter fell short of analyst forecasts, and co-founder and Chairman Reed Hastings announced he would step down from the board after 29 years. Consequently, Netflix shares fell approximately 9% in after-hours trading.
Markets are now watching for developments from weekend talks between U.S. and Iranian officials; any breakdown in negotiations could reignite volatility. With no major economic data released on Friday, investor attention remains focused on corporate earnings, with reports so far this week indicating continued resilience in U.S. consumer spending.
Comments