U.S. stocks surged Wednesday after a last-minute ceasefire between the United States and Iran calmed markets and reduced fears of a wider conflict.
The Dow Jones Industrial Average rose 1,326 points, or 2.85%, closing at 47,910.79. The S&P 500 gained 2.51% to 6,782.83, and the Nasdaq Composite climbed 2.80% to 22,635.00, according to Reuters.
The rally followed a two-week ceasefire agreement brokered by Pakistan. The deal paused fighting that began on February 28 after joint U.S.-Israeli strikes on Iran. The conflict had disrupted global oil supply and raised concerns about inflation.
Stocks jumped at the opening bell and held gains throughout the session. Investors responded to signs that tensions may ease, at least in the short term.
“It’s an expected move today and there’s still a lot of work to do, but I think the market is quite relieved,” said Mike Dickson, head of portfolio management at Horizon Investments. “The other side of this coin could have been a lot worse and frankly there’s a good reason to think that it was possible too. So you’re seeing that relief rally in the hardest-hit areas of the market.”
Oil prices dropped sharply as the ceasefire raised hopes that the Strait of Hormuz could reopen soon. The route handles about one-fifth of the world’s oil supply. U.S. crude fell 16.4%, while Brent crude dropped 13.3%, both settling below $100 per barrel.
The drop in oil helped ease immediate inflation pressure. However, minutes from the Federal Reserve’s March meeting showed officials remain cautious and are open to future rate hikes due to earlier war-driven price shocks.
The gains were broad across the market. Eight of the 11 S&P 500 sectors rose more than 2%. Industrials led the advance, while energy stocks fell as oil prices declined.
Several industries that were hit hard during the conflict saw strong rebounds. Airline stocks moved higher, with Southwest Airlines rising 6.7% and United Airlines gaining 7.9%. Cruise companies also jumped, with Carnival up 11.2% and Norwegian Cruise Line rising 7.6%.
Other companies posted notable gains. Levi Strauss rose 10.7% after raising its annual forecast. Delta Air Lines added 3.8%, even after warning about ongoing uncertainty tied to the conflict.
The rally pushed the S&P 500 back above its 200-day moving average for the first time since mid-March. The Dow recorded its largest one-day percentage gain in nearly a year.
Market volatility dropped as well. The CBOE Volatility Index fell to its lowest level since the war began, signaling reduced investor anxiety.
Global markets also moved higher. European stocks rose nearly 4%, while broader world indexes posted their biggest gains in about a year.
“Most other countries were more exposed to an energy shock and a food shock than the U.S.,” said Ross Mayfield, an investment strategy analyst at Baird. “So this is a much bigger near-term relief for international stocks.”
Trading volume was strong, and advancing stocks outnumbered decliners by wide margins. Analysts said the breadth of the rally reflects relief over easing geopolitical risk.
The ceasefire is temporary, and negotiations are ongoing. For now, markets are reacting to a pause in the conflict and more stable global energy conditions.