U.S. stocks climbed Thursday after President Donald Trump and Iran's president signed a memo to reopen the Strait of Hormuz, a move that eases months of tensions in the region. The rally was led by tech shares, pushing indexes higher across the board.
Why the Strait of Hormuz matters to markets
The Strait of Hormuz is a narrow waterway between Iran and Oman, through which roughly a fifth of the world's oil passes. Disruptions there have historically sent crude prices spiking and rattled global markets. The memo signed by the two leaders aims to restore normal shipping traffic and dial back the risk of military escalation. For investors, that removes a major geopolitical overhang that had been weighing on sentiment, especially in sectors sensitive to energy costs.
Tech stocks lead the rally
Thursday's advance was concentrated in technology companies, which had been under pressure in recent weeks amid uncertainty over trade and interest rates. The sector's gains suggest traders are pricing in a more stable environment, both geopolitically and in terms of monetary policy. The broader market also rose, but the tech-heavy indices outperformed.
What the Fed might do next
Polymarket data shows a 74.5% probability that the Federal Reserve will hold interest rates steady at its July meeting. That reading has changed little in recent days, indicating the Strait of Hormuz deal hasn't shifted expectations for central bank policy. The Fed has been watching inflation and employment data closely, and a rate hold in July would keep the benchmark rate where it is, giving policymakers more time to assess economic conditions.
What comes after the memo
The memo itself is a preliminary agreement, with details on implementation still to be worked out. Both sides have said they aim to keep the waterway open and reduce hostilities, but past deals between the U.S. and Iran have faltered. For now, markets are reacting to the immediate reduction in risk. The next test could come when oil tankers actually begin moving through the strait in larger numbers and whether both parties stick to the terms.
