Stocks rally worldwide as oil prices ease on hopes for a possible end to the Iran war

Diana Avigdor, portfolio manager & head of trading at Barometer Capital Management, joins BNN Bloomberg to provide a closer look at the markets.

NEW YORK (AP) — Stocks rushed higher worldwide, and oil prices eased Wednesday as hopes built that the war with Iran  could end soon.

That’s even though some of the signals investors saw as hopeful are already under dispute, and several earlier bouts of optimism in financial markets quickly got undercut by continued, fierce fighting in the war.

The S&P 500 rose 0.7 per cent and added to its leap from the day before, which was its best since last spring. That followed even bigger gains for stock markets across Europe and Asia, including an 8.4 per cent surge in South Korea, which were catching up to Wall Street’s rally from Tuesday.

The Dow Jones Industrial Average climbed 224 points, or 0.5 per cent, and the Nasdaq composite rallied 1.2 per cent.

Oil prices  also fell back toward US$100 per barrel after President Donald Trump said late Tuesday that the U.S. military could end its offensive in two to three weeks.

That added to optimism following a couple tenuous signals of hope from earlier Tuesday that Wall Street latched onto, including a news report quoting Iran’s president as saying that it has “the necessary will to end the war” as long as certain requirements are met, including “guarantees to prevent a recurrence of aggression.”

The worry on Wall Street has been that the war may last a long time and keep oil and natural gas  from the Persian Gulf out of global markets, which could create a brutal blast of inflation.

But hope has been quick to reverse to doubt on Wall Street, triggering manic swings back and forth for financial markets since the war with Iran began. Trump has also made statements that lifted markets, only to see the gains quickly disappear after increasing his military threats.

Shortly before Wall Street began trading on Wednesday, Trump claimed in a post on his social media network that Iran “has just asked the United States of America for a CEASEFIRE!”

“We will consider when Hormuz Strait is open, free, and clear. Until then, we are blasting Iran into oblivion or, as they say, back to the Stone Ages!!!”

But Iran’s Foreign Ministry spokesman, Esmail Baghaei, quickly called that claim “false and baseless,” according to a report on Iranian state television.

Oil prices also remain high, even if they’ve eased recently. The price for a barrel of Brent crude oil, the international standard, was sitting around US$101 following its declines, which is still up from roughly US$70 before the war began.

U.S. gasoline prices  rose again overnight to a national average of US$4.06 per gallon, according to the auto club AAA.

Iran, meanwhile, hit an oil tanker off the coast of Qatar and Kuwait’s airport on Wednesday while airstrikes battered Tehran as the fighting continued. Iran also continues to hold a grip on the Strait of Hormuz, where a fifth of the world’s traded oil passes during peacetime.

“De-escalation hopes have given markets a lift, but we think the effects of the war would, in many cases, persist even if the war did end soon,” Thomas Mathews, head of markets, Asia Pacific at Capital Economics, said in a research note Wednesday.

“It’s worth thinking through how markets might fare if the war were to end ‘very soon,’” he wrote. “Do markets have further to recover if sentiment continues to improve? The answer is almost certainly yes.”

The White House said Trump will deliver a public address Wednesday evening on the Iran war.

On Wall Street, three out of every five stocks within the S&P 500 rose as Big Tech powered the move higher. Gains of 3.4 per cent for Alphabet and 0.8 per cent for Nvidia were two of the strongest forces lifting the S&P 500.

Eli Lilly rallied 3.8 per cent after U.S. regulators approved its GLP-1 pill  for weight loss.

Such gains have pulled the S&P 500, which sits at the heart of many 401(k) accounts, back to within 5.8 per cent of its all-time high set early this year. Just on Monday, the index briefly neared a 10 per cent drop from its record, a steep-enough fall that professional investors have a name for it: a “correction.”

Nike sank 15.5 per cent even though it reported a stronger profit for the latest quarter than expected. Analysts said it gave some lackluster financial forecasts.

Oil companies also fell with the price of crude. Exxon Mobil slumped 5.2 per cent, and Chevron dropped 4.6 per cent.

All told, the S&P 500 rose 46.80 points to 6,575.32. The Dow Jones Industrial Average added 224.23 to 46,565.74, and the Nasdaq composite climbed 250.32 to 21,840.95.

In stock markets abroad, indexes leaped more than 2 per cent in France and Germany. Asian markets had even bigger gains.

Tokyo’s Nikkei 225 jumped 5.2 per cent after a survey showed business sentiment for major Japanese manufacturers improved despite worries about the Iran war.

In the bond market, Treasury yields held relatively steady after a report said U.S. retailers made more money in February than economists expected. A separate report said U.S. manufacturing growth last month was slightly faster than economists expected.

The 10-year Treasury yield rose to 4.32 per cent from 4.30 per cent late Tuesday.

Stan Choe, The Associated Press. Associated Press writers Matt Ott and Chan Ho-him contributed.