Oil fell to its lowest settlement in roughly two months on Friday and global stocks extended their relief rally, as traders positioned for a US-Iran agreement that could reopen the Strait of Hormuz and return Iranian barrels to the market. West Texas Intermediate crude settled at $84.41 a barrel, down about 3.8 percent on the day, while Brent finished near $87.
Equities built on Thursday's surge, when the Dow jumped nearly 930 points after President Trump said a deal could be signed within days. On Friday the S&P 500 added 0.5 percent to close at 7,431.46, the Nasdaq Composite rose 0.3 percent to 25,888.84, and the Dow Jones Industrial Average gained 353 points, or 0.7 percent, to 51,202.26, according to Yahoo Finance data. Europe's STOXX 600 climbed 1.5 percent.
The driver is a draft memorandum of understanding that, according to a report by Iran's Mehr news agency citing an unnamed official, would commit Iran to reopening the Strait of Hormuz within 30 days, alongside a permanent halt to fighting on all fronts and a 60-day window to negotiate a final agreement on its nuclear program. Neither government has confirmed the leaked terms, and Iranian officials stressed Friday that no deal is final.
Crude has now given back the bulk of its war premium. WTI traded above $108 in mid-May at the height of fears that the Hormuz closure — which chokes off about 20 percent of the world's energy supply — would persist into the second half of the year. Friday's settlement leaves the US benchmark down more than 20 percent from that peak, though prices remain elevated relative to the start of the year.
Analysts cautioned that the move is running ahead of the facts. 'You never know what the final details will be,' Chris Zaccarelli of Northlight Asset Management told Reuters, noting that markets have rallied and faded on signing chatter several times since the April ceasefire.
Lower crude also tempered the inflation anxiety that has dogged markets since May's consumer price index came in at 4.2 percent. Treasury yields eased from their midweek highs and the dollar index hovered near 99.8, little changed on the day.
The other story of the session was SpaceX's record Nasdaq debut, which closed up about 19 percent and added a tailwind to the broader risk-on tone. Whether the rally holds, traders said, now depends almost entirely on whether the weekend produces a signature or another round of whiplash.