10/04/2026 08:24 AST
Oil futures sank below $100 a barrel while equity and bond prices rallied sharply yesterday after the US and Iran agreed on a two-week ceasefire, prompting hopes for a resumption of oil and gas flows through the Strait of Hormuz.
Investors, who had moved to the sidelines on Tuesday ahead of Trump's deadline, pushed Wall Street equities to nearly one-month highs yesterday while the US dollar slipped.
Treasury yields tumbled as investors bet that sliding oil prices could keep inflation in check and increase the probability of Federal Reserve rate cuts.
"Today's market rally is a classic geopolitical relief trade because oil is collapsing and some of the tail risks are coming off the table for now," said Gene Goldman, chief investment officer at Cetera Investment Management.
"The market is quickly repricing away from a global energy shock. Today's move is being amplified. There's a lot of short covering taking place, a lot of systematic buying, turning what should be a modest equity bounce into a strong rally."
He noted, however, that "there's still uncertainty about the ceasefire, which is only two weeks, and there's contradictions around what the Trump administration has said and what the Iranians have said about the Strait of Hormuz."
In US equities, the Dow Jones Industrial Average rose 1,017.69 points, or 2.19 per cent, to 47,605.54, the S&P 500 rose 126.99 points, or 1.92pc, to 6,744.40 and the Nasdaq Composite rose 499.60 points, or 2.29pc, to 22,522.33.
MSCI's gauge of stocks across the globe rose 28.73 points, or 2.88pc, to 1,026.82 and the pan-European STOXX 600 index rose 3.61pc.
In energy markets, US crude fell 14.92pc to $96.15 a barrel and Brent fell to $95.08 per barrel, down 12.99pc on the day; both were still well above pre-war levels.
In Treasuries, the yield on benchmark US 10-year notes fell 7.2 basis points to 4.271pc, from 4.343pc late on Tuesday while the 30-year bond yield fell 6.1 basis points to 4.8603pc.
The two-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 6.8 basis points to 3.769pc.
Earlier, Euro zone government bond yields also dropped sharply, as the ceasefire prompted traders to dramatically scale back their bets on future rate hikes from the European Central Bank.
In currencies, the dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.13pc to 98.80, with the euro up 0.85pc at $1.1691.
Against the Japanese yen, the dollar weakened 0.78pc to 158.36.
Dollar has been the major beneficiary of the Iran war in the currency market, in part due to the fact that the US is a net energy exporter and, therefore, less exposed to the economic hit that importers like Japan and many European countries might face.
The index, which measures the dollar's performance against a basket of six currencies, weakened for a third day to 98.526, its lowest level since February. However, the dollar is still above where it was prior to the onset of the war, showing investor sentiment has not fully recovered.
"Yes, oil prices have retreated. Yes, the dollar has given back some of its gains. But I would be cautious in terms of chasing it at this point," said Jeremy Stretch, head of G10 FX strategy at CIBC Capital Markets.
"Obviously, people are reluctant to put a lot of will behind this relief rally because there are so many caveats and so many uncertainties and so many potential hurdles to go through between now and any eventual resolution," he said.
In precious metals, gold touched a nearly three-week peak after the ceasefire agreement. Spot gold rose 0.82pc to $4,740.92 an ounce while spot silver rose 2.7pc to $74.90 an ounce.
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