Markets are trading strongly this week on hopes the Iran war might soon be coming to an end. A fragile ceasefire has held despite peace talks collapsing, but President Trump overnight suggested conversations could resume this week.
Investors are ready to hear some good news—in fact, some economists are worried that they’re so keen to hear about an end to the war they will trade on optimism rather than concrete facts. Tickers across Asia are up this morning; S&P futures are hovering in hopeful territory; and markets in Europe are relatively flat (perhaps less inclined to trade on the promises of the White House).
Ahead of the opening bell in New York this morning, the S&P 500 closed “just shy of a record high,” Deutsche Bank’s Henry Allen told clients this morning. This means the index is now up 9.8% over the past 10 sessions, he added: “For reference, that’s now even faster than the bounce-back after Liberation Day last year, and we haven’t seen a run of gains that quick over 10 sessions since the post-COVID bounce-back in April 2020.”
For markets, the sooner the peace talks are finished, the better. That’s when the real test begins. The consternation about Iran, after all, stems from its hold over global oil and energy supplies. Oil prices have increased because Iran borders the Strait of Hormuz, a narrow waterway in the Persian Gulf through which exports from the UAE, Qatar, Kuwait, and Iraq all flow. Some 20 million barrels of oil typically flowed through the strait every day, about 20% of global supply. Between a U.S. blockade of the strait and threats from Iran that it has mined the area, ship captains have been unable to enter the waterway, choking off supply and sending prices spiraling.
