Strait of Hormuz reopening could pull oil back to the $70s, analyst says

The benchmark S&P 500 and the tech-heavy Nasdaq touched all-time highs on Friday (April 17), while the blue-chip Dow hit its highest level in more than two months, as investors cheered Iran's decision to reopen the Strait of Hormuz.

Iran's Foreign Minister Abbas Araqchi said in a post on X that passage for all commercial vessels through the strait was "completely open" for the remainder of the 10-day truce between Israeli forces and Iran-backed Hezbollah agreed to in Lebanon.

That came after President Donald Trump said Washington could soon secure a peace agreement to end the war with Iran.

With markets increasingly confident the conflict may ease, oil prices slid more than 11%, easing concerns about inflation. The Strait of Hormuz is a critical chokepoint for global oil flows.

Rob Thummel, senior portfolio manager at Tortoise Capital, said the reopening could help restore supply and bring prices down from crisis levels.

“We expect the oil to start flowing, physical oil volumes that come back to the markets, and that means that the market won't be as undersupplied,” he said.

He said lower oil prices are also boosting the broader market because they could help cool inflation, support consumer spending and reduce pressure on the economy. "I think what we'll see is more of an oil price that's probably in the seventies," he said, adding that prices could still move into the $80s depending on geopolitical developments.

Falling oil prices weighed on energy stocks, with the S&P 500 energy sector down 4.8%. Exxon Mobil fell 5.7%, while Chevron dropped 4.5%.

But lower crude boosted travel-related shares. American Airlines and United Airlines both jumped more than 7%, while CarnivThe CBOE Volatility Index also hit a two-month low.al and Norwegian Cruise Line rose 8.7% and 7.5%, respectively.

-Christine Kiernan/Reuters