Author: Deep Tide TechFlow

What happened over the weekend: 21 hours of negotiations break down, the United States blocks Hormuz

Before writing today's market report, we need to rewind 48 hours.

On Saturday, Vance, Whittaker, and Kushner led a U.S. delegation of 300 people to the Serena Hotel in Islamabad to sit face-to-face with Iranian Speaker of Parliament Ghalibaf and Foreign Minister Araqchi, who led a 70-person delegation. This was the highest-level direct contact between the U.S. and Iran since the 1979 Iranian Revolution.

After 21 hours, Vance emerged from the hotel and told the cameras, "They chose not to accept our terms."

The core disagreement can be summarized in two words: nuclear weapons. The U.S. red lines were very clear: halt all uranium enrichment, dismantle key enrichment facilities, hand over more than 400 kilograms of highly enriched uranium believed to be buried underground, and stop funding Hamas, Hezbollah, and the Houthis. Iran's position was equally non-negotiable: continued control over the Strait, retaining uranium enrichment rights, lifting all sanctions, and compensation for war losses, along with withdrawal of U.S. troops from the Middle East.

Iranian Foreign Minister Araqchi's statement was more nuanced: "We were one step away from signing a memorandum of understanding, but the U.S. side keeps shifting the goalposts." Trump's statement was more straightforward: "Most points were agreed, but the one that matters, nuclear weapons, we couldn’t agree on."

Pakistan was shocked at how quickly the negotiations broke down; they had initially expected days of talks to gradually narrow the differences. Vance's exit after 21 hours was viewed as a unilateral signal to terminate negotiations.

Hours later, Trump announced on Truth Social that the U.S. Navy would "immediately" implement a blockade of the Strait of Hormuz, intercepting all ships trying to enter or leave Iranian ports and seizing any ships that paid "illegal tolls" to Iran. U.S. Central Command confirmed the blockade would take effect at 10 a.m. on Monday (Eastern Time), targeting all ships entering or leaving Iranian ports, while non-Iranian bound vessels could pass freely through the Strait.

This created an absurd situation: there are now two layers of blockade in the Strait. Iran has been controlling who can pass since the first day of the war, and now the U.S. has blocked Iran's ports from the other side. Two opposing nations each hold one end of the Strait, with more than 800 detained cargo ships and over 230 fully loaded oil tankers in between.

UK Prime Minister Starmer clearly stated that he would not join the U.S. blockade. Intelligence indicates China is planning to supply air defense weapons to Iran. Trump responded, "If China does that, China will have big trouble."

The futures market reacted on Monday: S&P 500, NASDAQ, and Dow futures all fell by over 1%. Oil prices spiked above $104.

But when Vance left, he left behind a statement: "We have left a final offer. Let’s see if Iran accepts." The ceasefire agreement remains valid on paper until April 22.

U.S. Stocks: From a 400-point plunge to a 300-point gain, one sentence reverses the situation

On Monday morning, the market faithfully reflected the bad news from the weekend. The Dow Jones dropped over 400 points (-0.9%), the S&P 500 fell 0.4%, and the NASDAQ was down 0.5%.

Then Trump said six words: "The other side has called us." ("对方打电话给我们了.")

This ambiguous hint that Iran might want to talk was enough to cause shorts to collapse instantly. The Dow pulled back from -400 points to +301 points, with an intraday swing of over 700 points. The S&P 500 closed up 1.02% at 6,886.24 points, marking the highest close since the outbreak of the war, and it means that the S&P 500 has officially recovered all the declines during the 40 days of war. The year-to-date return for the S&P has turned positive to +0.05%.

The NASDAQ rose 1.23% to 23,183.74 points, marking its ninth consecutive rise, setting a new record for the longest consecutive gains since 2023.

Technology stocks led the gains. Oracle surged 13% (showing AI capabilities at the client summit), and Palantir rose 3%. Software stocks rebounded after last Friday's selloff. However, Goldman Sachs dropped 1.9% after recording the second-highest quarterly profit in its history, a typical case of "buy the rumor, sell the news." Airline stocks collectively fell over 2% due to storms and oil price impacts.

The VIX closed at 19.12, continuing to operate below 20, which is the lowest range since the war began.

Ed Yardeni wrote in Monday's report: "Financial markets may be learning to coexist with the Middle East war, just as they have learned to coexist with the Russia-Ukraine war." He maintained a year-end target of 7,700 points for the S&P 500.

Tom Lee from Fundstrat said something profound on CNBC: "The market has a very strong capacity to anticipate outcomes. I think the reason for the stock market's rise is that we will ultimately get a favorable outcome." He cited World War II as a case: The U.S. stock market bottomed in May 1942, just as the U.S. had entered the war and troops had not yet been massively deployed. The market always reaches the finish line before the war.

The earnings season for the first quarter has officially begun. FactSet data shows an expected profit growth rate of 12.6%, marking the sixth consecutive quarter of double-digit growth. This week, major banks such as Goldman, JPMorgan, Citi, Wells Fargo, Morgan Stanley, and BofA will report.

Oil Prices: Blockade upon blockade, is $97 the new normal?

After experiencing sharp fluctuations on Monday, oil prices closed near $97 per barrel (WTI).

On Sunday evening, prices spiked above $104 (+8%) due to the blockade news, but retreated as Trump hinted that "the other side has called." Brent closed around $97.

The pricing dilemma the market now faces is unprecedented: Iran blockades the Strait + U.S. blockades Iranian ports = dual blockade. CENTCOM made it clear that the blockade targets Iranian ports, and non-Iranian bound vessels can pass freely. But in practice, who can guarantee that an oil tanker passing through the Strait will not be intercepted by either Iran or the U.S.?

Data from Lloyd's List Intelligence shows that transit through the Strait is in a state of "complete stagnation." Ships turned around after the blockade directive was issued. IEA Director Birol had previously warned that strategic oil reserves released in March would be nearly depleted by mid-April.

Goldman Sachs maintained its judgment that "if the Strait is closed for another month, Brent's average price for the year will exceed $100." The analysis from the Kobeissi Letter was more straightforward: "Trump's long-term plan seems to be to first blockade the Strait, gain control, and then gradually open for passage. But if this route is feasible, it will at least take another two months to continue restricting traffic."

Two months. This means that U.S. gasoline prices will keep running above $4, inflationary pressures will not ease, and the Fed's interest rate cut window will remain closed.

Gold: $4,733, waiting at the crossroads

Gold prices fell by 0.3% to $4,733 per ounce on Monday, remaining mostly unchanged.

The breakdown of negotiations and the news of the blockade should have boosted flight-to-safety demand, but a strengthening dollar (as safe-haven funds flowed back into the dollar) offset the upward momentum for gold. Gold prices are currently stuck in a wide range of $4,300 to $5,600, which has not been breached since the outbreak of war.

State Street's judgment is: If oil prices normalize to $80-$85, gold prices could "quickly return to above $5,000." However, if Brent breaks above $150 and forces the Fed to raise rates, gold prices may revisit the structural bottom of $4,000-$4,100.

The current gold price almost precisely hits the median of Reuters' 30 analysts' forecasts for gold prices in 2026, which is $4,746.50. The market is waiting for a directional signal, which depends on when the Strait will really be open for navigation.

Cryptocurrency: BTC $72,000, resilience that cannot be killed by war

Bitcoin rose about 2% to around $72,100 on Monday, showing unexpected resilience even to analysts.

Looking back at the weekend: Breakdown of negotiations + announcement of blockade → BTC fell from $73,000 to $70,600 → On Monday, with the news of "the other side called," it rebounded to above $72,000. Throughout this process, BTC's decline was far less than expected. When the war broke out on February 28, BTC dropped 12% in one day. Now, facing breakdown of negotiations + the blockade of the Strait, the decline was only 2-3%.

Analysts at FX Leaders wrote: "Bitcoin did not collapse due to the blockade, which is a signal in itself. It is building support, preparing for a strong upward movement."

$70,000 has become a solid bottom after multiple tests. BTC was at $66,000 before the ceasefire, surged to $73,000 afterward, and held $70,000 after the breakdown of negotiations. The net effect of the 40-day war is a trading range from $66K to $72K, not a collapse.

CoinDesk's analytical framework is the most noteworthy: "If oil prices continue to decline by 15-16%, the futures market will reprice the 2026 interest rate cut probabilities, which would be a structural tailwind for non-yielding risk assets (including Bitcoin)." Currently, around $72,200-$73,500 has gathered about $6 billion in leverage short positions. If BTC breaks through this region, a short squeeze may push prices towards $80,000.

The ceasefire will expire on April 22. The CLARITY Act roundtable will be held on April 16. The Fed's FOMC meeting will take place on April 28-29 (possibly Powell's last meeting). These three dates will define BTC's direction in late April.

Today's Summary: The market chose to believe

After the weekend of the breakdown in Islamabad negotiations and the U.S. blockade of the Strait on April 14, the market delivered its judgement with a strong bullish candlestick:

U.S. stocks: The S&P recovered all war losses to 6,886.24 (+1.02%), turning positive for the year. The NASDAQ's nine consecutive gains set a record for the longest winning streak in 2023. Trump's statement, "The other side has called," reversed a 400-point downturn.

Oil prices: WTI fell from a weekend high of $104 to $97. The dual blockade is a new reality, but the market is betting that a deal will ultimately be reached.

Gold: $4,733 remained flat. Stuck in the $4,300-$5,600 range, waiting for the Strait and the Fed to give direction.

Cryptocurrency: BTC rose 2% to $72,100. The breakdown of negotiations + blockade only caused a 3% decline, showcasing resilience that cannot be killed by war. $70,000 is the new solid bottom.

Tom Lee cited World War II: In May 1942, just after the U.S. entered the war, the stock market bottomed out. The market always reaches the finish line before the war.

Wall Street is making a bold bet: No matter how convoluted the process, the U.S. and Iran will ultimately reach an agreement, the Strait will reopen, oil prices will drop, and inflation will ease. The Dow has rebounded nearly 3,000 points from the low of the war. The S&P has recovered all war losses. The NASDAQ has risen for nine consecutive days.

This could either be the market's foresight, as the stock market saw victory at the darkest hours of the war in 1942, or an expensive collective illusion, as two layers of blockade still exist over the Strait, 800 ships remain stuck waiting, the ceasefire will expire in eight days, and there is still no solution to the nuclear weapons issue.

But at least today, the market chose to believe.