Oil prices surged more than 4% on Thursday after Iran declared it would not reopen the strategic Strait of Hormuz as long as a US naval blockade remains in place, defying hopes that a ceasefire extension would ease tensions in the region.
West Texas Intermediate (WTI), the benchmark US oil contract, climbed 4.06% to $96.73 per barrel in early trading, while international benchmark Brent North Sea crude rose 3.62% to $105.63. Both benchmarks later pared some gains but remained sharply higher.
Iran Stands Firm Amid Mediation Efforts
The price surge comes after US President Donald Trump unilaterally extended the ceasefire in the Iran war on Tuesday, allowing more time for Pakistani-brokered peace talks. Iran welcomed Pakistan’s mediation efforts but made no further comment on Trump’s announcement, and its Revolutionary Guards seized two vessels for maritime violations hours after the truce extension.
“Despite the energy shock and headlines that have inundated investors, the macroeconomy, corporate fundamentals, and consumer spending remain strong,” said Bill Merz, head of capital markets research at US Bank Wealth Management in Minneapolis. “Investors are taking the stance that the Strait of Hormuz will open before too much damage is inflicted on the global economy.”
Approximately one-fifth of the world’s oil and liquefied natural gas (LNG) normally pass through the narrow waterway, making its closure a significant threat to global energy markets.
Wall Street Hits Record Highs Despite Geopolitical Uncertainty
Despite the oil shock, Wall Street stocks gained ground following Trump’s ceasefire extension. All three major US stock indexes advanced, with the S&P 500 and the Nasdaq reaching record closing highs. The Dow Jones Industrial Average rose 341.27 points, or 0.69%, to 49,490.52. The S&P 500 gained 73.90 points, or 1.05%, to 7,137.91, and the Nasdaq Composite was up 397.60 points, or 1.64%, to 24,657.57.
US stocks, initially battered by the war, have since made a full recovery. However, geopolitical uncertainty lingers, and a prolonged period of elevated oil prices remains a threat to corporate earnings and economic growth.
Corporate Concerns Over Energy Prices MountAbout two-thirds of the S&P 500 companies that have reported quarterly earnings since the beginning of April have voiced concerns about energy prices in their analyst conference calls, according to a Reuters review of transcripts. Dozens of international firms have withdrawn guidance or signaled price hikes since the war began.
“Anytime there’s a global event like the conflict the Middle East, and it grabs so many headlines and captures attention, it will crop up in earnings commentary,” Merz added. “ we’re not seeing it significantly impact behaviour yet.”
First-quarter earnings season is well underway amid lofty expectations. Analysts currently estimate year-on-year S&P 500 earnings growth of 14.4% for the January-March period, according to the most recent LSEG data.
Global Markets Show Mixed Performance
European shares ended lower for the third straight session as the Middle East strife continued to weigh on markets and investors assessed a raft of corporate earnings. The pan-European STOXX 600 index fell 0.35%, while the FTSEurofirst 300 index dropped 0.35%.
Emerging market stocks fell 0.58%, and MSCI’s broadest index of Asia-Pacific shares outside Japan closed lower by 0.6%. Japan’s Nikkei, however, rose 0.40%.
The dollar rose amid lingering geopolitical worries, with the dollar index climbing 0.26% to 98.63. US Treasury yields increased, with the benchmark 10-year note yield rising 1.2 basis points to 4.304%.
In cryptocurrencies, Bitcoin gained 4.13% to $78,866.74, while Ethereum rose 3.48% to $2,398.37.
