Wall Street Rallies As Hormuz Reopens, US Maintains Pressure On Iran

The temporary reopening of the Strait of Hormuz has triggered a sharp rally across global markets, even as the United States maintained its hardline position on Iran, underscoring that geopolitical risks remain far from resolved.

Iran on Friday allowed commercial vessels to pass through the critical oil transit route for the duration of a 10-day ceasefire, signalling a potential de-escalation in the ongoing conflict, according to Reuters. However, US President Donald Trump made it clear that the American naval blockade on Iranian ports would continue until a broader agreement is finalised, keeping strategic pressure intact.

The mixed signals are partial reopening alongside continued military restrictions which created a fragile balance between optimism and caution in global markets.

Markets Cheer Easing Tensions

Global equities surged in response to the easing geopolitical risk premium. On Wall Street, all major indices closed at or near record highs, driven by a sharp decline in oil prices and renewed investor appetite for risk.

The S&P 500 rose 1.2% to a fresh all-time high, marking its third consecutive record close and its longest weekly winning streak since late October. The Nasdaq Composite gained 1.5%, also logging its third straight record finish, while the Dow Jones Industrial Average jumped 868 points, or 1.8%, after surging as much as 1,100 points during the session.

Broader market participation was evident, with the Russell 2000 outperforming and hitting a record high, as cooling energy prices lifted margin-sensitive smaller companies.

The rally caps a sharp rebound, with US markets climbing over 12% since late March, driven by expectations that the United States and Iran may avoid a worst-case economic fallout from the conflict.

Oil Prices Collapse as Supply Risks Ease

Global oil prices plunged sharply on Friday, with both benchmark crude contracts falling over 10% after signs of easing geopolitical tensions and assurances on the reopening of the Strait of Hormuz, according to Reuters.

Brent crude futures dropped $10.42, or 10.48%, to $88.97 per barrel, after hitting an intraday low of $86.09. US West Texas Intermediate (WTI) crude fell $11.48, or 12.12%, to $83.21, touching a low of $80.56 during the session. Both benchmarks were trading at their lowest levels since March 10 and were set for their sharpest daily decline since April 8.

The reopening of the strait, even temporarily, eased concerns over a potential chokehold on global oil supply. The waterway typically carries nearly one-fifth of the world’s oil trade.

Fragile Truce, Conflicting Signals

Despite the market optimism, developments on the ground reflected continued uncertainty.

Iran's Foreign Minister Abbas Araqchi said the strait would remain open for commercial vessels during the ceasefire period, Reuters reported. However, senior Iranian leaders warned that the route could be shut again if the US naval blockade persists.

Tehran has also introduced new conditions, requiring ships to coordinate with its military authorities, while restricting access for vessels linked to the US and Israel. Vessel tracking data showed that several ships attempted to pass through the strait but later turned back, though reasons remained unclear, according to Reuters.

At the same time, the US reiterated its firm stance. Trump described the reopening as "a great and brilliant day for the world" at a rally, but confirmed that the blockade of Iranian ports would remain until negotiations are fully concluded.

Diplomacy Gains Momentum, But Gaps Remain

The reopening of Hormuz follows a US-brokered ceasefire between Israel and Lebanon, raising hopes of broader diplomatic progress.

Trump said Iran has agreed to suspend its nuclear programme indefinitely, fuelling optimism that a deal to end the conflict could be within reach, Bloomberg reported. However, Iranian officials have not confirmed the claim and continue to defend their right to civilian nuclear activity.

At the same time, there were conflicting signals on financial terms. While some reports suggested a potential unfreezing of Iranian assets as part of a deal, Trump denied that any funds would be released, reiterating a tough negotiating stance.

Diplomatic sources indicated that a preliminary agreement could be reached in the coming days, potentially extending the ceasefire and paving the way for a broader deal within 60 days, according to Reuters. However, officials on both sides acknowledged that significant gaps still remain, particularly around nuclear commitments and sanctions relief.

The temporary reopening of the Strait of Hormuz has provided immediate relief to global markets, lowering oil prices and boosting equities. However, the situation remains fluid and uncertain.

The coexistence of a ceasefire, partial maritime access, and continued military restrictions highlights a complex geopolitical environment where risks have eased—but not disappeared.

For now, markets are pricing in optimism. But the sustainability of this rally will depend on whether diplomatic progress translates into a lasting resolution, or whether tensions resurface once the ceasefire window closes.