US stocks opened significantly higher on Monday as diplomatic efforts to reopen the Strait of Hormuz progressed, easing market fears of a prolonged energy supply shock. The CBOE Volatility Index (VIX) fell 7.4% to 25.17, reflecting a notable decline in recent market anxiety. All three major indices posted gains, with the S&P 500 climbing 63 points to 6,695 and the Nasdaq Composite advancing 265 points to 22,370, indicating a broad-based rally rather than one confined to a single sector.
The key driver behind the market movement was Brent crude oil falling below $100 per barrel. After briefly touching $105 per barrel earlier on Monday, Brent dropped under the $100 mark. The price of WTI crude had surged from $71 on March 2 to $94.65 by March 9, placing its price at the 99.6th percentile of its range over the past 12 months. This sharp increase was catalyzed by Iran's blockade of the Strait of Hormuz, which severed a critical artery for global oil exports.
This relief rally occurred as the US President threatened to reconsider leniency towards Iranian oil facilities unless the strait was reopened, while his administration moved to announce the formation of a coalition to escort vessels through the waterway. Concurrently, Iraq began taking steps to resume operations on the Kirkuk-Turkey pipeline.
Analysts at Goldman Sachs noted that "the current supply shock appears concentrated in the energy sector," distinguishing it from the broader inflationary spike that followed. This assessment is significant because it suggests central banks may not need to respond as aggressively, providing room for equity markets to recover.
Regarding the VIX index, despite Monday's decline, its level of 25 remains substantially above its one-year average of 19 and sits at the 93.8th percentile of its readings over the past year. The index has experienced significant volatility, soaring to 52.33 during the tax-related panic in April 2025 before compressing to 13.47 by the end of December. While Monday's drop is meaningful, it has not fully erased the sharp increase triggered by recent geopolitical shocks.
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