Just as markets appeared to be moving in a constructive direction — with the S&P 500 at new highs, softer oil prices and firm gold — geopolitical tensions resurfaced over the weekend. Iran reimposed restrictions on vessel traffic through the Strait of Hormuz, while Israel launched strikes in Lebanon, lowering expectations for a near-term peace agreement.
Earlier in the week, US-Iran negotiations failed to reach common ground. Despite this, markets remained resilient. The S&P 500 reached a new all-time high of 7,126. Brent crude declined, suggesting limited immediate concern over supply disruption. Gold edged higher, reflecting a modest hedge against uncertainty. US Treasury yields moved lower, with the 10-year nearing 4.25% — one-month lows — supported by softer producer price data and a shift in focus toward earnings.
This tells you something important about where investor psychology sits right now. Markets have taken comfort in the fact that negotiations are ongoing and both sides remain engaged. The assumption is that neither side can afford prolonged disruption. That assumption has held so far. The weekend developments are a reminder of how quickly it can be tested.
Chart of the Week
S&P 500: from war low to all-time high in 10 days
Ten trading days. From the war low of 6,582 to an all-time high of 7,126 — an 8.3% rally driven by ceasefire optimism, Hormuz reopening and a strong start to Q1 earnings. The market has fully erased the war. The question is whether the war has fully resolved.
Ten trading days. From a war low of 6,582 on April 7 to an all-time high of 7,126 on Friday — an 8.3% rally that has fully erased every loss since the conflict began. The S&P 500 is now above where it was before the first US-Israeli strike on February 28. Markets are not just pricing in a ceasefire. They are pricing in a return to the world that existed before the war.
Two things drove the recovery. Hormuz reopening on Friday was the catalyst — oil down 9%, energy costs easing, airlines and cruise operators surging. But the foundation was Q1 earnings, which came in well ahead of expectations. JPMorgan profit up 13%. Citigroup revenue at its highest in a decade. Goldman Sachs up 19%. The caution sits in the forward guidance. Netflix beat Q1 comfortably then gave a muted revenue outlook and fell 10% in a session. The market no longer rewards the past. It is entirely focused on what companies say about the future.
Asset Roundup
What moved & why
The S&P 500 reached a new all-time high of 7,126, erasing all war-related losses. The SMI ended the week strongly at 13,426, reflecting broad-based optimism as peace talks continued. Historical data suggests the S&P 500 often extends gains after making new highs following pullbacks in the 5–10% range — which is exactly the pattern of the last three weeks. The key variable is whether earnings guidance can support that momentum.
The 30-year Treasury yield eased from 4.91% to 4.88%, a modest signal that inflation expectations are softening as oil prices fall. The 10-year dropped to 4.24% — a one-month low — supported by softer producer price data and the shift in sentiment toward earnings over geopolitics. Focus now turns to the April 28–29 FOMC meeting. With inflation easing and the ceasefire holding, the Fed has more room to hold — but any reversal in Hormuz access over the weekend changes that calculus quickly.
Brent ended the week at $90.38 — down 13% on the week. The market has unwound the majority of the war premium but has not fully removed it. That residual reflects ongoing uncertainty about whether Hormuz stays open and whether infrastructure damage is truly resolved. Gold closed at $4,833, higher than last week, reflecting continued demand for a hedge against uncertainty even as broader risk appetite improved.
The Swiss government moved this week to tighten the Lex Koller law, which restricts property purchases by foreigners. Under the proposed changes, non-EU and non-EFTA nationals would require authorisation to buy a primary residence and would no longer be permitted to acquire commercial real estate purely for investment purposes. Annual quotas for holiday home purchases by foreigners will also be reduced. The consultation runs until July 15. The changes come directly ahead of the June 14 referendum on the 10 million population cap — the government is signalling it takes the housing pressure seriously even if it opposes the cap itself. For international investors and wealthy individuals relocating to Switzerland, this is a market to watch closely.
Yield & Reason's Take
The negotiation premium
Despite repeated setbacks and renewed threats of escalation, markets are pricing a base case of continued dialogue rather than outright conflict. Call it the negotiation premium — the value markets assign to the fact that both sides are still talking. It has limited downside in risk assets because investors assume neither side can afford prolonged economic disruption.
That assumption is rational. It may also be fragile.
The first-order impacts of the conflict remain contained. But second-order effects are building quietly. Aviation capacity is being cut as jet fuel costs bite. Fertiliser prices remain elevated heading into the northern hemisphere planting season. Helium shortages are tightening semiconductor supply chains. These are slow-moving pressures that do not trigger single-session sell-offs — but they compound.
Talks continue with periodic breakdowns but no definitive collapse. No sustained disruption to Hormuz flows. Economic drag remains contained in travel, logistics and sentiment. This is what markets are largely pricing today — uncertainty, but manageable. Equities grind higher, oil stays range-bound with a modest risk premium, rates stable to slightly lower.
A credible framework is reached. The risk premium fades quickly. Trade, travel and energy flows normalise. Equities stage a sharp risk-on rally with cyclicals, airlines and emerging markets leading. Oil pulls back as the geopolitical premium unwinds. This is the upside surprise scenario — markets would reprice quickly and aggressively.
Negotiations collapse decisively. A credible threat to shipping or partial Hormuz closure returns. Equities sell off sharply, defensives outperform, airlines and travel are hit hardest. Oil spikes, potentially disorderly. Rates initially fall on flight to safety then rebound as inflation fears reassert. This is low probability but high impact — and the scenario for which current positioning is least prepared.
One Concept, Simply Explained
Risk Premium
Every asset price contains two components. The first is the fundamental value — what the asset is worth based on earnings, cash flows or physical supply and demand. The second is the risk premium — the extra return investors demand for the uncertainty of holding that asset rather than something safe.
In normal times the risk premium is relatively stable and easy to ignore. In a geopolitical crisis it becomes the dominant driver of prices. When Brent was at $109, a significant portion of that price was not oil fundamentals — it was the risk premium for Hormuz being closed. When the S&P 500 fell to 6,582, part of that decline was not earnings — it was the risk premium for an inflationary shock that might force the Fed to hike.
This week, as Hormuz reopened and talks continued, risk premiums compressed. Oil fell. Equities rallied. Bonds recovered. Not because the fundamental picture changed dramatically — but because investors required less compensation for uncertainty.
The important question now is whether risk premiums have compressed too far. The weekend developments suggest the geopolitical situation remains fluid. If the risk premium that has come out of markets needs to go back in, the moves can be as fast in reverse as they were on the way down.
Data Snack
The average age of a doctor in Switzerland is 50. A quarter are already over 60 and approaching retirement. With more people aged 65 and over than under 20 for the first time in Swiss history, the demand for healthcare is rising precisely as the supply of doctors is about to fall. A third of GP practices can no longer accept new patients. Deep dive coming next month.
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