Summary<\/p>\n
Gas prices have dropped below $4 a gallon and stocks are near record highs after the Strait of Hormuz reopened.
\n But analysts warn that markets may be pricing in too much optimism about the fragile 60-day negotiation period.
\n Traffic through the strait remains minimal and substantial risks could still disrupt oil flows in coming months.<\/p>\n
\n AI-generated summary was reviewed by a CNN editor.<\/p>\n
New York\u00a0\u2014\u00a0\n <\/p>\n
\n The agreement to re-open the Strait of Hormuz has been met with swift relief in markets. But some traders worry the rally in stocks and drop in oil prices might be overdone.\n <\/p>\n
\n WTI, the US oil benchmark, settled at $76.60 a barrel Thursday, down almost 10% on the week. Gas dipped below $4 a gallon for the first time since March. US stocks are near record highs.\n <\/p>\n
\n \u201cTraders are kind of pricing in perfection,\u201d said David Oxley, chief commodities and climate economist at Capital Economics. \u201cIt\u2019s the relief that the strait\u2019s open \u2013 this is wonderful news compared with the nightmare scenario of it being shut.\u201d\n <\/p>\n
\n \u201cBut actually, I think (the market) might have gone a little bit too far,\u201d he added. \u201cIt\u2019s not necessarily a sign that everything is going to be completely smooth ahead.\u201d\n <\/p>\n
\n Oil futures have dropped and gas prices have eased on optimism that flows through the Strait of Hormuz will pick up now that the US-Iran agreement has been signed.\n <\/p>\n
\n But the market might be disregarding risks and moving on more enthusiasm than reality, analysts noted.\n <\/p>\n
\n Traffic through the key waterway remains a drop in the ocean compared to pre-war levels. The strait was just at the center of war, and insuring ships there remains costly. Questions remain about mines in the strait, as well.\n <\/p>\n
\n The agreement outlines a 60-day ceasefire period; the strait could potentially close up again after that, or logistical concerns could arise if Tehran demands to earn traffic fees.\n <\/p>\n
\n And how quickly can producers in the Gulf region revamp their production and recover from war-related damage?\n <\/p>\n
\n \u201cI do see pretty substantial risk that this doesn\u2019t play out as optimistic as maybe some are pricing into the market,\u201d said Adam Turnquist, chief technical strategist at LPL Financial.\n <\/p>\n
\n The S&P 500 is up 9% since the war with Iran started in late February. US stocks continue to rise on enthusiasm about artificial intelligence.\n <\/p>\n
\n Yet stocks fell Wednesday after the Federal Reserve held interest rates steady, and traders are pricing in the chance of a rate hike as soon as September.\n <\/p>\n
\n The stock market continues to shrug off geopolitical concern and hit record highs, padding people\u2019s 401(k)s and retirement accounts. The drop in oil prices is a tailwind for stocks, but until the conflict is settled, the Middle East turmoil remains a risk.\n <\/p>\n
\n \u201cThe market really likes the news that a deal was reached and then is not really thinking about the risks over the next 60 days,\u201d Turnquist at LPL Financial said.\n <\/p>\n
\n As oil has come down from late April peaks, Wall Street banks have cut their year-end forecasts.\n <\/p>\n
\n Analysts at Citi on Monday adjusted their forecast for oil to $75 a barrel in the third quarter of this year, compared to a previous forecast of $110.\n <\/p>\n
\n It all comes back to the Strait of Hormuz.\n <\/p>\n
\n Investors need to see traffic through the strait rise meaningfully in the coming weeks and months at a minimum to keep prices subdued.\n <\/p>\n
\n Even then, there are logistical challenges with bringing oil production across the Gulf region back online.\n <\/p>\n
\n \u201cWe\u2019re walking a very fine line,\u201d Turnquist said. \u201cThe market right now, and especially oil, is assuming a lot of things go right.\u201d\n <\/p>\n","protected":false},"excerpt":{"rendered":"Summary Gas prices have dropped below $4 a gallon and stocks are near record highs after the Strait…\n","protected":false},"author":2,"featured_media":713500,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[18],"tags":[23,3,21,19,22,20,25,24],"class_list":["post-713499","post","type-post","status-publish","format-standard","has-post-thumbnail","category-united-states","tag-america","tag-news","tag-united-states","tag-united-states-of-america","tag-unitedstates","tag-unitedstatesofamerica","tag-us","tag-usa"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/713499","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=713499"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/713499\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/713500"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=713499"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=713499"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=713499"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}