JUANA SUMMERS, HOST:
News of the two-week ceasefire in the U.S. war with Iran triggered a relief rally in the stock market today. The Dow Jones Industrial Average jumped more than 1,300 points, or more than 2.8%. Investors are hoping that oil, natural gas and other critical goods will soon be moving smoothly again through the narrow waterway south of Iran. That would help to ease the price spikes the war has triggered over the last six weeks. NPR's Scott Horsley has been following this, and he's here now. Hi.
SCOTT HORSLEY, BYLINE: Hi. Good to be with you.
SUMMERS: Good to talk with you, Scott. So stock prices are up today. Crude oil prices are down. What does that say about the economic fallout from this war?
HORSLEY: It says the war has been very costly, and investors are relieved that the U.S. and Iran may have found an off-ramp. Jason Pride is chief of investment strategy for the money management firm Glenmede.
JASON PRIDE: This is a big step forward here, and markets are generally thinking this is a step towards an eventual resolution.
HORSLEY: All the major stock indexes rose between 2 1/2 and 3% today. But, you know, they're still down as much as 4 1/2% from where they were back in mid-February, before the wartime tensions started ratcheting up. So we're not out of the woods yet, and investors still see this as a somewhat fragile ceasefire.
SUMMERS: Right. So what does this deal mean for global energy supplies?
HORSLEY: You know, the war left a sizable hole in the global energy market, and it's not going to be filled overnight. When shipping traffic was halted in the Strait of Hormuz, some of the Gulf oil producers didn't have any place to store their oil, so they had to idle some oil fields. And John Kilduff, who's an energy analyst at Again Capital, says getting that oil flowing again is not as simple as just turning a valve or flipping a switch.
JOHN KILDUFF: It's going to take time, which is why, as much as there's a relief here that oil prices are back down below $100 a barrel, they're still far from where they were as we were coming into the new year here.
HORSLEY: The Energy Department is predicting oil supplies won't be fully restored until late this year, which means prices are likely to remain elevated.
SUMMERS: OK, Scott, as someone with a long commute, I have a question. When can drivers here in the U.S. expect a little relief at the gas pump?
HORSLEY: Yeah. There was less celebrating at gas stations today than there was on Wall Street. AAA says the average price of gas nationwide is $4.16 a gallon. That's actually up a couple of cents from yesterday. But wholesale gas prices have started to come down, and Kilduff says those savings will trickle down to your local filling station.
KILDUFF: There will be some relief at the pump from this. I would expect the national average to be back under $4 by Friday if this peace holds.
HORSLEY: So under $4 a gallon, but maybe not all the way back down to $3 a gallon, which was the average just before the war started. In fact, the Energy Department predicts that gas prices will average around 3.70 a gallon this year, so that would be a break from where we are today, but it'd be about 24% more than we were paying on average back in February.
SUMMERS: And these higher gas prices - how are they likely to affect the broader economy?
HORSLEY: Well, there're going to be a drag on the economy, but less of a drag than we might have seen had the war continued indefinitely and energy prices continue to climb. You know, the government is going to issue its monthly report card on the cost of living in a couple of days, and the spike in gas prices alone in March is expected to push inflation for the month back above 3%. And high-priced diesel fuel could drive up the cost of transporting lots of other things. All that could make the Federal Reserve even more cautious about cutting interest rates, especially after the report last week showing that the job market's still in OK shape.
You know, when Fed policymakers met three weeks ago, they were pretty clear in saying they didn't know what the economic effects of the war would be. We have a somewhat better idea now if this ceasefire holds. Of course, once we have a better handle on the price tag of the war, then we can set about asking the question, was the outcome of the battle worth the cost?
SUMMERS: NPR's Scott Horsley, thank you.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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