Stocks rallied around the world as oil prices fell on hopes of a possible end to the Iran war

NEW YORK (AP) – Stocks rose sharply around the world, and oil prices fell Wednesday on hopes that the war with Iran could end soon. That or some of the signs that investors see as hope have become controversial, and the few earlier moments of optimism in the financial markets were quickly eroded by the continuing, fierce fighting in the war.

The S&P 500 rose 0.7% and added to its jump from yesterday, which was the best since last spring. That followed even bigger gains in stock markets across Europe and Asia, including an 8.4% surge in South Korea, which topped Wall Street’s session from Tuesday.

The Dow Jones Industrial Average rose 224 points, or 0.5%, while the Nasdaq composite gained 1.2%.

Oil prices fell back to $100 per barrel after President Donald Trump said on Tuesday that the US military could end its offensive in two to three weeks.

That added to the optimism following a few signs of hope since early Tuesday on Wall Street, including a news report citing Iran’s president as saying he has the “necessary desire to end the war” as long as certain conditions are met, including “guarantees to prevent a recurrence of violence.”

The concern on Wall Street has been that the war could drag on for too long and keep Persian Gulf oil and natural gas off the world market, which could trigger a vicious burst of inflation.

But optimism is quickly giving way to skepticism on Wall Street, which has caused manic swings back and forth in financial markets since the war with Iran began. Trump also made statements that lifted the markets, only to see the gains quickly disappear after he escalated his threats of war.

Just before Wall Street opened for trading on Wednesday, Trump tweeted that Iran “just asked the United States of America to CEASEFIRE!”

“We will consider when the Hormuz Strait is open, free, and clear. Until then, we are blasting Iran into oblivion or, as they say, back to the Stone Ages!!!”

But a spokesman for Iran’s Foreign Ministry, Esmail Baghaei, immediately called the claim “false and baseless,” according to a report on Iranian state television.

Oil prices also remain high, even if they have fallen recently. The price of a barrel of Brent crude oil, the international standard, was sitting at around $101 following the decline, still up from around $70 before the war began.

US gasoline prices rose again overnight to a national average of $4.06 per gallon, according to the AAA auto club.

Meanwhile, Iran hit an oil tanker off the coast of Qatar and at Kuwait’s airport on Wednesday as airstrikes hit Tehran as the war continued. Iran also continues to hold the Strait of Hormuz, through which a fifth of the world’s oil trade passes in peacetime.

“Expectations of a recession have boosted markets, but we think that the effects of the war, in many cases, will continue even if the war ends quickly,” said Thomas Mathews, head of markets, Asia Pacific at Capital Economics, in a research note on Wednesday.

“It’s worth thinking about how markets might work if the war could end ‘too soon,'” he wrote. “Will markets still recover if sentiment continues to improve? The answer is probably yes.”

The White House said Trump will hold a public address Wednesday evening on the Iran war.

On Wall Street, three out of five stocks within the S&P 500 rose as Big Tech powered the move. Alphabet’s 3.4% gains and Nvidia’s 0.8% were the two strongest forces lifting the S&P 500.

Eli Lilly gained 3.8% after US regulators approved its GLP-1 weight loss pill.

Such gains have pulled the S&P 500, which sits at the heart of many 401(k) accounts, back to within 5.8% of its all-time high set earlier this year. Just Monday, the index briefly came close to a record 10% drop, a fall enough that professional investors have a name for it: “correction.”

Nike fell 15.5% despite reporting stronger-than-expected earnings in the latest quarter. Analysts say it has given some of the fiscal deficit forecasts.

Oil companies also dropped the price of crude. Exxon Mobil fell 5.2%, while Chevron fell 4.6%.

All told, the S&P 500 rose 46.80 points to 6,575.32. The Dow Jones Industrial Average added 224.23 to 46,565.74, and the Nasdaq composite rose 250.32 to 21,840.95.

In stock markets abroad, indices jumped more than 2% in France and Germany. Asian markets had even bigger gains.

Tokyo’s Nikkei 225 jumped 5.2 percent after a survey showed business sentiment at Japan’s biggest manufacturers was improving despite concerns about the Iran war.

In the bond market, Treasury yields held back slightly after a report said US retailers made more money in February than economists had expected. A separate report said US manufacturing growth last month was slightly faster than economists had expected.

The 10-year Treasury yield rose to 4.32% from 4.30% late Tuesday.

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AP Business Writers Chan Ho-him and Matt Ott contributed.