Oil falls to $90 and stocks soar as Iran opens Strait of Hormuz

Oil prices fell sharply and U.S. stocks surged Friday after a top Iranian official declared the Strait of Hormuz "completely open" to commercial traffic during the ceasefire between Israel and Lebanon.

Brent crude oil prices fell almost 9% to $90 a barrel, while WTI oil futures fell 10% all the way to $84 a barrel. The Dow Jones Industrial Average closed up 869 points, or 1.7%, while the S&P 500 added 1.2% and the Nasdaq rose 1.5%.

Iranian Foreign Minister Seyed Abbas Araghchi shared the announcement via X. "In line with the ceasefire in Lebanon, the passage for all commercial vessels through Strait of Hormuz is declared completely open for the remaining period of ceasefire," he said.

The announcement followed President Donald Trump's remarks Thursday that the Iran war "should be ending pretty soon." Speaking at a Las Vegas event, Trump characterized the conflict as "going along swimmingly. Earlier this week, Trump said the Middle East conflict is "very close to over" and that Tehran wants to "make a deal very badly."

Israel and Lebanon agreed Thursday to a 10-day ceasefire that went into effect at 5 p.m. E.T. that day. Netanyahu and Lebanese President Joseph Aoun, Trump added, would receive White House invitations for what he called the most substantive bilateral engagement between the two nations since 1983, according to CNBC. The U.S. State Department said both sides aimed to create conditions for lasting peace, including mutual recognition of sovereignty.

Measured over the past three weeks, both the S&P 500 and the Nasdaq are tracking gains not seen since 2020, according to The Wall Street Journal, with the Nasdaq's weekly advance alone surpassing 5%. Record highs for equities in recent sessions have been powered by optimism over a potential peace agreement, with weekly gains across the three major averages reaching 1.4% for the Dow, 3.3% for the S&P 500, and 5.2% for the Nasdaq.

The Strait of Hormuz has been at the center of an energy supply crisis since the U.S. and Israel launched attacks on Iran on Feb. 28, a conflict that has killed more than 5,000 people, mostly in Iran and Lebanon. Before hostilities began, the waterway carried roughly one-fifth of the world's oil supply. Iran effectively shut down commercial traffic through the strait for much of the conflict, with the U.S. Navy at one point moving to blockade Iranian ports after peace talks collapsed in mid-April.

The supply disruption sent oil prices above $100 a barrel at their peak, drove the national average gas price to $4.15 a gallon, and contributed to a 0.9% monthly surge in the consumer price index in March, with gasoline prices posting their steepest single-month rise since the series began in 1967. Consumer sentiment fell to a record low of 47.6 in April, with one-year inflation expectations rising to 4.8%, as Americans cited the conflict as a primary driver of their economic anxiety.

Before Araghchi's post, ING noted that crude had already been softening as traders anticipated a possible two-week extension of the U.S.-Iran ceasefire and renewed diplomatic negotiations. ING's analysis puts the total supply disruption at approximately 13 million barrels per day, a toll that persists despite attempts to compensate through alternative pipeline routes and restricted tanker activity.