Oil Plunges Below $95, Dow Rises 1,000 Points on Ceasefire

Investors around the globe on Wednesday cheered what appears to be the beginning of the end of the military clash between the U.S. and Iran, sending stocks higher and government bond yields lower. Oil prices plunged on the promise that the Strait of Hormuz may soon be open for shipping.

The Dow Jones Industrial Average was up by 1,000 points by midday, a 2.3 percent gain. The S&P 500 rose 2.1 percent. The Nasdaq Composite climbed 2.6 percent. Stocks had been even higher earlier in the morning but pared gains as reports on ongoing missle strikes and a drone attack on a pipeline in Saudi Arabia spurred concerns that the ceasefire announced Tuesday night could be fragile.

Out of the 11 sectors of the S&P, only energy was down. Industrials was the strongest performer, rising 3.6 percent. Consumer discretionary, often a risk-on trade for investors, rose 2.9 percent. The tech heavily information and communications sectors each rose 2.7 percent.

Brent Crude futures, the international oil benchmark, fell by 13 percent, to just under $95. West Text Intermediate futures fell by more than 15 percent.

U.S. Treasury yields declined as the ceasefire dampened fears that higher energy prices could convince the Federal Reserve to hold off on interest rate cuts later this year.  The 10-year yield fell 0.072 percent to 4.271 percent and briefly touched as low as 4.23 percent. These are the lowest since March 19. The 2-year fell 0.066 percent to 3.769 percent, also the lowest since March 19.

The major European indexes soared. The Stoxx600, an broad measure of European stocks, rose 3.6 percent. The Dax index, which tracks Germany’s blue chip companies, rose 4.7 percent. The U.K.’s FTSE climbed 2.4 percent. France’s CAC index was up 4.4 percent.
Japan’s Nikkei soared 5.4 percent. The Kopsi index, which tracks South Korean stocks, jumped 6.9 percent. Australian stocks rose 2.6 percent. Hong Kong stocks climbed 3.1 percent.