- Stock indexes moved up dramatically after President Trump announced a ceasefire with Iran.
- Oil futures moved down sharply on expectations that the Strait of Hormuz would reopen.
- Market watchers say the pendulum could quickly swing back to negative if the deal falters.
U.S. investment markets soared and oil prices dipped sharply following President Donald Trump’s announcement that a ceasefire agreement had been struck with Iran.
U.S. stocks rose sharply in early trading on Wednesday with the Dow Jones Industrial Average spiking over 1,300 points, around 2.95%, the Nasdaq Composite gaining 2.54% and the S&P 500 up over 2%.
Wholesale prices for crude oil plummeted following the cease-fire news with international benchmark Brent crude sliding about 17% to $91 a barrel and the U.S. benchmark down 18% to $92 a barrel.
The deal to pause the five-week conflict came just hours before a deadline Trump had set for Iran to re-open the Strait of Hormuz, a critical shipping lane, or face heightened attacks targeting the country’s infrastructure.
“Based on conversations with Prime Minister Shehbaz Sharif and Field Marshal Asim Munir, of Pakistan, and wherein they requested that I hold off the destructive force being sent tonight to Iran, and subject to the Islamic Republic of Iran agreeing to the COMPLETE, IMMEDIATE, and SAFE OPENING of the Strait of Hormuz, I agree to suspend the bombing and attack of Iran for a period of two weeks,” Trump wrote on Truth Social Tuesday evening. “Almost all of the various points of past contention have been agreed to between the United States and Iran, but a two week period will allow the Agreement to be finalized and consummated.”
Iran’s closure of the Strait of Hormuz, through which about 20% of global oil shipments pass on the way to international markets, has choked off 12 million to 15 million barrels of petroleum a day, according to CNN.
But even as investors responded positively to the ceasefire, market watchers warned the pendulum could swing the other way if the shipping passage fails to re-open as promised.
“The market has been eager to get good news but it remains to be seen if the Strait of Hormuz opens fully,” Bob McNally, founder and president of Rapidan Energy Group, told CNN. “That’s the whole ball of wax and so far Washington and Tehran seem to be talking past each other on that.”
Economists have warned that a protracted Iran war could lead to widespread negative impacts on the U.S. economy.
How energy costs impact the price of almost everything
The average price of a gallon of regular across the U.S. was $4.16 on Wednesday, up 71 cents from a month ago, according to data from AAA.
Utah drivers are paying well above the national average currently with the average cost of regular hitting $4.26 per gallon on Wednesday. The last time U.S. gas prices were in the $4 per gallon range was at the onset of Russia’s invasion of Ukraine in 2022. Prices would eventually hit an all-time high of over $5 per gallon in June of that year.
A report released just after the U.S. and Israel launched attacks on Iran late last month forecasts that the increase in energy costs is on a path to potentially foment even broader negative impacts on the U.S. economy.
The analysis from the Organization for Economic Cooperation and Development predicts U.S. inflation will rise to 4.2% in 2026, far ahead of the 2.68% average rate throughout 2025.
“The evolving conflict in the Middle East has human and economic costs for the countries directly involved, and will test the resilience of the global economy,” the report reads. “A halt in shipments through the Strait of Hormuz and the closure or damage of energy infrastructure has generated a surge in energy prices and disrupted the global supply of energy and other important commodities, such as fertilizers.
“The breadth and duration of the conflict are very uncertain, but a prolonged period of higher energy prices will add markedly to business costs and raise consumer price inflation, with adverse consequences for growth.”
While gas prices may be the most clear evidence of impacts the Iran war is having on family budgets, higher energy costs come back to hit consumer pocketbooks in numerous other ways.
Diesel fuel, which powers the trucks and other vehicles that transport raw materials, consumer goods, agricultural products and much more, is much more expensive than before the conflict began. The average price for a gallon of diesel across the U.S. was $5.57 on Wednesday according to AAA, up from $4.60 per gallon a month ago.