traders worry – After the Strait of Hormuz reopened, US stocks climbed toward record highs and WTI fell to $76.60 a barrel. Gas prices dipped below $4 a gallon for the first time since March. But traders and analysts warn the rally may be pricing in perfection—given minimal t
On Thursday, relief moved fast—too fast for some traders who have seen how quickly oil can tighten when geopolitics turns.
WTI, the US benchmark, settled at $76.60 a barrel, down almost 10% on the week. Gas prices dipped below $4 a gallon for the first time since March. US stocks, meanwhile, hovered near record highs after the Strait of Hormuz reopened.
David Oxley, chief commodities and climate economist at Capital Economics, framed the mood in a single line. “Traders are kind of pricing in perfection,” he said, calling reopening “wonderful news compared with the nightmare scenario of it being shut.”
Then he pushed back against the speed of the celebration. “But actually, I think (the market) might have gone a little bit too far,” Oxley added. “It’s not necessarily a sign that everything is going to be completely smooth ahead.”
Oil futures and gasoline eased because the market is reacting to optimism that shipments through the Strait of Hormuz will pick up now that the US-Iran agreement has been signed. Still, analysts warn that the optimism may be covering up real vulnerabilities.
Traffic through the strait remains minimal compared with pre-war levels. The strait was at the center of war, and even with reopening, insuring ships there remains costly. There are also questions about mines in the strait—another reminder that the danger doesn’t disappear just because headlines improve.
The agreement itself adds a built-in deadline. It lays out a 60-day ceasefire period, with the possibility that the strait could close again after that. There are also logistical concerns if Tehran seeks to earn traffic fees. And even beyond the security risks. there’s the practical question of how quickly Gulf-region producers can revamp production and recover from war-related damage.
Adam Turnquist, chief technical strategist at LPL Financial, said he sees “pretty substantial risk that this doesn’t play out as optimistic as maybe some are pricing into the market.”
That tension—good news now, uncertainty soon—runs through Wall Street’s posture. The S&P 500 is up 9% since the war with Iran started in late February. and US stocks have continued rising on enthusiasm about artificial intelligence. Yet stocks fell on Wednesday after the Federal Reserve held interest rates steady. with traders now pricing the chance of a rate hike as soon as September.
Even so, the stock market has treated Middle East alarm as something to wait out. The market is “shrugging off geopolitical concern,” hitting record highs and padding people’s 401(k)s and retirement accounts. The drop in oil prices has helped as a tailwind for stocks. but until the conflict is settled. the turmoil remains a risk.
Turnquist described how quickly the market has moved past the hard part: “The market really likes the news that a deal was reached and then is not really thinking about the risks over the next 60 days.”
As oil has fallen from late April peaks, Wall Street banks have adjusted too—cutting their year-end forecasts. Analysts at Citi on Monday lowered their oil outlook to $75 a barrel in the third quarter of this year, down from a previous forecast of $110.
For investors, the Strait of Hormuz is still the hinge.
The expectation, analysts say, is that they’ll need to see traffic through the strait rise meaningfully in the coming weeks and months if oil prices are going to stay subdued. Even then, bringing Gulf-region output back online is not instantaneous; logistical challenges remain.
Turnquist summed up the tightrope in the same way he summed up the market’s mood. “We’re walking a very fine line,” he said. “The market right now, and especially oil, is assuming a lot of things go right.”
Strait of Hormuz WTI gas prices oil futures US-Iran agreement stocks near record highs S&P 500 Federal Reserve 60-day ceasefire mines in the strait