New York, Jun 24 (AP) Oil prices are dropping further, and US stocks are pulling closer to their all-time high Tuesday on hopes that Israel's war with Iran will not damage the global flow of crude, even if a tentative truce seemed to fray under fire in the morning.

The S&P 500 was 0.9 per cent higher in morning trading, following up on even bigger gains for stocks across Europe and Asia, after President Donald Trump said late Monday that Israel and Iran had agreed to a “complete and total ceasefire.” The main measure of Wall Street's health is back within 1.1 per cent of its record set in February after falling roughly 20 per cent below during the spring.

The Dow Jones Industrial Average was up 352 points, or 0.8 per cent, as of 10:45 am Eastern time, and the Nasdaq composite was 1.2 per cent higher.

The strongest action was again in the oil market, where a barrel of benchmark US crude fell 4.4 per cent to USD 65.52. Brent crude, the international standard, dropped 5 per cent to USD 66.96.

The fear throughout the Israel-Iran conflict has been that it could squeeze the world's supply of oil, which would pump up prices for gasoline and hurt the global economy.

Iran is a major producer of crude, and it could also try to block the Strait of Hormuz off its coast, through which 20 per cent of the world's daily oil needs passes on ships.

Oil prices began falling sharply on Monday after Iran launched what appeared to be a limited retaliatory strike that did not target the production or movement of oil. They kept falling even after attacks continued past a deadline to stop hostilities early Tuesday. Trump later said that the ceasefire was “in effect.” Oil prices have dropped so much in the last two days that they're below where they were before the fighting began nearly two weeks ago.

With the global oil market well supplied and the OPEC+ alliance of producing countries steadily increasing production, oil prices could be headed even lower as long as the ceasefire holds and a lasting peace solution can be found, said Carsten Fritsch, commodities analyst at Commerzbank.

Falling oil prices should take some pressure off inflation, and that in turn could give the Federal Reserve more leeway to cut interest rates.

Wall Street loves lower rates because they can give the economy a boost by making it cheaper for US households and businesses to borrow money to buy a car or build a factory. But they could also give inflation more fuel. That latter threat is why the Fed has been hesitant to cut rates this year after lowering them through the end of last year.

The Fed has said repeatedly that it wants to wait and see how much Trump's tariffs will hurt the economy and raise inflation before committing to its next move. So far, the economy seems to be holding up OK, though a report on confidence among US consumers came in weaker on Tuesday than economists expected, while inflation has remained only a bit above the Fed's 2 per cent target.

Trump, though, has been pushing for more cuts to rates. And two of his appointees to the Fed have said in the last week that they may consider cutting rates as soon as the Fed's next meeting next month.

Fed Chair Jerome Powell remains more cautious. He said again in testimony delivered to Congress Tuesday that the Fed is “well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance.” Such mixed messages had Treasury yields swiveling up and down in the bond market. The yield on the 10-year Treasury eased to 4.30 per cent from 4.34 per cent late Monday.

The two-year Treasury yield, which more closely tracks expectations for Fed action, fell to 3.82 per cent from 3.84 per cent.

On Wall Street, cruise operator Carnival steamed 9.7 per cent higher after delivering a much stronger profit for the latest quarter than analysts expected. CEO Josh Weinstein said it's seeing strong demand from people booking cruises close to the departure date, and customers are spending strongly once on board. Carnival also raised its forecast for an underlying measure of profit for the full year.

Other companies that burn a lot of fuel and that could benefit from falling oil prices also jumped to big gains. Norwegian Cruise Line jumped 6.4 per cent. United Airlines flew 2.2 per cent higher, and Delta Air Lines rose 2.8 per cent. Such travel-related companies also need their customers feeling confident enough to travel to make their profits.

In stock markets abroad, indexes rallied more than 1 per cent everywhere from France to Germany to Japan following the announcement of the Israel-Iran ceasefire. Hong Kong's jump of 2.1 per cent and South Korea's leap of 3 per cent were two of the strongest moves. (AP) NPK NPK