Markets Rally on Hopes of US-Iran Deal as Oil Prices Slide

US financial markets climbed near record highs on Wednesday while oil prices dropped sharply, as investors increasingly bet that Washington and Tehran may be edging closer to a ceasefire agreement that could ease pressure on global energy supplies.

The market reaction followed reports from Iranian state media claiming that Tehran had obtained a preliminary framework for a possible deal with the United States. According to the report, Iran would restore shipping through the Strait of Hormuz to pre-war levels within 30 days, while the US would lift its naval blockade on Iranian ports.

The Strait of Hormuz remains one of the world’s most critical energy chokepoints, carrying a significant share of global oil and gas shipments. Since the outbreak of the US-Israel war involving Iran earlier this year, fears over disruptions in the strait have rattled markets and pushed fuel prices sharply higher worldwide.

Oil prices fell immediately on the reports. US crude dropped 5.5 percent to settle at $88.68 per barrel, while Brent crude slipped to around $92 after trading above $100 only days earlier.

Notably, prices remained relatively subdued even after the White House dismissed the Iranian report as a “complete fabrication”.

The stock market also extended its recent gains. The S&P 500 added another 0.1 percent after reaching a record high the previous day. The Dow Jones Industrial Average rose 243 points, or 0.5 percent, while the Nasdaq composite also edged higher.

Markets have reacted similarly several times during the conflict, rallying on reports of diplomatic progress before retreating again when negotiations stalled or violence escalated. But analysts say the latest surge appears stronger because officials on both sides have recently signaled that talks may be approaching a more serious phase.

During a cabinet meeting on Wednesday, Donald Trump suggested negotiations were moving closer to US expectations, though he also maintained a threat of further military action.

“I think they’re starting to give us the things that they have to give us,” Trump said.

“And if they do, that’s great, and if they won’t, then the man on my left will have to finish them off,” he added, pointing toward Defense Secretary Pete Hegseth.

Despite the market optimism, major disagreements remain unresolved.

One key issue is the future of roughly 440 kilogrammes of highly enriched uranium currently held by Iran. Washington has also long demanded the dismantling of Iran’s nuclear infrastructure, while Tehran continues to resist broader restrictions tied to its ballistic missile programme and regional alliances.

Another unresolved question is whether any deal would include a halt in fighting involving Hezbollah in Lebanon. Iranian officials have repeatedly insisted that regional de-escalation must be part of a broader agreement, but Israeli Prime Minister Benjamin Netanyahu this week ordered intensified strikes against Hezbollah targets.

Sanctions relief also remains uncertain. It is still unclear whether Washington would agree to lift major sanctions on Iran or release frozen Iranian assets abroad — two issues Tehran considers central to any meaningful settlement.

For now, markets appear focused less on the unresolved details and more on the possibility that the conflict may finally be moving away from escalation. After months of volatility tied to war fears, disrupted shipping routes and energy shocks, even the suggestion of diplomatic movement has been enough to lift investor confidence and cool oil markets.