Oil prices are dropping further, and stocks are rallying worldwide Tuesday on hopes that Israel’s war with Iran will not damage the global flow of crude, even if a tentative truce seemed to fray under fire in the morning.
The S&P 500 was 0.7% higher in early trading, following up on even bigger gains for stocks across Europe and Asia, after President Donald Trump said late Monday that Israel and Iran had agreed to a “complete and total ceasefire.” The Dow Jones Industrial Average was up 289 points, or 0.7%, as of 9:31 a.m. Eastern time, and the Nasdaq composite was 0.9% higher.
The strongest action was again in the oil market, where a barrel of benchmark U.S. oil fell 4.9% to $65.12. Brent crude, the international standard, dropped 4.8% to $67.14.
The fear throughout the Israel-Iran conflict has been that it could squeeze the world’s supply of oil, which would pump up prices for gasoline and hurt the global economy. Iran is a major producer of crude, and it could also try to block the Strait of Hormuz off its coast, through which 20% of the world’s daily oil needs passes on ships.
But oil prices began falling sharply on Monday after Iran launched what appeared to be a limited retaliatory strike that did not target the production or movement of oil. They kept falling even after attacks continued past a deadline to stop hostilities early Tuesday. Trump would later said that the ceasefire was “in effect.”
Oil prices have dropped so much in the last two days that they’re below where they were before the fighting began nearly two weeks ago.