The economic feedback continues to roll in following Tuesday evening's announcement of a cease-fire between the United States and Iran in Operation Epic Fury. Iran has reportedly agreed to cease trying to interfere with shipping in the Strait of Hormuz, and both American stock markets and the energy sector are already reflecting the easing of tensions.
First, the stock markets. Financial markets, like energy markets, hate uncertainty, and few things are as uncertain as war. But that's changing as of Wednesday morning.
US stocks surged Wednesday morning as oil plunged below $95 after President Trump said he had agreed to a two-week ceasefire with Iran — paving the way to reopen the Strait of Hormuz.
The Dow Jones Industrial Average had soared 1,048 points, or 2.3%, as of 11:15 a.m. ET, while the S&P 500 and Nasdaq jumped 2.1% and 2.6%, respectively.
As of this writing, 12:35 EDT, the Dow Jones is up 1174.50 points, the S&P 500 is up 152.8, and the NASDAQ is up 705.3 points. It's a good day to take a look at your 401(k) account.
Second, the energy markets are happy, too, to see lower prices.
Brent crude oil prices dropped 13.1% to $94.96 a barrel – its lowest price in nearly a month after news that Iran would allow the temporary safe passage of ships through the strait, a vital maritime route for 20% of the world’s oil supply.
West Texas Intermediate crude also fell 3.9% to $72.22 a barrel.
RedState's own Susie Moore brought us the good news on oil prices right after the cease-fire was announced:
Read More: Oil Prices Nosedive Upon News of Iran Ceasefire
And, Susie (as usual) makes one very good point:
Don't necessarily expect this to show up at the gas pump instantaneously, but there's good news on the oil price front following President Trump's announcement that a tentative ceasefire agreement had been reached with Iran.
That's the catch. (There's always a catch.) Gas and diesel prices always rise very quickly at the hint of a crisis, but they always drop back towards the mean much more slowly.
Read More: Winning: Dow Jones Index Reaches Historic Milestone, Showing Trump's Policies Are Working
A quick trip to the post office earlier today revealed gasoline prices here in the Susitna Valley still over $4.00 a gallon, with diesel approaching $6.00. That will likely take a while to come back down, assuming the whole Iran cease-fire doesn't suddenly come apart at the seams.
In the meantime, let's take the win. The stock market report is great, yes, but it's the energy price drop that's really significant. Every business owner, every board of directors, every CEO in the United States and elsewhere is probably breathing a small sigh of relief and hoping that the cease-fire holds. Energy is at the heart of every modern human endeavor, for every household, every business, large and small, in every economic decision we make, from buying a bottle of pop at the gas station to investing a billion dollars in a tech startup. This drop in oil prices back towards the antebellum mean, assuming it holds, will be a big boost to the global economy.
Now, let's cross our fingers that the whole thing holds, and that a new, more stable, less terroristic Iran somehow emerges from all this, so that we hopefully won't see another price shock like this anytime soon.
Editor's Note: For decades, former presidents have been all talk and no action. Now, Donald Trump is eliminating the threat from Iran once and for all.
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