US stocks surge to record high on Strait of Hormuz reopening hopes

Wall Street woke up Tuesday morning to the kind of news that makes portfolios sing. The S&P 500, the broadest measure of American stock health, climbed 1.8 percent and broke through the 7,700 barrier for the first time in history, leaving its previous record of 7,620.90 in the dust. The Dow Jones, tracking thirty of the country's largest companies, followed suit with a 1.7 percent gain to 54,085.88—its second record close in as many days. By year's end, the S&P 500 will have climbed 12.80 percent, well ahead of its typical annual pace of around 10.5 percent.

Two forces were driving the rally. Corporate earnings had come in stronger than expected, with Palantir Technologies, a data analytics firm with deep ties to defense and intelligence work, posting second-quarter revenue of $1.94 billion and watching its stock price leap 29.5 percent. But beneath the earnings beat lay something larger: a shift in the calculus of global risk. Oil prices were falling. Brent crude, the international standard, had dropped about 5 percent overnight and stood at $79.11 per barrel by Wednesday morning in Asia—down roughly 13 percent from the previous week. The reason was simple and geopolitically charged: officials from the United States and Iran were signaling real progress toward reopening the Strait of Hormuz.

For months, the waterway had been a chokepoint of extraordinary consequence. Since late February, when the US-Israel war on Iran began, shipping through the strait had become a gauntlet. Iranian threats of attack on vessels, combined with an American blockade of Iranian ports, had strangled traffic. On a single Sunday, only nine ships transited the strait—a number that would have seemed absurd before the conflict, when roughly 130 vessels crossed daily. The strait carries about one-fifth of the world's oil supply. Its closure had rippled through global markets, keeping energy prices elevated and uncertainty high.

Now, both sides were talking. US Secretary of State Marco Rubio told reporters on Tuesday that while no final agreement existed yet, he expected one "very shortly." Treasury Secretary Scott Bessent went further in a television interview, suggesting a deal could materialize as soon as Tuesday or Wednesday. Iran's Foreign Ministry spokesperson, Esmaeil Baghaei, described talks with Omani mediators about establishing safe shipping corridors as "positive." The language was careful—no one was claiming victory—but the tone had shifted from confrontation toward negotiation.

The market's response was immediate and global. Tokyo's Nikkei 225 index rose 3 percent by early Wednesday morning, while Seoul's Kospi climbed 4.6 percent. Investors were pricing in a world where oil flowed more freely, where supply chains could normalize, where the risk premium that had been baked into energy costs for months might finally ease.

Yet the underlying dispute remained unresolved. The US military insisted on Tuesday that the strait was "free and open" to all commercial traffic, citing the fact that American forces had escorted more than 1,000 vessels through the waterway over the past three months despite what it called "unwarranted Iranian aggression." Iran, for its part, had repeatedly asserted its right to control movement through waters it considers its own. These were not small disagreements. They touched on sovereignty, on the balance of power in the Persian Gulf, on who got to decide what happened in one of the world's most strategically vital passages.

But for now, the market was betting on resolution. The hope alone—the mere possibility that nine ships might soon become ninety, or 130—was enough to move billions of dollars across exchanges and reshape the calculus of risk that traders and investors carry in their heads. Whether that hope would survive contact with the actual negotiations remained to be seen.