Iran Ceasefire Sparks Furious Stock Market Rally

Investors were on the edge of their seats Tuesday night, following an ominous warning from the President to the leaders of Iran. The President posted to social media that “a civilization will die tonight” unless a deal was reached by 8 pm to open the Strait of Hormuz. The financial markets would have certainly reacted negatively to an escalation with Iran, but with little time to spare, a deal was reached. The pact provided for a two-week ceasefire period for negotiators to finalize a lasting agreement, and stocks soared on the news.

The relief rally Wednesday brought the S&P 500’s eighth largest point gain of all time. The index jumped 185 points (2.9 percent), erasing much of the benchmark’s first quarter loss. The Dow Jones Industrials average soared to similar heights, enjoying its best day since April 2025. Gains were not evenly distributed, however. Stocks that had suffered the most from the conflict were the biggest winners on the day. And stocks that had benefited from higher oil prices slumped, as the price of oil fell 14 percent. Lower oil prices provided an added boost to non-US stocks, as Europe and Asia are more reliant than the US on oil from the Middle East.

The rally continued Thursday, as the ceasefire largely held despite little traffic flowing through the strait. Meta provided an added lift, rallying 2.6 percent. Meta introduced a new AI model, Muse Spark, in an effort to gain ground on dominant AI players Anthropic, Google, and OpenAI. But while Meta jumped on the news, software stocks remained under pressure, as fears mounted that AI is growing powerful enough to expose cybersecurity vulnerabilities. Information service stocks, such as FactSet, S&P Global, and Fair Isaac, have come under similar pressure, with worries growing about AI’s impact on their long-term growth.

The inflation impact of the Iran conflict came into focus Friday, with consumer prices jumping an annualized 3.3 percent in March. That represented the highest rate of inflation in almost two years. The increase was large, however, and unsurprisingly concentrated in energy prices. Indeed, the price of gas jumped a record 21.2 percent for the month. And stripping out energy and food, consumer prices rose a more palatable 2.6 percent for the year.

This week, markets will be monitoring the fragile ceasefire, as the US and Iran failed to reach a peace deal during the first day of high-level talks. Meanwhile, first quarter earnings kick off in earnest, with financial heavyweights Goldman Sachs, JPMorgan, Citigroup, and others reporting first-quarter results.