US-Iran War: My Fundamental Analysis as of April 10 2026

Context:

Earlier this week (Tuesday April 07 2026, 18:32), Trump announced a ceasefire between USA, Israel and Iran, with Iran agreeing to temporary reopen Hormuz. Israel continued to bomb southern Lebanon as Lebanon was not part of the ceasefire, which led to Iran saying (Thursday April 09 2026, ~12:00) it will not negotiate as long as Israel continues bombing Lebanon. Iran delegation arrived in Pakistan (TODAY ⇒ Friday April 10 2026, ~16:00) waiting for USA delegation (JD Vance, Jared Kushner and Steve Witkopf). Negotiations are still planned, but it may not happen… or, more likely, will happen but with low expectations, because of Iran’s “preconditions” which are the following: 1) there has to be a ”ceasefire in Lebanon”. However, Israel has continued, and still continues to bomb Southern Lebanon since the beginning of the ceasefire and has clearly stated its intention to continue the bombings on Lebanon. 2) “the release ⁠of Iran's blocked assets”. I don’t think Trump will agree to this “precondition,” because it would make him look like he is in an inferior position, and he can’t afford that after repeatedly telling the whole world that he is winning the war, that Iran can no longer defend itself, and that Iran’s military has been “obliterated”. However, what Trump can do is have a “precondition” too, something like “I will release Iran’s blocked assets if Iran does x or y in return”.

Ceasefire scenarios:

1. The negotiations don’t happen at all, due to preconditions not fulfilled.
2. The negotiations happen and fail.
3. The negotiations happen and are successful long-run.
4. The negotiations happen and are successful short-term but war resumes.

Hormuz & oil & inflation & SPX based on ceasefire scenarios:

1. Strait of Hormuz will be closed indefinitely. Strikes will resume. Risk if that USA might targets civilian infrastructure (as Trump threatened days before the ceasefire), then Iran will almost instantly respond by bombing energy infrastructures in the Gulf. This would create an energy crisis; oil will go up significantly, and at this point even if they come to an agreement, the damage done will take years to repairs, reducing the global supply. Inflation will continue to increase due to higher energy prices (just as today’s CPI m/m at “actual: 0.9%” vs “expected: 1%” and Core CPI m/m “actual: 0.2%” vs “expected: 0.3%”). That would put the Fed in a difficult situation which is trying to balance inflation and the job market; they would try to keep rates higher for longer to fight inflation but that would put pressure on economic growth and therefore weight on the job market. In my opinion, in this scenario it will be important to differentiate CPI and Core CPI (the latest excludes food and energy), because the Fed don’t want to kill core CPI to reduce overall inflation largely caused by energy crisis which is something they don’t have tool against; as Powell said (on March 30 2026) “Fed’s tools have no meaningful effect on supply shocks”, meaning that it “can’t print oil”. In this scenario, overall CPI remains persistently well above the Fed’s 2% target. In that case, the Fed would likely keep rates unchanged as long as the job market data shows it is holding up, and cut rates only if the data shows that the job market is deteriorating or if policymakers judge that core CPI has reached its lowest tolerable level. Consequently, the outcome would be negative for the stock market (as household have less money to spend after filling tank, purchasing more expensive essential goods, or facing potential layoffs) and portfolio managers will anticipate this and reduce their equity exposure, likely reallocating those funds into USA Treasury Bonds.
2. Idem as #1, but with an even higher likelihood (if not with certainty) of civilian and energy infrastructure being hit.
3. Strait of Hormuz is reopened (whether it is with or without an Iranian transit fee). Oil will go down as insurers begin to reinsure tankers, allowing them to transit through the Strait of Hormuz and deliver oil to both Eastern and Western markets. The good news for the Fed is that inflation driven by the war would be temporary. However, it could still linger for 3 to 6 months, since petroleum is used not only for fuel, but also in plastics, construction materials, manufacturing, transportation, and many other parts of the supply chain. In that scenario, the Fed will keep an eye on both core CPI and headline CPI, but will place much more attention on core CPI, since it knows that the rise in overall CPI caused by the war should gradually fade over time. Fed could then restart planning to slowly cut rates (plus we will likely have dovish Kevin Warsh as new Fed Chair coming in May 2026). However, in that scenario, despite having an agreement, tensions in the Middle East would likely remain elevated, so I expect that the Fed would probably avoid rushing into aggressive rate cuts. Consequently, the outcome would be positive for the stock market, and investors could view any opportunity to buy the SPX below ~$6,868 as a discount (which is roughly the closing price on Friday February 27 2026, the last trading day before the beginning of the conflict).

Until the outcome of the negotiations (SPX) …

I definitely don't see portfolio managers going fully long; I don't see prices closing above and trading through the February 27 2026 close around $6,868 before an agreement. Obviously, we will likely have updates during the negotiations and positive rumors/expectations about a longer-term agreement could send prices above the Feb 27 close, but that would be the only reasonable way to trade higher. Otherwise, I believe the logical thing to do is to range between the Feb 27 close and the ceasefire gap from Wednesday April 08 2026. On the contrary, if updates from the negotiations are negative and the market starts expecting the war to resume, it would send prices back down to the war lows.