US stocks edged higher on Friday as oil prices fell and traders leaned into the prospect of a US-Iran agreement that would reopen the Strait of Hormuz. In early trading the S&P 500 was up around 0.16 per cent, the Dow Jones Industrial Average added about 0.13 per cent and the Nasdaq Composite gained roughly 0.20 per cent, with the small-cap Russell 2000 outperforming, up about 0.57 per cent, a sign of slightly broader participation than the mega-cap-led tape of recent sessions.
The move in crude was the day's clearer signal. West Texas Intermediate fell about 1.4 per cent to $87.66 a barrel and Brent slipped 1.3 per cent to $92.47, as the market repriced the likelihood of a prolonged supply shock. With diplomatic sentiment improving, traders judged a sustained disruption to Gulf oil flows less probable, unwinding part of the war-risk premium that had been built into the price through the spring.
The diplomacy itself kept investors cautious. Vice-President JD Vance said the United States and Iran were "not there yet" on the framework that would reopen the strait, extend the ceasefire and advance nuclear talks, while adding that the two sides were "very close." That mix of progress and unresolved detail left equity markets to grind modestly higher rather than stage a decisive rally.
Friday's gains built on a strong Thursday, when the S&P 500 closed at a record 7,563.63 and the Nasdaq Composite at a record 26,917.47, lifted by a powerful technology rally. That advance was notable for coming despite an uncomfortable inflation print: the April personal consumption expenditures index rose 0.4 per cent on the month, taking the annual rate to 3.8 per cent, up from 3.5 per cent in March and 2.8 per cent in February, the hottest reading in nearly three years.
The willingness of equities to set records in the face of accelerating inflation reflects a market betting that the energy-driven price surge will prove temporary if the Iran framework holds and oil retreats. It also reflects the gravitational pull of the artificial-intelligence trade, which has repeatedly overridden macro concerns. Bond markets have been more circumspect, with yields reflecting the tension between hot inflation data and the prospect of slower growth.
The immediate catalyst now is the same one hanging over every market this week: whether President Trump signs the memorandum. A signed deal that brought crude lower would validate the equity market's optimism and ease the inflation pressure the PCE data laid bare. A collapse would send oil back up and force a rapid repricing. For Friday, at least, investors chose to bet on the deal.