US stocks closed sharply higher on Wednesday after a last-minute, two-week ceasefire agreement between the United States and Iran lifted investor sentiment. All three major U.S. stock indexes rose at the early bell, gains muscled by a broader relief rally after a two-week suspension of the war as a result of a deal brokered by Pakistan. The conflict, which began with a joint US-Israeli strike on Iran on February 28, has roiled world markets, disrupted global oil supplies and raised fears of rising inflation.

A senior Iranian official told Reuters that the crucial Strait of Hormuz, through which a fifth of the world’s oil is shipped, could be reopened on Thursday or Friday ahead of peace talks if the countries agree on a framework for a ceasefire.

“Today is an expected move and there’s still a lot of work to be done, but I think the market is quite relieved,” said Mike Dixon, head of portfolio management at Horizon Investments in Charlotte, North Carolina. “The other side of this coin could be a lot worse and frankly there’s a good reason to think that was possible as well. So you’re seeing that relief rally in the hardest hit areas of the market.”

The financially sensitive ⁠Dow Transports touched an all-time high, while the Russell 2000 outperformed its large-cap peers. The rally was not limited to US indices. European shares rose 3.9%, while MSCI’s world index rose more than 3%. Both indices posted their biggest one-day percentage gains in a year.

“Most other countries were more exposed to energy shocks and food shocks than the U.S.,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. “So this is a very big near-term relief for international stocks.”

The CBOE Market Volatility Index, a barometer of investor anxiety, fell to its lowest level since the start of the war.

Front-month WTI and Brent crude futures fell 16.4% and 13.3% respectively, both settling below $100 a barrel.

The US Minutes of the Federal Reserve’s March meeting, released on Wednesday, showed a growing openness to a rate hike as policymakers raised their 2026 inflation outlook due to a war-related oil shock.

According to preliminary data, the S&P ⁠500 rose 166.63 points, or 2.52%, to end at 6,783.48 points, while the Nasdaq Composite gained 620.05 points, or 2.82%, to 22,637.90. The Dow Jones Industrial Average rose 1,329.56 points, or 2.85%, to 47,914.02.

Sectors that have taken a beating since the start of the war, including commercial airlines, travel and leisure-related stocks and homebuilders, have enjoyed strong bouncebacks. Delta Air Lines rose despite its disappointing second-quarter profit forecast. The commercial air carrier declined to update its annual forecast due to uncertainty related to the Iran war.

Delta Piers Southwest Airlines and United Airlines also advanced.

Cruise operators Carnival and Norwegian Cruise Line both posted strong gains. Levi Strauss jumped after the apparel maker raised its annual sales and profit forecast.