S&P 500 Set for All-Time Highs on Hormuz Deal Push

Hopes for a deal to revive the Strait of Hormuz lifted stocks toward all-time highs, bonds rose and oil sank, with Wall Street’s enthusiasm also fueled by a batch of solid corporate earnings.

Brent crude fell below $80 on bets mediators will be able to broker an agreement and avoid major US airstrikes on Iran. The S&P 500 topped its June closing record. The Nasdaq 100 gained 2.9 percent as Palantir Technologies Inc’s outlook reassured investors about artificial intelligence (AI) demand, with traders now gearing up for SpaceX and Advanced Micro Devices Inc’s results.

The prospect of an interim Iran deal focused on the Strait of Hormuz appeared to be gaining traction, with Qatar saying a proposal had been drafted and American officials sounding hopeful for a pact to reopen the crucial waterway.

Iran is considering allowing European nations to remove mines from Hormuz, according to diplomats familiar with the matter. Both US Secretary of State Marco Rubio and Treasury Secretary Scott Bessent gave optimistic assessments of talks regarding the Strait.

“Markets are reacting to the possibility that a reopening of the Strait of Hormuz could help normalize global oil supplies and reduce near-term energy price pressures,” said Tony Miano at Wells Fargo Investment Institute. “Lower oil prices can ease inflation concerns.”

That said, inflation is unlikely to normalize overnight, Miano warned. Energy-related pressures may ease, but broader prices could remain sticky in the near term, limiting how far Treasury yields move lower, he concluded.

While Federal Reserve policymakers last week left rates unchanged, more officials have expressed support for a hike as the Middle East conflict and an AI investment boom fuel inflationary worries.

On the economic front, US job openings eased in June but hiring picked up slightly, indicating relatively steady demand for workers heading into the summer.

That stability gives the Fed room to stay focused on inflation, although Friday’s jobs report could quickly change the conversation, according to Bret Kenwell at eToro.

“A red-hot print could strengthen the case for a September rate hike, particularly with inflation still elevated,” he said. “However, a disappointing report combined with last week’s weaker-than-expected gross domestic product growth could give the Fed more cover to remain on hold.”

“Inflation is still the only part of the Fed mandate not being met. That puts renewed focus on this week’s US non-farm payrolls. If they are strong, it can help put renewed upward pressure on real yields,” says Edward Harrison, macro strategist at Bloomberg Strategists.