Markets bet on U.S.-Iran deal despite Hormuz Strait blockade

Hello, this is Dylan Butts writing to you from Singapore. Welcome to another edition of CNBC’s Daily Open.

Markets appear to think a deal between Washington and Tehran is within reach.

Stocks extended their rally again on Tuesday, with the S&P 500 pushing toward record territory as investors bet that U.S.–Iran negotiations are gaining traction. 

But that optimism might be running ahead of reality. Talks have already stalled once, and instead of a full reopening, the Strait of Hormuz is now under a new U.S. blockade.

The stock market has continued rallying on hopes that a deal between the U.S. and Iran is taking shape, with a White House official telling CNBC on Tuesday that a second round of negotiations between Washington and Tehran is under discussion.

The S&P 500 is nearing its all-time high, with Tuesday marking the index’s ninth positive session in 10, while the technology-heavy Nasdaq extended its streak to 10 consecutive advances. Asia-Pacific markets tracked Wall Street, opening higher on Wednesday. 

Meanwhile, oil prices extended recent declines. 

But a resolution to the situation in the Middle East remains uncertain. Talks between U.S. and Iranian negotiators in Islamabad stalled last weekend, prompting Trump to announce a U.S. blockade of the Strait of Hormuz, the vital trade route that normally carries about 20% of global oil supply.

More than 10,000 U.S. sailors, Marines, and airmen are enforcing the blockade, alongside over a dozen warships and dozens of aircraft, the U.S. Central Command said. 

The blockade further chokes off traffic through the strait, which has slowed to a trickle despite Trump’s earlier claim on April 7 that a two-week ceasefire agreement with Iran would hinge on its full reopening.

A key sticking point between both sides regarding the ceasefire has been Israel’s attacks on Lebanon. U.S. Secretary of State Marco Rubio hosted the first direct talks between Israel and Lebanon in decades, though it was not immediately clear whether any framework for peace was reached.

The broader economic risks have continued to rear their head. Citadel CEO Ken Griffin warned that a prolonged disruption in the Strait of Hormuz could push the global economy toward a recession.

Meanwhile, experts told CNBC that Europe’s airline industry is at risk of a “systemic” jet fuel shortage in the next few weeks if the Strait of Hormuz blockade persists, potentially leading to hundreds of flight cancellations.

The conflict is also raising tensions among major powers. U.S. Treasury Secretary Scott Bessent accused China of being an unreliable global partner during the Middle East war, claiming it was hoarding oil supplies and enacting export restrictions ‌on some goods.

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