Oil crashes 9% as Iran reopens the Strait of Hormuz

Iran declared the Strait of Hormuz open to commercial shipping for the remainder of the ceasefire, triggering the sharpest single-day decline in crude prices since the conflict began. Brent crude collapsed 9.07% to $90.38 and WTI fell 9.41% to $82.59 as tankers reversed course and traders rushed to unwind war-risk premiums. The S&P 500 surged 1.2% to a fresh record at 7,126.06, with US stocks heading for their best month in six years on hopes of an end to hostilities.

The reopening was accompanied by signals from both Washington and Tehran that a deal could come “soon,” with President Trump explicitly floating the prospect. Some tankers initially attempted to transit the waterway before formal confirmation, and the declaration remains conditional on the ceasefire holding. Treasury yields fell sharply, with the 10-year dropping to 4.246%, as the risk-on rotation pulled capital out of safe havens and into equities. Gold still climbed to $4,879.60 despite the improved risk tone, suggesting that while tactical optimism is building, structural inflation concerns have not been resolved.

The 9% oil crash is the defining move of the session, and it has reshaped positioning across every major asset class. US equities rallied broadly, with the Dow adding 869 points (+1.8%) and the Russell 2000 surging 2.1% — a signal that the rally extends beyond large-cap tech into cyclicals and small caps that benefit most from lower energy costs. European indices posted even larger gains, with the DAX jumping 2.3% and the CAC 40 advancing 2.0%, as the continent most exposed to energy disruption priced in relief.

The divergence with Asia persists. The Nikkei fell 1.75% and the Hang Seng lost 0.89%, reflecting the region’s deeper entanglement with disrupted supply chains and the yen’s continued strength against the dollar. Gold climbed to $4,879.60 despite the risk-on move — a reminder that investors are not yet ready to abandon inflation hedges entirely. The VIX fell to 17.48, its lowest since before the conflict escalated, but the real question is whether this marks a lasting de-escalation or a ceasefire-driven head-fake that reverses if diplomacy stalls.

The Strait of Hormuz reopening sent oil prices tumbling and provided immediate relief to Gulf shipping routes, with a Pakistan-bound tanker carrying ADNOC crude among the first vessels to transit. The UAE economy continues to demonstrate resilience, with banking assets reaching $1.49 trillion and trade volumes hitting $1.63 trillion. Abu Dhabi is pressing ahead with infrastructure investment, launching 834 new homes at Tara Park on Reem Island and an AirPass programme opening the airport to non-flying visitors.

Saudi Arabia’s Finance Minister cautioned that the Gulf will take “weeks if not months” to fully recover from the conflict, a sobering assessment even as the ceasefire holds. The IEA chief echoed this, warning that it will take two years to recover energy output lost during the hostilities. The Saudi PIF crossed $906.7 billion in assets with $200 billion deployed, while Moody’s flagged deteriorating fundamentals in Bahrain as the conflict hits exports, tourism and the kingdom’s debt profile.

The Hormuz reopening is conditional on the ceasefire holding, and crude’s 9% crash has priced in a level of diplomatic certainty that does not yet exist. If talks stall or hostilities resume, the snap-back in oil prices could be sharper than the decline, given how aggressively traders have unwound war-risk positions in a single session. The S&P 500’s record close and the VIX at its lowest since before the conflict escalated both reflect a market betting heavily on de-escalation — the risk is that this bet is premature.