Oil prices are declining further, and U.S. stocks are approaching their all-time high on Tuesday amid optimism that Israel’s conflict with Iran will not disrupt the global crude supply, despite the fact that a provisional ceasefire appeared to be eroding in the morning.
The S&P 500 was 1.2% higher in afternoon trading, following on the even more substantial gains for equities across Europe and Asia, following President Donald Trump’s announcement late Monday that Israel and Iran had reached a “complete and total ceasefire.” The primary indicator of Wall Street’s health has returned to within 1% of its February record, following a decline of approximately 20% during the spring.
At 1:56 p.m. ET, the Nasdaq composite was 1.5% higher, while the Dow Jones Industrial Average was up 518 points, or 1.2%..
In the oil market, the most significant movement occurred once more, as a barrel of benchmark U.S. crude decreased by 5.4% to $64.82. Brent crude, the global benchmark, experienced a 5.5% decline to $66.62.
Throughout the Israel-Iran conflict, there has been concern that it could restrict the global energy supply, resulting in increased gasoline prices and a negative impact on the global economy. Iran, which is a significant producer of petroleum, has the potential to obstruct the Strait of Hormuz off its coast. This passage is used by ships to transport 20% of the world’s daily oil requirements.
On Monday, oil prices experienced a significant decline following Iran’s apparent limited retaliatory strike, which did not affect the production or movement of crude. Even after the deadline to cease hostilities expired on Tuesday morning, prices continued to decline. Subsequently, Trump declared that the ceasefire was “in effect.”
In the past two days, oil prices have plummeted to a level that is nearly two weeks lower than it was prior to the onset of the conflict.
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According to Carsten Fritsch, commodities analyst at Commerzbank in Germany, oil prices may continue to decline as long as the ceasefire remains in effect and a sustainable peace solution is achieved, given the abundance of oil in the global market and the steady increase in production by the OPEC+ alliance of producing countries.
As a result of the decrease in crude prices, inflation should be alleviated, which could potentially provide the Federal Reserve with additional flexibility to reduce interest rates.
Wall Street is fond of lower rates because they can stimulate the economy by making it more affordable for U.S. households and businesses to borrow money to purchase a vehicle or construct a factory. However, they could also serve as an additional source of inflation. The Fed has been hesitant to reduce rates this year due to the latter concern, as it has already done so through the end of last year.
The Federal Reserve has stated on numerous occasions that it intends to delay its next action until it has determined the extent to which Trump’s tariffs will exacerbate inflation and harm the economy. Despite the fact that a report on consumer confidence in the United States was weaker than anticipated on Tuesday, the economy appears to be holding up well. Inflation has remained slightly above the Federal Reserve’s 2% target.
However, Trump has been advocating for additional rate reductions. And two of his appointees to the Federal Reserve have indicated in the past week that they may contemplate reducing rates at the Fed’s upcoming meeting next month.
Fed Chair Jerome Powell continues to exhibit a more circumspect approach. In his testimony to Congress on Tuesday, he reiterated that the Federal Reserve is “well-positioned to delay any policy adjustments until we have a better understanding of the economy’s likely trajectory.”
Powell stated, “We will arrive at a point where we cut rates, sooner rather than later—but I would not want to point to a particular meeting,” when asked whether a cut could occur as soon as July. I believe there is no need for us to be in a hurry, as the economy is still robust.
Treasury yields fluctuated in the bond market as a result of these contradictory messages. 4.30% was the yield on the 10-year Treasury, which decreased from 4.34% as of late Monday.
The two-year Treasury yield, which is more closely aligned with expectations for Federal Reserve action, decreased from 3.84% to 3.82%.
Carnival, a cruise operator, surged 6.7% higher on Wall Street following the announcement of a significantly higher profit for the most recent quarter than analysts had anticipated. According to CEO Josh Weinstein, there is a significant increase in demand from individuals who are reserving cruises in close proximity to the departure date, and customers are spending significantly during their stay. Carnival also increased its forecast for a fundamental measure of profit for the full year.
Uber Technologies experienced a 7.8% increase in value following the announcement that its app will enable customers in Atlanta to travel in Waymo autonomous vehicles.
The cryptocurrency exchange, Coinbase Global, experienced a 11.4% increase in value as the price of Bitcoin surpassed $105,000.
Following the Israel-Iran ceasefire announcement, indexes in foreign stock markets experienced a surge of over 1% in countries such as France, Germany, and Japan. Two of the most significant movements were the 2.1% increase in Hong Kong and the 3% increase in South Korea.
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