Good morning investors,
The war is pausing. The Strait is opening. Oil is plunging. And futures are surging.
President Trump announced late Tuesday that the US and Iran have agreed to a two week ceasefire, conditioned on the complete, immediate, and safe opening of the Strait of Hormuz. Iran's Foreign Minister confirmed that Tehran will allow safe passage through the waterway during the ceasefire period.
The announcement came less than two hours before Trump's 8 PM ET deadline, after which he had threatened to destroy Iran's "whole civilization." Instead, we got diplomacy.
This morning tells the story. WTI crude has plunged more than 16% to around $94 per barrel. Brent has dropped nearly 14% to approximately $94 as well. If these declines hold, WTI would log its worst daily performance since April 2020.
The market was ready for this. Now it is pricing it.
Opening Bell
Dow ($DIA ( ▼ 1.15% )) futures have surged 1,229 points or 2.6%. S&P 500 ($SPY ( ▼ 0.44% )) futures have jumped 2.7%. Nasdaq 100 ($QQQ ( ▲ 0.03% )) futures have climbed 3.5%.
The ceasefire framework emerged from conversations between Trump, Pakistani Prime Minister Shehbaz Sharif, and Field Marshal Asim Munir. Pakistan brokered the deal after Sharif asked Trump for a two-week extension and requested Iran open the Strait as a goodwill gesture.
Iran's 10-point proposal includes withdrawing US combat forces from regional bases, lifting sanctions, releasing frozen Iranian assets, full payment of war-related damages, and establishing a protocol for controlled passage through the Strait. Trump called the proposal "a workable basis on which to negotiate" after rejecting it as "not good enough" just 24 hours earlier.
Both sides are framing this as a win. Trump claimed the US had "already met and exceeded all military objectives." Iran's Supreme National Security Council declared that the US "has accepted these principles as the basis for negotiations and has surrendered to the will of the Iranian people."
The spin does not matter. What matters is that ships will transit the Strait, oil is falling, and the acute phase of this crisis appears to be ending.
Treasury Yields Plunge Alongside Oil
The bond market is repricing rapidly. The 10-year Treasury yield has plummeted around 10 basis points to 4.24%. The 2-year yield has dropped 10 basis points to 3.73%. The 30-year has fallen 7 basis points to 4.84%.
This is exactly the dynamic I have been writing about for weeks. If the oil shock proves temporary, the bond market repricing of the past six weeks could partially reverse, easing financial conditions and restoring Fed optionality.
With yields falling and oil collapsing, the path to rate cuts later this year reopens. The stagflation fears that had gripped markets are receding. Chicago Fed President Austan Goolsbee said just yesterday that he was "cautious-slash-nervous" about the oil disruption pushing prices up "in a stagflationary way." That concern looks less acute this morning.
The Pattern Finally Broke
This is the fourth time in six weeks that Trump set a deadline to escalate strikes on Iran and then pulled back. He issued a 48-hour ultimatum on March 21, postponed 12 hours before it expired. He escalated threats on March 26, extended to April 6. He pushed that to April 7, then to 8 PM Tuesday.
Each cycle the rhetoric got hotter and the follow-through got softer. The market learned to read this pattern. The market has gotten better at figuring out Trump's next move. That is why stocks eked out small gains Tuesday even as the President threatened to destroy an entire civilization.
We now see if the two week ceasefire holds. We have bought time, not peace. Negotiations will take place in Islamabad over the next two weeks. The terms Iran is demanding, including sanctions relief and reparations, remain substantial.
But the direction of travel has shifted. Both sides are talking. The Strait is opening. And the market can finally look beyond the daily headline cycle.
Delta: A Window Into the Damage
Delta Air Lines reported this morning, providing the first detailed look at how the oil shock affected a major US company.
The numbers tell the story of the past six weeks. Delta's fuel bill will be $2 billion higher this quarter than originally planned. Jet fuel prices in major US cities surged nearly 88% from February 27 through April 6. Globally, jet fuel that averaged $85 to $90 per barrel in February has reached around $209 per barrel according to the International Air Transport Association.
Delta beat first quarter expectations, reporting adjusted earnings of 64 cents per share versus the 57 cents analysts expected on revenue of $14.2 billion versus $14 billion expected. But second quarter guidance came in below consensus at $1 to $1.50 per share versus the $1.41 expected.
CEO Ed Bastian said Delta is removing all planned capacity growth from the June quarter, cutting supply by about 3.5 percentage points from the original plan. Capacity growth plans now have a "downward bias until the fuel environment improves."
Delta shares are trading more than 10% higher in premarket, lifted by the collapse in oil prices. The airline also raised checked bag fees by $10 on new bookings, as did Southwest, to offset soaring fuel costs.
Bastian noted that Delta owns a refinery near Philadelphia that converts crude oil into jet fuel, providing a hedge other carriers lack. The refinery will deliver a $300 million benefit in the second quarter. "To the extent fuel stays elevated, that refinery will continue to help us," he said.
The positive news is that demand remains strong. Premium ticket revenue rose 14% in the first quarter. Main cabin revenue increased for the first time since late 2024. Business travel that pulled back during last month's TSA lines from the partial government shutdown has recovered.
The Bottom Is In?
I believe the worst of this market is behind us for now.
Peak negativity arrived last week. Short interest hit 15-year highs. Put volumes reached their highest since Liberation Day. The VIX spiked. Sentiment surveys showed extreme fear. And through all of that, the S&P 500's peak to trough decline was roughly 10%, exactly the correction I had anticipated for 2026.
Now we know both sides are open to a ceasefire. Oil is plunging. The Strait is opening. Treasury yields are falling. Financial conditions are easing. The Fed has regained optionality.
The setup favors a significant rally from here.
I have been writing for weeks that technology valuations became compelling during this selloff. Nvidia at 22 times forward earnings with 66% revenue growth. Microsoft with unanimous analyst buy ratings. Meta at 20 times forward earnings while growing revenue above 20%. CrowdStrike and Palo Alto Networks near 52-week lows during an active cyber conflict.
Those names should lead this bounce. The AI thesis never changed. The capex cycle never paused. Only the prices moved, and they moved in our favor.
Small caps should outperform as well. With rate hike fears fading and the path to cuts reopening, the interest rate sensitivity that had weighed on the Russell 2000 becomes a tailwind instead of a headwind. Small caps carry higher floating rate debt loads and benefit disproportionately from each quarter point of rate relief.
International equities, which I had high conviction on coming into the year, also look attractive here. The energy shock that disproportionately hurt oil importing economies is reversing. European and Japanese equities that sold off on energy fears should recover.
Private Credit Stress Continues
Moody's cut its outlook on Blue Owl's $36 billion Credit Income Corp fund to negative from stable, citing redemption requests that were "significantly higher" than peers in the first quarter. The rating agency also noted that most redemptions came from a very limited number of investors, revealing concentration in the equity holder base.
This marks the latest signal of stress in a private credit market that has seen several funds cap withdrawals over the past two months. The sector is not out of the woods even as the broader market celebrates the ceasefire.
Anthropic Launches Cybersecurity Partnership
Anthropic announced a cybersecurity partnership with Amazon, Apple, and Microsoft to defend against AI-powered cyberattacks. The project, dubbed Glasswing, uses Claude Mythos Preview, a frontier model accessible to only a few dozen companies.
The model has already identified thousands of previously unknown software vulnerabilities and detected flaws in every major operating system and web browser. Anthropic is in discussions with the US government to deploy the model despite the company's ongoing dispute with the Pentagon over AI restrictions.
This is exactly the kind of development that reinforces the structural case for cybersecurity equities. The threat environment is evolving rapidly. The companies positioned to address that evolution will capture substantial value regardless of geopolitical headlines.
April Seasonality Favors Bulls
For those who appreciate historical context, April is historically one of the best months for stocks. Over the past 25 years, the MSCI World Index has posted positive returns 75% of the time in April with an average monthly gain of 2.0%, the strongest of any month.
The S&P 500 has gained 1.3% on average in April since 1928, the second-best month of the year after July. This is double the overall monthly average return of 0.7%.
Seasonality alone does not drive markets. But when combined with a ceasefire, plunging oil prices, falling yields, extreme bearish positioning, and compressed valuations in quality names, the setup is about as favorable as it gets.
Final Thought
Six weeks ago, the US and Israel launched strikes on Iran and killed the Supreme Leader. The Strait of Hormuz closed. Oil surged 70%. The S&P 500 fell into correction territory. Headlines screamed about stagflation, rate hikes, and economic collapse.
Through all of that, the market held. The economy held. And now the crisis is pausing.
I came into this year expecting the index to gain 10%, and I still believe that. I also said to expect extreme volatility and a major pullback at some point. We got both. The pullback is now behind us. The volatility may continue, but the direction from here favors higher prices.
The companies I have been favoring throughout this conflict, Microsoft, Nvidia, Meta, CrowdStrike, Palo Alto Networks, small caps, international equities, all of them look better today than they did six weeks ago. The prices are lower. The fundamentals are intact. And the headwind that drove the selloff is reversing.
This is what buying opportunity looks like. Not certainty. Not comfort. But favorable risk-reward at prices you will not see once the headlines improve.
Stay disciplined. The playbook continues working.
As always, feel free to reach out with questions about navigating this environment.
Best regards,
Dan Sheehan [email protected]
Subscribe: https://substack.com/@dansheehan3
This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.