Markets rally as Iran-Pakistan talks cut oil nearly 10%

Global markets rallied Friday after reports that Iran and Pakistan engaged in negotiations that produced concessions and that tanker traffic through the Strait of Hormuz was set to resume. Brent and WTI crude each fell roughly 10%, and U.S. stock indexes climbed to record levels.

The Nasdaq and S&P 500 reached fresh all-time highs, while the Dow Jones Industrial Average rose and narrowed the gap with those indexes. Bitcoin traded near $78,000, and other cryptocurrencies and silver outperformed during the session. WTI briefly traded below the $90 a barrel level following the reports.

Market participants identified the reopening of the Strait of Hormuz as the immediate catalyst. President Trump told reporters he expects a finalized deal “in a day or two,” remarks that coincided with the sharp drop in oil prices. Traders say the decline erased much of the week's earlier rally in crude.

Oil markets experienced pronounced volatility. Prices moved nearly 10% from the prior session, and some participants flagged unusual trading activity in futures and options contracts shortly before the Hormuz news, which they said was suggestive of advance knowledge. Physical traders will monitor actual tanker flows to confirm the reports and assess whether supply flows return.

U.S. inflation readings released this week showed higher CPI and PPI prints than in recent months but were below the most extreme forecasts. Analysts noted the recent commodity-driven price moves could affect inflation readings in coming months.

Market calendars next week include Japan's March inflation data due Thursday evening, which could factor into Bank of Japan deliberations. Canadian inflation is scheduled Monday, with a consensus near 2.5 percent. The United Kingdom will publish employment, inflation and retail sales figures, and Germany will release the ZEW sentiment survey and purchasing managers' indices. The United States posts retail sales on Tuesday.

The current ceasefire tied to the talks is scheduled to expire on April 22. Market participants noted that without a formal extension or a signed agreement, the gains in stocks and the drop in oil could reverse quickly if hostilities resume.

Cross-asset flows showed the largest gains in higher-beta assets this week, with cryptocurrencies and silver leading performance tables while major U.S. indexes extended advances. Oil fell about 10% since the prior session and roughly 17% from the week's opening gap before a partial intraday rebound. Observers said next week's headlines and the pace at which tanker traffic actually restarts will be key to market direction.