US president Donald Trump said the war he launched with Israel was “close to over” and the White House expressed optimism about a deal, but industry sources said transit through the Strait of Hormuz, a crucial waterway for global oil and gas shipments, is running at a fraction of its usual volume.
A source briefed by Tehran told Reuters Iran could consider allowing ships to sail freely through the Omani side of the strait if a deal was reached to prevent renewed conflict.
The S&P 500 rose 0.80%, to 7,022.95 and the Nasdaq Composite rose 1.60%, to 24,016.02, but the Dow Jones Industrial Average fell 0.15%, to 48,463.72.
“Equity markets, especially in the United States, have rallied back pretty aggressively, showing a decent amount of confidence that this is probably over, or close to the end,” said David Seif, chief economist for developed markets at Nomura, referring to “the supply disruption that comes from Hormuz being closed.”
In a Fox Business Network interview conducted on Tuesday and broadcast Wednesday, he said, “I view it as very close to over.”
White House press secretary Karoline Leavitt told a news conference, “We feel good about the prospects of a deal.”
Major banks reported rising profits, kicking off an earnings season analysts expect to show growth across the S&P 500.
Bank of America and Morgan Stanley both reported strong first quarters, pushing their shares up 1.8% and 4.5% respectively.
Oil steadies
Oil steadied following steep falls during the previous session, as the stranglehold on the Strait of Hormuz countered optimism about peace talks.
Energy consulting firm Gelber & Associates said a small but increasing number of tankers were moving through the strait. The market was “no longer pricing a full-scale outage, but still holding a residual premium as flows recover unevenly rather than snapping back to normal,” the analysts said.
US crude settled up 0.01% at US$91.29 a barrel, while Brent rose 0.15% to US$94.93 per barrel.
The US Energy Information Administration reported a surprisingly large draw on US weekly crude, supporting prices.
Dollar drifts
The US dollar held nearly unchanged, fluctuating slightly but on track for its eighth straight session of declines.
The dollar index, which measures the US currency against six units, was last up 0.01% at 98.08.
“Not only are we at the mercy of the headlines over the conflict, but now the focus is going to be on economic growth,” said Juan Perez, senior director of trading at Monex US.
Treasuries slide
Continuing caution tied to the Middle East hostilities saw US Treasuries slide, reversing some of their recent gains.
The two-year Treasury yield, which typically moves in step with expectations for the Federal Reserve’s next moves on interest rates, rose 1 basis point to 3.761%. The 10-year yield was up 2.5 basis points to 4.282%.
Disruptions to global energy markets from the Iran war have had more of an effect on European markets than on the United States, which is a net energy exporter, Nomura’s Seif said.
“If you look at what has happened to bond prices in the US, Treasuries, versus in Europe, it hasn’t been good for US bond prices but it has been arguably a lot less negative,” Seif said.
The yield on benchmark German 10-year Bunds rose 1.5 basis point to 3.045%, from 3.03% late on Tuesday.