Relief rally on the New York Stock Exchange. However, optimism across the Atlantic is lower than in Europe

Wednesday's session on Wall Street ended with strong increases in stock indices. However, the scale of the increases was much smaller than in Europe or Asia, where the war with Iran caused much greater damage than to America.

Euphoria gripped financial markets after an overnight halt to hostilities in the Persian Gulf was agreed and promises to open the Strait of Hormuz to shipping, even though hours earlier the US president had threatened to end the Iranian civilization. Oil prices fell by 12% each, giving hope for an end to the fuel crisis.

Stock exchanges in Asia – the region of the world most dependent on oil and gas supplies from the Persian Gulf – increased by as much as 5-7%. In Europe, the German DAX increased by over 5%, the French CAC40 gained 4.5%, and the indices in Milan and Madrid increased by almost 4% each. In this context, the rally on Wall Street was much more moderate. But it should also be remembered that in March, Europe and Asia were hit much harder than America, which is rich in energy resources.

And so the Dow Jones industrial average went up by 2.85% and reached 47,909.92 points. After an increase of 2.51%, the S&P500 index reached 6,782.81 points. The Nasdaq Composite gained 2.80% and finished with a score of 22,635 points. It was the sixth consecutive upward session on Wall Street. It was clearly visible that the market had been expecting some form of end to the war with Iran and a resumption of oil and gas supplies from the Persian Gulf since the end of March.

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After Wednesday's session, the S&P500 and Nasdaq are on their way to recent all-time highs and, just like a year ago, they may soon start setting new bull market highs. Despite all the noise, there are a few flaws in this pro-growth narrative. First, for now we only have a 14-day truce and basically nothing more. Secondly, it does not apply to Lebanon, which is a convenient excuse for Tehran to break off negotiations. Thirdly, it is not known when and under what conditions legal navigation through the Strait of Hormuz will be resumed. Reuters managed to report that on Wednesday Iran closed the Strait of Hormuz in response to Israel's continued attacks on Lebanon.

– This is a big increase based on the inclusion of risk-on mode and this is something you could expect on a day like this. Especially after the sentiment had been constantly deteriorating over the previous six weeks – this is how Ross Mayfield, an investment strategies analyst at Baird, commented on Wednesday's session, quoted by Reuters. “When we have a fuse like that, there's more room to move up,” Mayfield added.

All this optimism is based on the assumption that “nothing happened.” I.e. that the oil shock will be resolved quickly and that it has not changed this year's plans of both consumers and producers. Both of these calculations may yet turn out to be wrong. Caution about the macroeconomic outlook was also visible during the March FOMC meeting. The minutes of the last meeting of the US monetary authorities showed that decision-makers were afraid of both an increase in inflation and weakening economic growth.

Even after the truce with Iran, the futures market is basically not pricing in any significant chances for a reduction in the federal funds rate in 2026. It's good for the capital markets that price increases are no longer being priced in, which seemed to be the base scenario two weeks ago. But yields on US government bonds fell only slightly. The yield on 10-year Treasuries remained virtually unchanged at 4.29%. American 2-year bonds paid almost 3.8% today – slightly above the current midpoint of the Fed's rate range (3.50-3.75%).

In set terms, the increases covered virtually all market segments. There were basically three exceptions. Firstly, the shares of oil companies were significantly overvalued, which is understandable given the double-digit decline in oil prices. Exxon Mobil's shares dropped by nearly 5% and Chevron's by 4.3%. Secondly, for equally obvious reasons, defensive shares of telecommunications companies were disposed of. And finally, thirdly, the shares of Palantir – a company providing dual-use technology – experienced a decline of over 6 percent.

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