US stocks closed at record highs on Tuesday after Treasury Secretary Scott Bessent said a deal to reopen the Strait of Hormuz could arrive within a day. Oil prices dropped more than 5% and Treasury yields eased as investors bet on a de-escalation between the US and Iran.
The S&P 500 closed at a record high on Tuesday after Treasury Secretary Scott Bessent said Washington and Tehran could reach a deal to reopen the Strait of Hormuz as soon as Tuesday or Wednesday. Oil prices and Treasury yields fell as traders bet on an easing of the war between the US and Iran, which is in its sixth month.
Oil slides as Hormuz shipping deal nears
Bessent told CNBC that talks with the Iranians were ongoing. According to CNBC: "There is a chance we may have a deal today or tomorrow", he said.
Iranian and Omani negotiators had agreed on a temporary arrangement to direct shipping through the strait, though Iran's top leadership had yet to sign off on the deal, two people briefed on the talks told the FT. Under the plan, vessels would enter the strait through Iranian waters and leave through a channel mostly in Omani waters, with Iran first sending oil and LNG tankers through to confirm the route is clear of mines.
Brent crude, the international benchmark, dropped below $80 a barrel for the first time in three weeks before settling 5.3% lower at $79.36. US West Texas Intermediate futures fell 5.69% to $75.77 a barrel.
Stocks jump to a record as yields ease
The S&P 500 climbed 1.8% to close at a record high. The Nasdaq 100 jumped 3.3% as investors also welcomed strong results from Palantir.
Treasury yields also eased. The 10-year yield fell more than 6 basis points to 4.619%. The 2-year note, which tracks Fed policy more closely, slipped more than 5 basis points to 4.198%. The 30-year bond shed more than 4 basis points to 5.182%.
Yields had been climbing in recent weeks, with the 30-year hitting its highest level since 2007, as elevated oil prices stoked concern over persistent inflation. Investors are also weighing an apparently hawkish policy hold from the Federal Reserve last week. Tony Miano, a global fixed income analyst at Wells Fargo Investment Institute, said it could take time for oil market fundamentals to stabilize even once shipments resume, so inflation is unlikely to normalize overnight.
Diplomats hope that if a deal on the strait is reached, Iran and the US would then return to talks aimed at a final settlement to the conflict.
Sources: Financial Times, CNBC International
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