** “Life is a tragedy when seen in close-up, but a comedy in long-shot.” ~Charlie Chaplin**
The continued sanguinity of the markets is, to be frank, baffling to me. Graham’s famous motto that ‘in the short run, the market is a voting machine, but in the long run, it is a weighing machine’ seems to need updating; the market right now seems to be not a ‘voting machine’ but an ‘emotion machine’, reacting to EVERY.SINGLE. HEADLINE with alacrity. Perhaps this is the natural result of the Twitterverse, with every new and fake headline available for immediate consumption, exacerbated by media-savvy politicians adept at market-moving comments ( with some clear insider trading).
What seems to be missing is a sober, cogent analysis of the long-term situation and its impact. Ships take weeks to arrive at destinations once they are loaded. Supplies and storage are finite. Inputs are a necessity for outputs. The absolute reality is that there will be a meaningful window during which supplies will be exhausted, and replenishment will be weeks (or months) away. There are already shortages of fuel. There is already a quantifiable impact of crops and food. Even if the energy futures are correct, WTI will be back to ~80 by the fall, which is 33% higher than pre-war. Thirty-three percent. To believe that there will be no inflationary or consumption impact is to believe in the Tooth Fairy; exciting for a while but ultimately disappointing and wrong. There are moments where markets act this way; we’ve all experienced them. But the extent to which there seems to be (willful?) ignorance just defies belief.
Tl:dr
U.S. futures are climbing this morning as investors digest earnings and monitor Iran peace talks. Brent crude slipped 1.1% to below $95 a barrel. Iran peace talks create binary risk event: Markets are rallying on hopes for successful negotiations in Islamabad, but the Wednesday ceasefire deadline creates significant uncertainty, with Trump stating Iran has violated the ceasefire numerous times. The Strait of Hormuz remains at a near-standstill with around 20,000 seafarers and 2,000 ships stranded , though three vessels appeared to have crossed the waterway on Tuesday . Markets are increasingly leaning toward the view that tensions will not spiral into a more disruptive scenario, helping to stabilize risk appetite
Global markets mixed: Stoxx Europe 600 up 0.3%,Nikkei 225 rose 524.28 points, finishing up 0.9% as bank and tech issues advanced on earnings results and outlooks. Kospi surpassed its pre-conflict peak on April 21, close to fresh all-time high, up over 2%.
Kalshi odds of Patel gone in 2026 now 81%
Geopolitics
Iran peace talks dominate market sentiment as ceasefire deadline approaches. Another round of imminent Iran-U.S. peace talks is perking up markets, with Iran planning to send a negotiating team to Pakistan today. President Trump says “Iran has Violated the Cease Fire numerous times” in a Truth Social post, without providing details. Iran threatening GCC oil facilities
To recall, Iranian State TV denied unspecified media reports that an Iranian delegation has departed for or arrived in Pakistan for negotiations with the US.While the timing and content of additional US-Iran discussions remain uncertain, the likelihood of a standoff is high. Additional US assets continue to flow towards the region. Meanwhile, the IDF is operating below the Litani river in Lebanon, clearing Hezbollah strongholds in and around Bint J’bail.
Brent crude and WTI are both trading in very narrow ranges and well above their last Friday’s low. The price action implies that market participants are reluctant to engage with all eyes on further developments in the Middle East that will depend on another round of talks between the US and Iran, if the Iranian delegation shows up.
Economic impact continues to reverberate globally DHL warned that the global economy risks hitting a “tipping point” if the shortfall in oil supply isn’t resolved, as the conflict in the Middle East squeezes transport routes and pushes up freight costs. China’s trade with Iran and Gulf countries fell sharply in March as restrictions on the Strait of Hormuz tightened amid the US-Israeli war on Iran, with imports from Iran plunging 48 percent year on year last month, while exports to the country dropped 90%
Global growth concerns persist despite market optimism: Russian steel consumption down 15% year-over-year, China’s trade with Iran plunging, and warnings from logistics executives about “tipping points” suggest underlying economic fragility.
Politics
Political ramifications are mounting. Feels like desperation, even some panic, in Trump’s mind that things are not going the way they were supposed to go, with the war on Iran now a major part of US midterm elections as inflation bites. White House CoS Wiles summoned dozens of Republican political consultants from across the country for a meeting Monday at the Waldorf Astoria, as the White House develops its strategy for November’s midterm elections amid Donald Trump’s Iran war challenges.
Tough for Republicans …
Trump invoked the Defense Production Act for coal, natural gas, and other parts of the energy sector, according to presidential memorandums released by the White House. Virginia voters are deciding on a new House map with major midterm implications.
Commodities
European natural gas declined during lean trading in Asia as the market focused on another round of peace talks between the US and Iran, with benchmark futures down 2.2% at €39.400 per megawatt-hour.
Natural gas consumers in different parts of the world massively cut consumption in reaction to the Iran war, though current demand levels aren’t sustainable according to Vitol Group.
Asian refiners are contemplating 20-30% run rate cuts and accelerated maintenance schedules as dozens of crude tankers remain stranded in the Persian Gulf. UBS analysts noted that in a best-case scenario, oil prices will stabilize in the mid-$80s per barrel, comparing the current supply shock to the Gulf War in 1990-91 .
Federal Reserve & Monetary Policy
Kevin Warsh’s Senate confirmation hearing is the focal point for monetary policy today. In his prepared testimony, Warsh said the Fed must take responsibility for inflation and wants the central bank to “stay in its lane” and focus on its task of fighting inflation. Warsh is set to tell lawmakers he commits to “ensuring that the conduct of monetary policy remains strictly independent,” according to Politico.
Bettors on Polymarket and Kalshi assign a 31% probability of Kevin Warsh being confirmed as the new Federal Reserve chair by May 15, the day that Jerome Powell’s term expires.
Wall Street strategists are lowering estimates for the Federal Reserve’s future monthly purchases of Treasury bills, prompted by the central bank’s decision last week to buy about $25 billion of Treasury bills each month, a greater wind-down than anticipated.
Stablecoin issuers are now the 7th largest holder of US Treasuries. Bigger than Germany. Bigger than South Korea. Bigger than Saudi Arabia. A form of “money” that didn’t meaningfully exist a decade ago now buys more US government debt than most developed nations. And 99% of retail still thinks “stablecoin” means “crypto thing, not for me.”
Hedge funds are massive holders of US Treasuries, driven by the huge basis trade; NOT long-term investors, obviously
Value/Growth ratio continues to revert, has now given back almost 50% of move since late 2025
Software/Semi ratio- no bounce
KRE/SPY ratio continues in 3 year range
‘‘POTUS Put’ Seems More Important Than ‘Fed Put’ for Traders: MAN’
https://blinks.bloomberg.com/news/stories/TDTDKXT9NJLT‘Will Mythos Ruin or Save the Global Financial System? ‘
(bbrg)I continue to believe Anthropic will be acquired by one of the big players: ‘Amazon boosts investment in Anthropic, which plans to spend over $100B on AWS technologies’ (
link)Private credit funds under strain as rising borrowing costs prompt investors to demand higher premiums (
FT)One of US’s leading insurance regulators warns transformation has pushed industry into riskier private investments (
FT)USTR Greer informs Mexico that Trump’s tariffs unlikely to be removed (
Reuters)Trump’s tariffs have not altered Beijing’s trade or military policies, leading to US policy confusion (
Reuters)
Sentiment
