U.S. stocks are on the verge of erasing losses sparked by the Iran war, with investors increasingly betting the geopolitical shock will prove short-lived. Oil markets remain far more cautious. A two-week ceasefire announced Tuesday night has helped fuel the recovery in stocks, triggering a relief rally that has helped push shares to recoup more than two-thirds of their losses since fighting began in late February. The S & P 500 is now less than 1% below its pre-war level of 6,878.88. Meanwhile, crude prices remain elevated amid lingering supply concerns tied to Middle East supply bottlenecks. .SPX YTD mountain S & P 500 year to date “Stocks look somewhat more hopeful of a happy ending than oil, with equity indices now outperforming the pull-back seen in oil futures,” Barclays strategists said in a note to clients. The rebound has been driven in part by a “powerful short squeeze,” as bearish bets were unwound into the rally, the British bank said. Investors have also grown more confident that President Donald Trump will seek an off-ramp and avoid prolonged economic damage, the firm noted. “Further de-escalation remains the most rational outcome, in our view, as Trump needs an off-ramp given mounting political and economic costs of the war,” Barclays said. Strategists at Citigroup echoed those views, saying the Tuesday ceasefire has shifted sentiment. “While there remain many unknowns, the fact that the U.S. and Iran have found an off-ramp is positive,” Citi wrote. “Clearly, it will not be a straight line to a deal. Investors have reduced risk very significantly and may be pulled back into adding risk if the ceasefire remains mostly on track. This suggests that the rally may have legs.” Oil markets, by contrast, continue to price in a more cautious scenario amid persistent tensions around the Strait of Hormuz, with the vital shipping lane still largely closed. U.S. West Texas Intermediate crude futures for May delivery traded near $100 per barrel Friday — versus about $67 before the war began.