April 8 (Reuters) - Wall Street stock index futures rose more than 2% across the board on Wednesday after the U.S. and Iran agreed to a two-week ceasefire, sending crude prices lower on expectations that energy supplies through the Strait of Hormuz could resume.
The announcement came less than two hours before U.S. President Donald Trump's deadline, marking a sharp turnaround from his earlier warning of wiping out "a whole civilization" if Tehran did not reopen the Strait, the narrow waterway that typically handles about one-fifth of global oil trade.
Global assets staged a sharp rally: equity indexes in the Asian and European markets climbed between 4% and 5%, while crude prices slid 13.7% to nearly $94.23 a barrel.
"The rally will need to be backed up by tangible progress in negotiations to hold. The underlying question of whether Iran will permanently reopen the Strait of Hormuz and whether a lasting deal can be reached is still very much unresolved," said Josh Gilbert, market analyst for eToro.
"If the two weeks pass without a deal, expect a sharp and unforgiving reversal of this relief rally."
The ceasefire brought immediate relief to investors after weeks of conflicting signals from Trump and Iran, dragging the conflict into a second month.
At 06:35 a.m., Dow E-minis were up 1,181 points, or 2.52%, S&P 500 E-minis were up 176.75 points, or 2.66% and Nasdaq 100 E-minis were up 852.25 points, or 3.5%.
Futures tracking the rate-sensitive Russell 2000 Index jumped 3.7%, while the CBOE Volatility Index (.VIX), slumped 5.29 points to 20.49, its lowest point in more than two weeks.
U.S. energy stocks tracked global oil prices and tumbled in premarket trading. Shares of Exxon Mobil (XOM.N), shed 5.6%, Chevron (CVX.N), dropped 4.7%, and Occidental Petroleum (OXY.N), lost 7.1%.
Stocks linked to travel and leisure sectors edged higher. Shares of American Airlines and United Airlines (UAL.O), jumped 8.6% and 9.8%, respectively, while cruise operators Carnival (CCL.N), and Norwegian Cruise Line (NCLH.N), added 10.2% and 8.8%, respectively.
Big banks also nudged higher, with JPMorgan Chase (JPM.N),, Bank of America (BAC.N), and Wells Fargo (WFC.N), up more than 2.4% each.
Concerns lingered that soaring energy costs could weigh on economic growth and complicate the Federal Reserve's monetary policy trajectory. In March, the benchmark S&P 500 (.SPX), posted its biggest monthly fall in a year.
Interest-rate futures show investors see a 56% chance of a 25-basis-point cut by the end of 2026, according to LSEG-compiled data, compared to expectations of no easing this year, a day ago.
Before the war erupted, traders were betting on at least two 25-basis-point interest rate cuts this year.
Later in the day, investors will parse comments from Fed policymakers Mary Daly and Christopher Waller, and minutes from the central bank's March 17-18 meeting.
Markets will also be looking forward to analyzing the local inflation readings later in the week for signs of whether the elevated crude prices during the war have added to price pressures.
Levi Strauss (LEVI.N), gained 11.6% in premarket trading after the denim apparel maker raised its annual sales and profit forecasts.
Reporting by Johann M Cherian, Purvi Agarwal and Avinash P in Bengaluru; Editing by Rashmi Aich, Sherry Jacob-Phillips and Shinjini Ganguli
