Geopolitical De-escalation Triggers Oil Slump and Equity Rally

Global equity markets surged to new heights following Iran's announcement that the Strait of Hormuz is now fully open, coinciding with a 10-day ceasefire agreement between Israel and Lebanon. The S&P 500 and Nasdaq Composite both reached all-time highs, marking a sustained rally for both indices. The de-escalation has had an immediate impact on energy markets. Brent crude prices plummeted 9.8% to $82.21 per barrel as the risk of supply disruptions through the critical maritime chokepoint diminished. However, market participants remain cautious, as the ceasefire is temporary and the U.S. continues to maintain a blockade on Iranian shipping. Asian markets, particularly South Korea, are seeing a sharp recovery. South Korea relies on the Strait of Hormuz for approximately 60% to 70% of its crude oil imports. Consequently, the iShares MSCI South Korea ETF (EWY) has rebounded strongly after losing over 20% during the height of the conflict. Beyond energy security, the recovery in Korean equities is supported by a boom in memory chips, driven by industry leaders Samsung and SK Hynix. With a price-to-earnings ratio of 20.4, the sector remains attractively valued compared to the S&P 500, while benefiting from improved corporate governance policies.