Want to know how the market will react when the U.S.-Iran war finally ends? CNBC’s Jim Cramer said Tuesday’s session gives investors the answer.
The “Mad Money” host said that the market “tipped its hand” during Tuesday trading as stocks finally rallied and rates went lower, describing the day as “a dry run of what will ultimately occur.” The S&P 500 and Nasdaq Composite jumped 2.91% and 3.83%, respectively, after a slew of headlines that gave traders hope of a de-escalation in the Middle East.
The Wall Street Journal reported late Monday that President Trump told aides that the U.S. is willing to end military hostilities with Iran even if the Strait of Hormuz remains largely shut. He also told the New York Post that the Iran war will probably end soon. Both follow an unconfirmed report that the Iranian President reiterated he is open to ending the conflict with security guarantees.
“Today we saw what would happen when you give peace a chance,” Cramer said. “Maybe this dialogue with Iran is really nothing more than an exchange of messages. Maybe it’s meaningless. So, consider today a dry run of what will ultimately occur when the war winds down.”
But Cramer predicted the market will shift in three ways once the war really is over.
First, he noted that rates are set to fall, marking a major reversal for the 10-year Treasury since the war began a month ago. The yield on the benchmark 10-year Treasury note, which influences borrowing costs across the economy, has jumped on concerns of inflation risks from higher energy costs and lower odds of the Federal Reserve cutting rates in 2026.
“They [will] go down noticeably,” Cramer said of rates. “They go down because we now realize that there’s a huge amount of inflation stemming from the war. Not just from oil going higher – we saw that at the pump – but from the ancillary products that came out of the Gulf: fertilizer, polyethylene and aluminum.”
He continued, “We didn’t know going into the war that our farmers were gonna need to raise prices to us because the price of fertilizer would go much higher. You allow the fertilizer to come back down, you stop the pernicious food inflation.”
There’s also going to be a huge comeback in growth stocks, according to Cramer, who pointed to Tuesday’s gains in Nvidia and Marvell. Nvidia and Marvell jumped 5.5% and nearly 13%, respectively, during the session.
Cramer said as rates go down investors can focus on what high-growth companies like these are actually doing right without getting distracted by conflict in the Middle East. He pointed to a new strategic partnership between the artificial intelligence giants, including Nvidia’s $2 billion stake in Marvell.
“Money managers believe that price-to-earnings multiples — how much we’ll pay for a company’s earnings – have been horribly compressed by the war,” Cramer added. “If the war’s over, we’ll start paying more for the stocks of companies that were never gonna skip a beat to begin with.”
Finally, Cramer expects a rally in big bank stocks.
The war has raised concerns that Wall Street dealmaking will freeze. The financials cohort, in turn, should benefit from the conflict ending and the possibility of more deals. Case in point: Big Tuesday winners were major investment banks like Goldman Sachs and Morgan Stanley, which advanced nearly 5% and 4%, respectively.
