Stocks traded higher for a second consecutive week as a ceasefire announcement between the U.S. and Iran triggered the
strongest single-day rally in roughly a year. The S&P 500 gained +3.7%, the Nasdaq rose +4.2%, and the Russell 2000
returned +4.3%. Most of the rally occurred Wednesday following news of a two-week ceasefire contingent on Iran
reopening the Strait of Hormuz. Oil fell -11%, the VIX dropped below 20, and international stocks rose as energyimporting nations benefited from lower oil prices. Industrials led all sectors with a gain of +5.3%, with most sectors
participating in the rally. Treasury yields declined modestly, and corporate bonds outperformed as credit spreads
tightened to levels from late January. However, the ceasefire was being tested by late in the week, with markets closely
monitoring weekend talks.
Key Takeaways
1. Stocks Trade Higher on Middle East Ceasefire Headlines
The U.S. and Iran agreed to a two-week ceasefire, triggering a relief rally. Late Tuesday, the White House
announced an agreement contingent on Iran reopening the Strait of Hormuz, less than two hours before a stated
deadline to launch strikes. Markets reacted decisively Wednesday: the S&P 500 surged +2.5%, its best single-day
gain in a year, the Dow jumped +2.9%, the Russell 2000 gained +3.0%, and international equities rallied +3.5%.
Unlike prior headlines, this was an actual agreement confirmed by both sides, with talks scheduled for this
weekend. Implication – The ceasefire is meaningful, but it was tested within hours. Israel launched strikes across
Lebanon, Iran accused the U.S. of violating three conditions, and the Strait remained effectively closed Thursday
morning. This weekend’s talks will determine whether the agreement marks a turning point.
2. Oil Prices Fall as Market Prices in Hormuz Reopening
Oil fell -16% on Wednesday, its largest single-day decline since April 2020, as markets priced in a potential
Hormuz reopening. WTI crude dropped from around $112 to roughly $94, erasing weeks of war-driven gains that
had pushed oil up more than +65% year-to-date. The move had immediate ripple effects: airline stocks rallied,
and expectations for a Fed rate cut increased as near-term inflation concerns eased. However, the physical
reopening of the Strait hadn’t occurred as of Thursday, and oil prices were moving back toward $100.
Why it matters: Oil is the primary channel through which this conflict affects inflation, the Federal Reserve’s
decisions, consumers, and corporate profits. Wednesday’s swing showed how quickly that dynamic can shift when
headlines change. The key question is whether the ceasefire produces an actual reopening.
3. Credit Market & Volatility Signal Improving Risk Appetite Across Asset Classes
High-yield credit spreads, which measure the extra yield investors require to hold corporate bonds over
comparable Treasuries, tightened nearly -0.50% over the past two weeks and reached their lowest levels since
late January. The VIX, a measure of expected market volatility, closed below 20 for the first time since late
February, after briefly touching 28 intraday Tuesday before the ceasefire announcement. Why it matters: When
credit markets and volatility measures move in the same direction as stocks, it generally signals that the rally
reflects genuine improvement in investor confidence rather than a narrow or speculative move. Both confirmed
the week’s stock market advance.
4. Treasury Yields Hold Steady Despite the Ceasefire Rally
The 10-year Treasury yield fell less than -0.05% on the week to around 4.30%, a muted response given the scale
of moves elsewhere. The bond market’s reaction reflects the Fed’s policy forecast. Seven of nineteen Fed
members forecast zero cuts in 2026, and the Fed’s March minutes, released this week, reaffirmed its patient
approach. Why it matters: The bond market’s muted reaction suggests investors are waiting to see whether the
ceasefire meaningfully changes the inflation and growth picture before adjusting their rate expectations.
5. Earnings Season Kicks Off Next Week
First-quarter earnings season unofficially begins next week, with the major Wall Street banks reporting.
Beyond the typical focus on revenue and profit results, investors will be listening closely to management
commentary on the conflict’s effects: energy costs, supply chain conditions, consumer demand, and any changes
to forward guidance. Why it matters: Corporate earnings calls will offer the first direct read on how the energy
shock has worked its way through company costs, pricing, and demand. Forward guidance and tone may matter
more than the headline numbers this quarter.
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