Dow, S&P 500, Nasdaq Climb as Trump Says Hormuz Deal Is Close

 

Dow, S&P 500, Nasdaq Climb as Trump Says Hormuz Deal Is Close

**Markets rallied again on Wednesday as diplomatic signals pointed toward a breakthrough that could end the five-month war with Iran and reopen the Strait of Hormuz, sending oil prices plunging and easing inflationary pressures. But the enthusiasm was tempered by a sharp selloff in SpaceX and AMD stock after their earnings reports disappointed investors.**

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## The Diplomatic Catalyst: "Tomorrow or the Next Day"

The Dow Jones Industrial Average extended its powerful two-day rally, climbing over 200 points in early trading after President Donald Trump told reporters that a deal to reopen the Strait of Hormuz could come as early as Wednesday or Thursday . The comments followed similar optimism from Treasury Secretary Scott Bessent, who told CNBC that Washington and Tehran were nearing an agreement .

The backdrop for the diplomatic push is significant. Just days earlier, Trump had suspended what he described as a "major" military strike on Iran to allow negotiations to proceed . Qatar has reportedly drafted a proposal to reopen the waterway, and Iran is considering allowing European countries to remove mines from the strait, a move that would accelerate the normalization of shipping traffic .

On Tuesday, the S&P 500 surged 1.8% to close above the 7,700 mark for the first time, while the Dow climbed more than 900 points to a record high . The Nasdaq Composite outperformed both, gaining 2.59% to finish at 26,584.99 . The Wednesday rally built on that momentum, though the gains were more measured as investors digested a mixed bag of earnings reports.

## Oil Prices: The Relief Rally Continues

The prospect of a diplomatic breakthrough sent oil prices tumbling this week, with Brent crude falling roughly 5% on Tuesday and WTI crude dipping below $80 a barrel . The Strait of Hormuz is a narrow waterway that handles a substantial portion of global seaborne oil and liquefied natural gas shipments; its closure had sent prices soaring above $100 a barrel in July .

However, oil prices reversed slightly on Wednesday after Trump's comments, with Brent crude rising 1% to $80 per barrel . The stabilization reflects lingering skepticism that a deal will materialize quickly, even as diplomatic signals point toward progress.

The collapse in oil prices has been a primary driver of the market rally. Lower energy costs ease inflationary pressures, reducing the likelihood of aggressive Federal Reserve rate hikes and providing a tailwind for consumer spending .

## The Mixed Earnings Picture

Not all stocks participated in the rally. SpaceX tumbled roughly 11% in premarket trading after reporting its first quarterly results as a public company. The company's AI spending overshadowed a revenue beat, raising concerns about free cash flow and capital intensity . Additional pressure came from a looming share unlock that could flood the market with new supply .

AMD also fell roughly 7% after reporting adjusted earnings that narrowly topped Wall Street estimates and issuing a strong outlook. Investors were looking for a "blowout" quarter from the chipmaker, and despite record revenue of $11.54 billion and a 107% surge in data center revenue, the guidance didn't meet the loftiest expectations .

The divergence between the broader market's optimism and the tech sector's struggles reflects a market in transition. Investors are rotating into value-oriented names that benefit from lower oil prices while punishing stocks that were priced for perfection.

## What's Next: The Hormuz Watch

Investors are now watching for any confirmation that a deal has been signed. The market is pricing in a near-term breakthrough, and any delay or setback could trigger a sharp reversal in both oil prices and equities.

Key signals to watch include:

- **Official announcements from the U.S. or Iran confirming a deal**

- **Shipping traffic data showing increased vessel movement through the strait**

- **Oil price movements—a sustained drop below $80 would signal confidence in the deal**

- **Federal Reserve commentary on whether lower oil prices reduce pressure to hike rates**

## Frequently Asked Questions

### Q: What is the Strait of Hormuz and why does it matter?

The Strait of Hormuz is a narrow waterway between Iran and Oman through which roughly one-fifth of the world's oil supply passes . Its closure during the U.S.-Iran war sent oil prices above $100 a barrel. A deal to reopen it would flood the market with oil, lowering prices and reducing inflationary pressure.

### Q: What did Trump say about a deal?

Trump told reporters that a deal to reopen the Strait of Hormuz "could happen. Tomorrow or the next day" . Treasury Secretary Scott Bessent echoed the optimism, saying Washington and Tehran were nearing an agreement .

### Q: Why did SpaceX stock fall after earnings?

SpaceX fell roughly 11% because the company's AI spending overshadowed its revenue beat. Investors were concerned about free cash flow and capital intensity, especially with a share unlock looming .

### Q: Why did AMD stock fall despite beating earnings?

AMD fell roughly 7% because the chipmaker's guidance, while strong, didn't meet the most optimistic expectations. The stock had rallied roughly 140% year-to-date, and investors were looking for a "blowout" result .

### Q: Will oil prices keep falling?

If a deal to reopen the Strait of Hormuz is signed, oil prices could fall further. But if diplomatic efforts stall, prices could rebound sharply. The market is pricing in a breakthrough, creating a risk of reversal if the deal falls through.

### Q: What does this mean for the Federal Reserve?

Lower oil prices ease inflationary pressures, reducing the likelihood of aggressive Fed rate hikes. However, the Fed is still weighing three dissents at the July meeting favoring a hike, and traders are pricing in a 70% chance of a September rate increase.

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## Disclaimer

**IMPORTANT:** This article is for informational and educational purposes only and does not constitute financial, investment, or trading advice. The information contained herein is based on publicly available sources and reflects the author's understanding as of the publication date. Market conditions, geopolitical developments, and economic data are subject to rapid change. Past performance is not indicative of future results. You should consult with a qualified financial advisor before making any investment decisions.