By Jared Mitovich, Hannah Erin Lang and David Uberti
A historic plunge in oil prices. A soaring stock market. A Treasury rally. And they all arrived Wednesday -- despite missiles and drones continuing to fly across the Middle East.
For weeks, pressure has built on Wall Street for a postwar rally that no one wanted to miss. Stock pickers hung on President Trump's every word for signs of de-escalation. Shorts on crude futures and energy stocks piled up.
The U.S. and Israeli cease-fire with Iran on Wednesday kicked many of those trades into high gear, even as the outlook for skyscraper-sized tankers of oil and gas transiting one of the world's key energy chokepoints remains unclear.
As traders sent crude futures to one of their largest one-day drops on record, the Dow Jones Industrial Average rose 2.8%, or around 1,325 points, logging its best day since April 9, 2025.
"There was a kind of pent-up demand for a modicum of good news," said Phil Blancato, chief market strategist at Osaic.
Investors on Wednesday didn't wait for signs of whether the cease-fire will hold or if ship traffic through the Strait of Hormuz picks up. Benchmark U.S. oil prices plunged 16% -- a decline not seen since the depths of the pandemic -- to $94.41 a barrel.
At a time when the price of oil has been a de facto extension of the battlefield between Washington and Iran, as well as a singular force driving financial markets worldwide, that was enough to send stocks catapulting higher from New York to London to Tokyo.
"It would be foolish to say we're out of the woods. But I think both parties have reasons to stay on the path toward a peaceful resolution," said Chris Grisanti, chief market strategist at MAI Capital Management. "It's always a dangerous thing to say, but I do think the worst is behind us."
The prospect that the largest oil-supply disruption in history could soon ease propelled the S&P 500 2.5% higher, while the Nasdaq composite jumped 2.8%. The gains extended across the globe, with every major European and Asian index logging gains of 2% or more.
The surge came almost one year to the day since the president paused his "Liberation Day" tariff proposals that had sent markets tumbling. That bait-and-switch -- and the optimistic bets that the Trump-fueled market rout would come to a rapid end -- ultimately earned their own moniker: TACO, for "Trump Always Chickens Out."
Wednesday's TACO trade didn't pack as much punch as past pullbacks from tariff or war ultimatums. But the shift from Trump's threats that "a whole civilization will die tonight" to a two-week cease-fire deal still momentarily vindicated those who bet the Middle East conflict would be just a short-term drag on markets.
Economically sensitive industrial and consumer discretionary stocks jumped, as did home-improvement stores and even risky artificial-intelligence plays. Flash-memory maker Sandisk Corp rose 9.9%, while shares of United Airlines climbed 7.9%. Chock-full of fuel-hungry companies including trucking firms and rail operators, the Dow Jones Transportation Average notched a record.
The flip side was that bets on a wartime commodity shock got hammered, with a selloff ranging from international major oil companies like Exxon Mobil, Texas shale drillers such as Apache and natural-gas exporter Cheniere. Shares of U.S. fertilizer producer CF Industries fell 5.7%.
Few are convinced the tumult is over. Tanker-tracking firms report that traffic through the Persian Gulf remains at a trickle compared with prewar levels. "It is highly unlikely that trade into the Gulf will simply resume," Neil Roberts, head of marine and aviation at Lloyd's Market Association, which represents Lloyd's underwriters, said.
At the same time, oil prices remain about 60% higher than at the start of the year, putting pressure on an American economy that was already staring down stubbornly high inflation.
The price of oil after the cease-fire announcement "has not fallen further, in our view, because fundamentals tend to be sticky and ceasefires tend to be tricky," Clearview Energy partners told clients.
And even before the war began, investors had other things to worry about. A fresh bout of AI jitters weighed on shares of software, financial services and even trucking companies earlier this year. Concerns about the private credit market still linger. The rise in energy prices has already dashed Wall Street's hopes for multiple interest rate cuts this year: On Wednesday, traders saw a 73% chance that the Federal Reserve doesn't cut rates at all in 2026, up from 4% before the start of the conflict, according to CME FedWatch.
"This is a fragile situation. You cannot ignore that," said Ben Emons, chief investment officer at Fed Watch Advisors. He noted that the Cboe Volatility Index, though it plummeted on Wednesday, still looks relatively elevated. "The pricing in the market indicates there's some hedging still required, or a desire to see how this plays out."
Mark Hackett, chief market strategist at Nationwide, said some investors remain concerned that Iran is tightening its grip on the Strait of Hormuz and limiting tanker traffic.
"This isn't as easy as waving a magic wand," Hackett said.
Write to Jared Mitovich at jared.mitovich@wsj.com, Hannah Erin Lang at hannaherin.lang@wsj.com and David Uberti at david.uberti@wsj.com
(END) Dow Jones Newswires
April 08, 2026 18:00 ET (22:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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