Editor's Note · Sunday Morning
US and Iran failed to reach a deal. Although the ceasefire still holds, markets will react Monday morning, possibly sending us back to levels prior to the ceasefire announcement. Further talks must take place to find a middle ground.
Welcome back to Yield & Reason. Week six of the conflict and the mood shifted dramatically — then shifted back.
Tuesday brought the news markets had been waiting for: a two-week ceasefire between the US and Iran, brokered by Pakistan. Oil fell 13% in a single session — its biggest one-day drop since COVID — the Dow had its best day in a year and for a few hours it felt like the worst was over. By Friday, reality had reasserted itself. Brent was back above $95, the Strait of Hormuz remained largely closed, and both sides were accusing each other of violating an agreement that was barely 48 hours old.
The ceasefire bought time. It resolved nothing.
Oil infrastructure across the Gulf has been damaged in ways that take months, not days, to repair. Saudi Arabia's production capacity is down 600,000 barrels per day. Iran is still demanding transit fees for Hormuz passage — a position the US calls unacceptable. And the conflict has quietly escaped the energy complex entirely: fertiliser prices are up 30–50%, one-third of global helium supply is off the market, and the spring planting season in the Northern Hemisphere is already being disrupted. The food price shock is baked in — it just hasn't hit supermarket shelves yet.
The two-week clock is running. Pakistan talks are scheduled. The question is not whether a deal gets announced — it is whether any deal can hold.
Chart of the Week
Brent crude: the week that told the whole story
Three days. Three acts. Tuesday's deadline threat pushed oil to $110. Wednesday's ceasefire announcement triggered the biggest single-day crash since COVID. By Friday reality had returned — Hormuz still closed, infrastructure still damaged, the war premium only partially unwound. The market moved $16. Then gave half of it back.
Brent opened Tuesday at $110 with Trump's midnight deadline for Iran looming. By Wednesday afternoon it had collapsed to $94.75 — a 13.3% single-day fall, the largest since the COVID crash of April 2020. Markets celebrated. The Dow had its best day in a year. For a few hours it felt like the war was ending.
Then Thursday came. And Friday. The Strait of Hormuz remained largely closed. Iran and the US immediately accused each other of violating the deal. Only one tanker transited the strait in the first 24 hours of the ceasefire. By Friday Brent had climbed back to $96.69 — recovering more than half of Wednesday's drop. The pre-war price was $73. Oil ended the week at $97. That $24 gap is still the market telling you it does not fully believe this is over.
Causal Chain
Ceasefire announced — why the relief rally was premature
The ceasefire is a political event. The supply shock is a physical one. Follow the chain to see why one cannot fix the other.
Asset Roundup
What moved & why
The ceasefire gave equities their best week in months. The S&P 500 gained 3.6% on the week, closing at 6,817. But look more carefully and the picture is less reassuring. The gains were concentrated in a handful of large technology names. When five stocks are carrying a 3.6% weekly move, it is not a broad recovery. It is a relief rally looking for confirmation. The real test comes this week — Q1 earnings season begins in earnest and companies will have to say out loud what energy costs have done to their margins.
The SMI held up comparatively well, closing the week at approximately 12,982. Swiss defensives — Nestlé, Roche, Novartis — continued to attract flows from investors seeking shelter. That pattern tends to persist as long as macro uncertainty does.
The 30-year Treasury crossed 4.91% this week as March CPI came in at 3.3% year-on-year — up sharply from 2.4% in February. That number landed on Friday and immediately erased morning equity gains. Bonds are telling you the inflation story is not going away just because a ceasefire was announced. The 10Y held at 4.31% and the 2Y edged to 3.81%. The curve remains positively sloped but the long end is under sustained pressure. The April 28-29 FOMC is now the most important policy meeting of the year so far.
Brent ended the week at $96.69 — down 12% from Tuesday's high but still $24 above the pre-war close of $73. That $24 gap is what the market still believes is permanent — the residual war premium it is not willing to give back even with a ceasefire in place. Gold closed at $4,749, easing slightly as the risk-on mood reduced safe-haven demand. In relief rallies gold tends to underperform assets with more upside. The structural case remains intact — watch how it behaves if the ceasefire frays over the next two weeks.
Switzerland is pushing to finalise its US trade deal by end of July. Swiss negotiators are pressing for a guarantee that no competing trading partner — particularly the EU or UK — receives a lower tariff rate than Switzerland. For the Swiss pharma sector the stakes are real. Roche and Novartis have secured three-year White House protections. The rest of the sector faces 15% duties and is pushing for a cap that mirrors whatever Switzerland's closest trading competitors ultimately secure. The outcome of those talks will matter directly for Swiss export revenues and for the broader CHF outlook.
Yield & Reason's Take
The ceasefire is real. The normalisation is not.
The market wanted good news and it got some. Whether it got enough is a different question entirely.
The ceasefire is real. The two-week window is real. The rally it triggered was rational — a world without active US-Iran hostilities is worth more than a world with them, and markets priced that immediately. But a ceasefire is a pause, not a resolution. And the gap between what was announced on Tuesday and what actually exists on the ground by Friday tells you how much work remains.
The Strait of Hormuz is still effectively closed. Saudi Arabia's production capacity is down 600,000 barrels per day and the pipeline that bypasses Hormuz has also been damaged. Qatar's Ras Laffan facility — which supplies a significant share of global fertiliser and helium — sustained direct infrastructure damage that will take time to repair regardless of what happens diplomatically. A political agreement signed in Pakistan cannot move a tanker through a strait that is still not open — and the physical oil market, which deals in actual barrels on actual ships, has barely moved to reflect the ceasefire. That is the most honest signal available.
The 1973 parallel from Edition 1 is worth revisiting. Markets peaked the day the Yom Kippur ceasefire was announced — then fell 40% over the following year. The ceasefire was not wrong. The assumption that everything returns to normal once the shooting stops was. We may be at a similar inflection point now. The relief is real. The normalisation is not.
The central question for the two weeks ahead is not whether talks in Islamabad succeed. It is what Iran's conditions for reopening Hormuz actually are — and whether the US can accept them. Iran wants to charge transit fees. Trump has called that unacceptable. That gap is not a rounding error. It is the entire negotiation.
A deal that reopens Hormuz without formal tolls, brokered in Islamabad with enough face-saving language for both sides. Oil falls toward $80, equities extend the rally, the FOMC breathes easier. Possible — but the nuclear question has proven harder to bridge than markets assumed on Wednesday.
Hormuz reopens to limited traffic, Iran extracts informal leverage, oil stabilises in the $85–95 range. The war premium does not disappear — it becomes a permanent feature of energy pricing. Stagflation risk persists. This is now clearly the base case and the one markets are not fully pricing.
Either back-channel talks fail entirely, or Israel's continued operations in Lebanon provide Iran with a pretext to resume hostilities. Oil returns to $110+. The relief rally reverses sharply. Every asset priced on resolution has to reprice in the other direction.
The Switzerland angle this week is the US trade deal. If Switzerland secures a most-favoured-nation clause — guaranteeing it receives no worse treatment than the EU or its closest trading competitors — that is a meaningful win for Swiss pharma exporters and a quiet positive for the CHF. If it does not, the 15% tariff becomes a structural drag on Switzerland's largest export sector. Watch the July deadline.
One Concept, Simply Explained
Backwardation
Last week we introduced contango — when futures prices are lower than today's spot price, signalling the market expects things to normalise. This week the oil market gave us a masterclass in the opposite.
Backwardation is when the spot price is higher than futures prices — but for a different reason than contango. While the futures price for Brent fell sharply on the ceasefire news, the price of physical Brent — actual barrels being bought and sold for immediate delivery — barely moved. That gap between the paper price and the physical price is backwardation in its rawest form.
The physical market is in backwardation because real barrels are genuinely scarce right now. 187 tankers are still trapped inside the Gulf. Refineries need oil today, not in December. They will pay a premium to get it.
The futures market is pricing in a world where the ceasefire holds and Hormuz reopens. The physical market is pricing in the world that actually exists today — pipelines damaged, tankers stranded, infrastructure that takes months to repair. When those two prices diverge this sharply, one of them is wrong. History — and the state of the Strait on Friday — argues for the physical market being right.
Data Snack
More than 12,000 Swiss people signed a petition this week to stop the American takeover of Aromat — the iconic seasoning that has sat on Swiss tables for generations, sprinkled on everything from cucumbers to boiled eggs.
Quick Quiz
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