US stock market hits record high amid hopes for Strait of Hormuz reopening

US stocks hit record highs as oil prices ease on Strait of Hormuz hopes

US stock markets surged to record highs this week, buoyed by a wave of strong corporate earnings and growing hopes for a diplomatic resolution to the conflict with Iran that has disrupted shipping in the Strait of Hormuz. Oil prices fell sharply as investors bet on a reopening of the critical waterway, which carries about one-fifth of global oil supplies.

Coverage comparison

Two days of dramatic gains pushed Wall Street's main indexes to unprecedented levels. On Monday, the S&P 500 climbed 1.5 percent, leaving the benchmark just shy of its closing record of 7,620.90 set on June 2, as reported by Al Jazeera. The tech-heavy Nasdaq Composite jumped 2.1 percent, while the Dow Jones Industrial Average rose 1.3 percent to hit a record high of 53,178.41.

The rally accelerated on Tuesday, with the S&P 500 surging 1.8 percent to top 7,700 for the first time, according to Al Jazeera. The Dow set a new record for a second straight day, climbing 1.7 percent to 54,085.88. The Guardian reported that the Dow added 907 points on Tuesday, while the Nasdaq composite jumped 2.6 percent.

Both outlets highlighted the role of corporate earnings in driving the rally, though their emphasis differed. The Guardian framed the surge primarily around company profits, noting that “profits kept piling up for companies” and that strong results were the latest in a series of beats from major firms including Amazon, Microsoft, and others. Al Jazeera, while also noting strong corporate results, placed greater weight on the geopolitical backdrop, pointing to hopes for a deal to reopen the Strait of Hormuz.

Key claims

Monday's market performance

According to Al Jazeera, the S&P 500 climbed 1.5 percent on Monday, the Nasdaq Composite jumped 2.1 percent, and the Dow Jones Industrial Average rose 1.3 percent to a record closing high of 53,178.41. The rally was led by big technology stocks, with Meta Platforms rising 6 percent, Microsoft and Amazon climbing between 4.4 and 4.9 percent, and Nvidia gaining 2.9 percent.

Tuesday's market surge

On Tuesday, the S&P 500 surged 1.8 percent to close above 7,700 for the first time, according to Al Jazeera. The Dow added 907 points, or 1.7 percent, to 54,085.88, setting a second straight record, as reported by The Guardian. The Nasdaq composite jumped 2.6 percent, according to The Guardian. Al Jazeera noted that the S&P 500 had risen 12.80 percent so far this year, beating its historical average of about 10.5 percent.

Corporate earnings

Palantir Technologies surged 29.5 percent after reporting second-quarter revenue of $1.94 billion, which beat forecasts and prompted the company to raise its full-year guidance. The Guardian cited CEO Alex Karp as saying overall revenue leaped 93 percent in what he called an “otherworldly” quarter. Caterpillar climbed 5.6 percent after reporting stronger profit and revenue than analysts expected, with The Guardian noting it was the first time the company surpassed $20 billion in quarterly sales.

Oil prices and the Strait of Hormuz

Brent crude fell about 5 percent on Monday, according to Al Jazeera, and continued to edge lower on Tuesday, with futures for October delivery standing at $79.11 per barrel, down about 13 percent from the previous week, as reported by Al Jazeera. The Guardian reported Brent crude sank 5.3 percent to $79.36 per barrel on Tuesday, attributing the drop to renewed hopes for a reopening of the Strait of Hormuz.

Perspectives

The recent market gains come amid conflicting signals about negotiations to end the war on Iran and restore shipping in the Strait of Hormuz. Al Jazeera reported that US and Iranian officials offered “conflicting accounts” of the status of talks, with Washington touting progress in discussions between Iran and Oman aimed at restoring shipping in the waterway.

A US military statement, as cited by Al Jazeera, said the Strait of Hormuz was “free and open” to all commercial vessels. This contrasted with Tehran's repeated insistence that it has the right to control the movement of traffic in the waterway.

While both US and Iranian officials expressed optimism about a potential deal, the specifics of negotiations remain unclear. Al Jazeera noted that the market's reaction reflected hopes for an end to the months-long disruption to shipping, which had begun with the start of the US-Israel war on Iran in late February. However, the same report also highlighted that some analysts were surprised by the magnitude of the rally given the lack of a clear fundamental reason. Melissa Brown, managing director of Investment Decision Research at SimCorp, told Al Jazeera she was “extremely surprised by the magnitude of the rally,” noting it came against a backdrop of “relatively negative sentiment.”