Volkswacht Bodensee - Oil drops, stocks hit records on hopes of Hormuz opening

The renewed optimism after five months of blockage for Gulf oil and gas tankers bolstered stocks, with Wall Street building on recent advances after the Dow hit a record closing high Monday, with the S&P 500 on track to do the same on Tuesday.

In Europe, the benchmark indexes in Paris and Milan closed at all-time highs, while both Frankfurt and Madrid extended records reached on Monday.

The gains came after last week's tech-led rollercoaster ride, spurred by renewed worries about massive AI spending and how quickly those investments will start generating wider economic payoffs.

A series of forecast-busting US corporate earnings -- most recently by AI-data mining giant Palantir as well as construction behemoth Caterpillar -- was also bolstering confidence that firms would weather the volatility sparked by the US and Israeli strikes on Iran.

Yet investors remained wary about the prospects for opening the Strait of Hormuz, having already seen earlier announcements of an imminent deal to end the US-Iran war going nowhere.

An unknown projectile hit a cargo ship in the strait on Tuesday even as US President Donald Trump insisted the waterway could reopen within hours.

But Bessent, his Treasury secretary, later told CNBC television that "I think there is a chance we may have a deal today or tomorrow to open the strait" -- a key sticking point in ceasefire talks with Iran.

"So you know, I'd expect the energy prices to settle back down, which, as I said, will be good for the entire world," he said.

"The market is now trying to price a more nuanced geopolitical path: lower risk of immediate military escalation, but no guarantee yet that the Strait of Hormuz returns to normal functioning," said Patrick Munnelly, market strategist at Tickmill Group.

The disruptions to global energy supplies has sent oil prices soaring -- a boon for oil majors such as BP, whose profit more than doubled in the second quarter. Its shares fell nearly five percent in London, however, as traders said the strong growth had been widely expected.

Also on Tuesday, oil titan Saudi Aramco reported a 44 percent surge in net profits.

The five biggest Western energy majors -- BP, Chevron, ExxonMobil, Shell and TotalEnergies -- have reported combined net profits of almost $47 billion for the April-June period.

Away from the energy markets, Lufthansa's share price slumped eight percent after the German airline said volatile jet fuel costs would impact full-year profit.

Traders are also awaiting earnings from SpaceX after the Wall Street close, as well as the release of US jobs data this week that could provide a fresh guide for interest rates in the world's biggest economy.

- Key figures around 1540 GMT -

Brent North Sea Crude: DOWN 4.9 percent at $79.69 per barrel

West Texas Intermediate: DOWN 5.4 percent at $76.04 per barrel

New York - DOW: UP 1.6 percent at 54,027.71 points

New York - S&P 500: UP 1.4 percent at 7,705.23

New York - Nasdaq: UP 2.0 percent at 26,418.64

London - FTSE 100: UP 0.2 percent at 10,879.38 (close)

Paris - CAC 40: UP 0.6 percent at 8,666.63 (close)

Frankfurt - DAX: UP 0.8 percent at 26,202.35 (close)

Tokyo - Nikkei 225: UP 0.3 percent at 63,957.53 (close)

Hong Kong - Hang Seng Index: DOWN 0.6 percent at 25,852.92 (close)

Shanghai - Composite: UP 0.3 percent at 3,822.28 (close)

Dollar/yen: UP at 157.43 yen from 156.85 yen on Monday

Euro/dollar: UP at $1.1521 from $1.1513

Pound/dollar: UP at $1.3450 from $1.3433

Euro/pound: DOWN at 85.68 pence at 85.70 pence

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M.Schneider--VB