The US-Iran ceasefire reached at the 11th hour, allowing Donald Trump to pull back from the threat to wipe out “a whole civilization” has sparked a relief rally in the world equities, including the US stock markets.
Wall Street was poised for a gap-up start on Wednesday, April 8, as US stock futures traded 2.5-3.5% higher around 5.30 am GMT. The tech-heavy Nasdaq’s E-mini futures were up 3.5%, S&P 500 futures rose 2.7%, and Dow Jones E-minis were up 2.5%.
The US stock market had ended mixed on Tuesday with signs of progress in the diplomatic efforts for peaceful settlement of the ongoing war in the Middle East.
US-Iran ceasefire “fragile”
The two-week ceasefire reached at the last minute cheered investors, as it sent crude oil prices lower amid hopes that the Strait of Hormuz could reopen for global energy supplies. The critical waterway — through which about 20% of global oil needs flow — has been effectively shut since the onset of the war on February 28.
US President Trump said he agreed “to suspend the bombing and attack of Iran for a period of two weeks” as long as Iran agrees to “the COMPLETE, IMMEDIATE, and SAFE OPENING of the Strait of Hormuz.” His announcement represented a sharp change in rhetoric from an earlier warning that “a whole civilization will die tonight, never to be brought back again” if Iran didn’t give in.
Iranian Foreign Minister Abbas Araghchi said in a statement that “for a period of two weeks, safe passage through the Strait of Hormuz will be possible via coordination” with Iran’s military and that if attacks on its territory are halted, “our Powerful Armed Forces will cease their defensive operations.”
Meanwhile, US Vice President JD Vance on Wednesday welcomed a “fragile truce” with Iran, urging Tehran to negotiate in “good faith” to reach a long-term deal and warning US President Donald Trump was “not one to mess around”, according to an AFP report.
That said, the ceasefire has brought relief to investors after weeks of conflicting signals from Trump and Iran that had dragged the conflict into a second month.
Airlines, tech stocks higher in pre-market trade
As the crude prices slid 16% to nearly $90 a barrel, stocks reacted differently to the news. The airline and travel stocks witnessed a leg-up. Shares of American Airlines and Delta Airlines were higher by almost 7% each.
However, energy stocks declined in pre-market trading. Chevron, Exxon Mobil and Occidental Petroleum lost between 5-8%.
Tech stocks also joined the gainers. Magnificent 7 stocks, which include mega-cap technology names like Apple, Nvidia, Microsoft, Meta and others, surged up to 5% ahead of the market open. These stocks had taken a beating during the Middle East conflict as investors rotated out of high-growth leaders and into safer assets.
Can US stock markets gain sustain?
The premise is set for a runaway rally for the US stocks; however, analysts believe that it would be too early to call if gains can be sustained.
Viram Shah, Co-Founder and CEO, Vested Finance, said that today’s rally is less about fundamentals improving and more about an unwind of extreme risk positioning, with oil falling from above $120 to sub $100 levels and equity futures rallying sharply ahead of the open.
“The Strait of Hormuz disruption was one of the largest supply shocks in recent history, with tanker traffic dropping close to zero at one point and triggering a global energy risk premium. While the ceasefire reduces immediate uncertainty, the system is still fragile, and any reversal could lead to equally sharp repricing of assets,” he added.
He also believes that it is too early to show confidence in the market as the ceasefire is only for two weeks and the underlying geopolitical tensions remain unresolved, which means markets are likely to stay highly event-driven in the near term.
Harshal Dasani, Business Head at INVasset PMS, said that the ceasefire should be seen as a pause rather than a resolution. “The ceasefire is time-bound, safe passage remains conditional, and negotiations are still at a fragile stage. Sustained market stability will hinge on whether this temporary truce evolves into a more durable de-escalation,” he noted.
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