U.S. stocks surged and oil prices plunged below $100 per barrel on Wednesday as a temporary ceasefire in the Iran war eased fears of a prolonged energy shock that has rattled markets for more than five weeks.

The Dow Jones Industrial Average was up 1,204 points, or 2.6%, in midday trading. The S&P 500 jumped 157 points, or 2.4%, while the tech-heavy Nasdaq Composite rose 2.9%.

“Markets have been primed for this moment,” Nigel Green, CEO of the financial firm deVere Group, said in an email. “Positioning had become defensive, volatility was elevated and energy prices were reflecting worst-case assumptions.”

“A pause, even a temporary one, releases that pressure very quickly,” he added.

The market rally came after President Trump announced a ceasefire deal with Iran on Tuesday night on Truth Social. Iran also released a statement acknowledging the deal, which it said includes “continued Iranian control over the Strait of Hormuz.” 

Mr. Trump had previously given Iran until 8 p.m. Eastern Tuesday to agree to a deal to reopen the Strait of Hormuz, threatening to destroy all of the country’s power plants and bridges if it did not meet the deadline.

Movement in the Strait

MarineTraffic, a maritime monitoring service, said Wednesday morning on X that there were “early signs” of vessel movement through the waterway following the ceasefire announcement.

However, some potential cracks in the deal appeared late Wednesday morning, with Iranian news outlets reporting that tanker traffic through the strait has been suspended after Israel continued to strike Lebanon. Israeli Prime Minister Benjamin Netanyahu’s office said in a statement Tuesday that it supported the ceasefire but that the deal “does not include Lebanon.”

Citing an anonymous “senior security source,” Iran’s Tasnim news agency said Tehran could pull out of the ceasefire agreement due to Israel’s actions.

That didn’t appear to weigh heavily on markets, which were still trading higher as of midday Wednesday.

Oil prices, however, ticked back up slightly with the U.S. benchmark, West Texas Intermediate, and the international benchmark, Brent crude, both trading around $95 a barrel by noon Wednesday. Oil prices remain well above their pre-war levels.

Investors have been preparing for the possibility that the Strait could remain closed through at least mid-April, which economists warned could push gasoline prices past $5 a gallon and put upward pressure on energy costs.

“Investors were bracing for escalation that could have choked off a fifth of global oil supply,” Green said.  “Remove even part of that threat and capital flows back into equities at speed.”

Still, it’s unclear how shipping activity will unfold in the coming weeks, given the ceasefire is set to extend for just two weeks, TD Securities analysts said Wednesday in a research note.

“We question the appetite for tankers to begin to move back into the Strait for as long as it is unclear this will extend beyond two weeks,” they said.