Risk Rally Builds as Hormuz Reopens and Oil Breaks Lower

Markets extended April’s surge as easing Middle East supply fears reinforced an already strong risk-on backdrop driven by AI enthusiasm, resilient earnings, and expectations for additional Fed easing later this year. Equities pushed to fresh highs, Treasury yields fell, the dollar weakened, and oil dropped sharply after Iran signaled the Strait of Hormuz was open to commercial traffic, reducing concern that an energy shock would derail growth.

Key Headlines & Market Movers:

• Hormuz Reopening Sparks Broad Risk-On Move: The biggest driver Friday was Iran’s declaration that the Strait of Hormuz would remain open for commercial shipping during the ceasefire period, which triggered a sharp drop in oil and a strong rally across equities, crypto, and credit. Investors interpreted the move as a meaningful easing of the market’s main geopolitical overhang, though several strategists cautioned that the broader US-Iran situation still appears fragile and unresolved.
• Tech Leadership and Earnings Momentum Keep Driving Stocks: The rally was also supported by continued strength in large-cap technology and semiconductors, with the Nasdaq 100 extending a long winning streak as investors stayed focused on AI demand and a generally constructive earnings backdrop. At the company level, Intel stood out on renewed optimism around its turnaround, while Netflix fell after weaker guidance reminded investors that expectations remain high even in a favorable tape.
• Rates Fall as Focus Shifts Back to Growth and Fed Policy: Treasury yields moved lower as falling oil prices eased immediate inflation pressure and encouraged the view that the Fed could still cut rates again before year-end. With the geopolitical shock appearing less acute for now, attention is shifting back to core macro fundamentals, especially the durability of consumer demand, the path of earnings, and whether lower energy prices offset the recent drag from the conflict.

S&P 500 Sector Performance

Looking Ahead

Next week, markets will watch whether ceasefire and US-Iran negotiations continue to hold, especially with the current ceasefire timeline nearing an important checkpoint. Investors will also focus on early earnings reports and Kevin Warsh’s confirmation hearing, as his comments may shape expectations for how aggressively the next phase of Fed policy could lean toward rate cuts if growth and inflation pressures continue to moderate.

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