Oil drops, stocks soar to wrap up a wild week. What just happened in markets?
Oil drops, stocks soar to wrap up a wild week. What just happened in markets?
Throughout the week, market participants acted as if the Iran conflict had concluded. The S&P 500 recently achieved three consecutive record highs, while the Nasdaq Composite extended its winning streak since 1992. This optimism stems from hopes for a Middle East ceasefire and the resumption of oil shipments through the Strait of Hormuz. Analysts suggest the global economic impact may ease as the crisis appears to be contained, allowing central banks to focus on stabilizing markets.
Wall Street’s recent performance shifted dramatically after the U.S. and Iran announced a ceasefire. Oil prices plummeted, with Brent crude hitting $90.38 per barrel—its lowest since March 10. This decline followed an Iranian foreign minister’s declaration that the Strait of Hormuz would remain fully open during the ceasefire period. The Dow surged 869 points, or 1.79%, reclaiming all losses since the conflict began. Despite lingering doubts about the ceasefire’s duration and the U.S. naval blockade, investors remained focused on recovery.
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The S&P 500 recorded its strongest week since May, driven by relief over the ceasefire, easing oil prices, and strong tech sector rebounds. Earnings reports further fueled the rally, with 88% of companies in the index delivering better-than-expected results. Analysts noted that even without full clarity, the market was encouraged by credible signals of de-escalation.
“The bar for positive surprises was reset lower, and the market and investors were braced for oil prices to be at higher levels than they are now,” said Keith Lerner, chief market strategist at Truist Advisory Services. “Even though there’s not full clarity at this point, there’s a pathway, or some credible signals, that we’re moving towards this de-escalation,” he added. “That little bit of good news has gone a long way.”
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The market’s rapid rebound also reflects technical factors. Algorithms triggered “forced buying” as volatility dipped, contributing to the surge. This pattern aligns with how U.S. markets have behaved in the past year, where dips often signaled buying opportunities. Traders anticipated Trump’s potential to ease risks if hostilities escalated, creating a self-reinforcing cycle of optimism.
“It’s momentum,” remarked Steve Sosnick, chief strategist at Interactive Brokers. “At this point, it’s almost a feeding frenzy. No one wants to be left out. FOMO is a weird thing, because you know that the F is clearly ‘fear,’ but it’s really ‘greed.'”
Despite oil prices still above pre-war levels, risk appetite grew. The Fear and Greed Index, a gauge of market sentiment, dipped into “extreme fear” in March before rebounding sharply to “greed” on Friday. While uncertainty persists, investors are capitalizing on the rally, confident that economic disruptions are temporary and that corporate earnings will sustain momentum.
