Wall Street Rebounds as US-Iran Deal Sends Oil Prices Sliding

US stock markets staged a significant recovery on Thursday, erasing much of the previous session's losses as geopolitical tensions eased. A breakthrough agreement between Washington and Tehran has cooled energy markets and lifted investor sentiment across major indices.

Geopolitical Breakthrough Triggers Oil Price Slide

The primary catalyst for the market rebound was an initial agreement between the US and Iran aimed at ending hostilities and reopening the Strait of Hormuz. This deal initiates a 60-day negotiating process focused on a final settlement regarding Iran's nuclear programme. Under the terms, the US will waive certain sanctions to allow Iran to resume oil exports, while Tehran has committed to diluting its stockpile of highly enriched uranium.

The impact on energy markets was immediate. Brent crude fell by $1.19 to $78.36 a barrel, while the US benchmark crude dropped $1.56 to $74.45. While prices remain above the $70 pre-war baseline, they have retreated significantly from the $100-plus peaks seen just weeks ago. This decline in energy costs provided a direct boost to travel-related sectors, with airlines like Delta, United, and American seeing gains between 1.5% and 2%, while cruise operators such as Royal Caribbean and Carnival rose by more than 2%.

Tech Giants Lead the US Market Rally

The Nasdaq Composite outperformed other indices, advancing 1.2% driven by strength in the technology sector. A major highlight was Intel, which surged 8.7% following President Donald Trump's announcement that the chipmaker has agreed to manufacture chips for Apple within the United States. This news comes amid reports that Apple may face price hikes due to global memory chip shortages.

However, the rally was not uniform across all tech players. SpaceX continued its downward trend, falling 3.2% in premarket trading, adding to a 4.9% decline recorded on Wednesday.

Despite the bullish momentum, investors remain cautious regarding the US Federal Reserve's monetary policy. The recovery follows a period of retreat caused by fears that the Fed might raise interest rates further to combat persistent inflation.

Market participants are closely analyzing signals from the rate-setting committee. Currently, nine of the 18 Fed members support higher interest rates this year, with six members backing two or more quarter-point increases. While Fed Chair Kevin Warsh has not provided a definitive forecast for 2026, the central bank's communication strategy remains a focal point for those wary of how higher rates might slow economic activity.

Global Market Divergence: Asia Hits Records

While European markets saw slight declines—with the FTSE 100 dropping 1%—Asian markets experienced a massive surge. Japan's Nikkei 225 climbed 1.7% to reach a fresh record close of 71,053.49, fueled by optimism over a durable end to conflicts and AI-related stock enthusiasm. Similarly, South Korea's Kospi jumped 2.3% to another record high, supported by heavyweights Samsung Electronics and SK Hynix.

Key Takeaways

  • Geopolitical Relief: The US-Iran agreement has lowered oil prices and eased fears of supply disruptions in the Strait of Hormuz.
  • Tech Momentum: Intel's 8.7% surge on domestic manufacturing news helped drive a 1.2% gain in the Nasdaq.
  • Monetary Caution: Investors remain on edge as a majority of Fed members signal potential interest rate hikes to manage inflation.