US Stocks Rally on Ceasefire, Goldman Warns of Short Squeeze

by Natalia Kniazhevich of Bloomberg News, 4/8/26

US stocks rallied after President Donald Trump’s announcement of a two-week ceasefire in the Iran war spurred relief across markets.

The S&P 500 Index soared 2.3% as of 9:52 a.m. in New York and the Nasdaq 100 climbed about 3%. Brent crude fell 16% to trade around $92 a barrel, while West Texas Intermediate dropped to around $93. Additionally, the CBOE Volatility Index hovered near 21.

Trump announced the agreement on social media hours after Pakistan, a mediator in talks, implored the US leader to back off his deadline for attacks on Iranian infrastructure. Israel has also agreed to the ceasefire, according to a White House official. Iranian Foreign Minister Abbas Araghchi said in a statement that safe passage through the Strait of Hormuz will be possible for two weeks.

The Strait of Hormuz appeared to remain largely blocked on Wednesday, as shipowners try to understand if they can safely transit the vital waterway following the ceasefire announced overnight.

Meanwhile, investors are trying to gauge whether this marks just a temporary halt to hostilities or a longer-term truce.

JPMorgan Chase & Co.’s trading desk turned tactically bullish after modeling three scenarios ahead of Trump’s Tuesday deadline. “This ceasefire should trigger a re-risking potentially similar to the post-Liberation Day pivot,” wrote Andrew Tyler, JPMorgan’s head of global market intelligence. “How far could this go? Breaching 7,000 feels likely as euphoria returns to markets.”

Goldman Sachs Group Inc. traders including Matthew Kaplan warned that investors should expect “a squeezy macro tape today” as hedges or short positions are unwound.

Goldman also flagged that investors should keep an eye on systematic funds that follow the stock market direction. Demand for stocks from Commodity Trading Advisors, or CTAs, now “kicks in mechanically and should persist” while “volatility compression becomes a powerful tailwind,” Richard Privorotsky, partner at Goldman Sachs International, wrote in a note to clients Wednesday.

Still, he warned that the market will try to move past Iran as the stock market has largely retraced a large portion of the drawdown. “Ceasefires are fragile by definition and we’ve already seen strikes overnight across the Gulf,” Privorotsky wrote.

To Michael O’Rourke, chief market strategist at JonesTrading, today’s rally is a major selling opportunity for investors. “Investor enthusiasm appears excessive given the uncertainty surrounding the deal,” he wrote. “The only bullish factor investors can have real confidence in is President Trump’s urgency to extricate the US from the region.”