Iran Just Delivered Incredible News for Stock Market Investors

Around 25% of the world's daily supply of seaborne oil transits through the Strait of Hormuz. Iran effectively closed the waterway after direct attacks on its territory by the U.S. and Israel, which began on Feb. 28, leaving countries scrambling to avoid a global energy shortage.

The price of a single barrel of West Texas Intermediate crude oil soared to a 52-week high of around $120 in March, more than doubling from where it opened in 2026. As a result, the S&P 500 (SNPINDEX: ^GSPC) plummeted by as much as 9% from its peak, as investors weighed the potential negative impacts on corporate earnings and the broader economy.

But earlier this morning (April 17), Iranian Foreign Minister Seyed Abbas Araghchi announced his country would allow safe passage of commercial vessels through the Strait of Hormuz, effective immediately. There are some conditions, but here's what it means for the stock market.

Image source: Getty Images.

The S&P 500 just exploded to a new record high

The U.S. and Iran reached a ceasefire agreement on April 8, which set the stage for negotiations for a longer-term peace deal. The stock market is a forward looking machine, so investors immediately started pricing in lower oil prices and a formal end to the conflict.

As a result, the S&P 500 quickly recovered all of its losses and hit a new all-time high on April 15. However, the Strait of Hormuz was still effectively shut. Iran wouldn't let commercial vessels pass until it saw a definitive ceasefire agreement between Israel and one of its closest allies, Lebanon. Those two countries were fighting a separate war, so Iran used the Strait as leverage to help shield its ally from further conflict.

A 10-day ceasefire appears to have been agreed today, April 17, and Iran says the Strait will only remain open for its duration. Therefore, any breaches sparked by renewed attacks by either side could result in further commercial shipping disruptions.

For now, though, West Texas Intermediate oil has pared the bulk of its war-related gains. It trades at a price of $84 per barrel as I write this, which is 30% below its recent peak.

What should investors do from here?

Any product that travels by boat, plane, or truck is affected by higher oil prices. Therefore, American consumers have recently faced higher prices at the grocery store and at their favorite retailers, not to mention at the gas pump.

In fact, the U.S. Producer Price Index surged to an annualized rate of 4% in March, which was the highest level in three years. This measures how fast input costs are rising for manufacturers and providers of services, so it's often a leading indicator for the more widely followed Consumer Price Index (CPI). In other words, if oil prices remained elevated, a prolonged spike in inflation would have been the likely outcome.

The U.S. Federal Reserve would normally raise interest rates in that scenario, putting the brakes on consumer spending and business investment. This would have almost certainly dented corporate earnings, which is why investors were quick to sell stocks when the conflict started.

With those concerns now mostly off the table, it's no surprise the S&P 500 hit yet another fresh record high today. But that doesn't mean investors should bet the farm right now -- ceasefires can be fragile, so until long-standing peace agreements are in place between the U.S. and Iran, and Israel and Lebanon, it's worth treading carefully.

Investors who do have some cash to put to work might want to deploy it slowly, but consistently over the next few months. That way, if negotiations break down and the stock market suffers another sell-off, they can dollar-cost average at lower prices.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.