The Top Line
Oil prices surged nearly 5% yesterday as a fragile ceasefire with Iran nearly fell apart, keeping inflation front and center. The economy is still growing, but the Iran situation is the single variable shaping everything right now.
We are operating in a transitional macro regime defined by the collision of a geopolitically-driven energy shock against a still-resilient earnings and growth backdrop. March CPI surged to 3.3% YoY—the highest print since May 2024—led by a 21.2% monthly gasoline spike tied directly to the Iran conflict, while core PCE stands 100 basis points above the Fed's 2% target at 3.0%. Q1 2026 S&P 500 earnings are tracking +13% YoY, the sixth consecutive quarter of double-digit growth, and the April Beige Book characterized broad economic activity as unchanged to slightly higher with wages rising modestly and financial conditions tightening modestly. The Fed is consequently pinned on hold—unable to cut into elevated inflation, and facing too much growth resilience to justify a policy reversal—while the Iran ceasefire, set to expire today, has become the dominant near-term variable for oil pricing, rate expectations, and equity sentiment alike.
Inflation
Last month, consumer prices jumped sharply — largely because gasoline soared more than 21% as the Iran conflict disrupted global oil supplies, pushing the overall inflation rate to 3.3%, the highest in nearly two years. The good news is that prices outside of energy stayed relatively tame, rising just 2.6% over the past year and coming in below what most economists had feared. The Federal Reserve — the central bank that controls interest rates — views inflation as still too high to justify cutting rates, and has signaled it will hold steady and wait for the picture to improve. Until energy prices cool or a durable peace deal takes hold, your mortgage rate, car loan, and cost of borrowing are unlikely to get any relief.
Key Takeaway
Inflation spiked in March mostly because of gas prices — the Fed is holding interest rates steady until things calm down.
The March CPI report, released April 10th, delivered the inflation shock the market had anticipated but hoped to avoid. Headline CPI surged 0.9% month-over-month—the largest single-month gain since June 2022—pushing the annual rate to 3.3% from 2.4% in both January and February. The driver was unambiguously Iran: energy costs jumped 10.9% for the month, with gasoline alone surging 21.2% and accounting for nearly three-quarters of the headline increase. National average gasoline prices crossed $4 per gallon for the first time in more than three years, and fuel oil advanced 44.2% YoY. Food prices were flat for the month, with food at home down 0.2%, providing a partial offset that did little to soften the headline impact.
Critically, core inflation told a more contained story and provided the Fed with meaningful analytical cover. Core CPI rose just 0.2% MoM and 2.6% YoY—both 0.1 percentage point below forecast—signaling that the underlying demand-driven inflationary impulse remains subdued. Services excluding energy rose 0.2% monthly and 3.0% annually; shelter increased 0.3% MoM and 3.0% YoY, tied for its lowest annual reading since August 2021. The absence of broad-based wage-price dynamics is notable: real average hourly earnings fell 0.6% for the month as the headline surge overwhelmed a modest 0.2% nominal wage gain. That said, EY forecasts headline CPI accelerating further toward 3.6% in April–May as energy costs continue filtering through supply chains, with core CPI potentially rising toward 2.9% in May–June as second-round oil effects work through transportation and manufacturing inputs.
The Fed's preferred measure, core PCE, stood at 3.0% YoY as of February—100 basis points above target and on an upward trajectory before the March energy shock compounded the picture. The March PCE data, scheduled for April 30th, will be the next critical inflation inflection point. March FOMC minutes confirmed that the vast majority of officials see inflation progress as slower than previously expected, and Governor Waller stated on April 17th that monetary policymakers remain "cautious about rate cuts now" and more inclined toward easing later in the year only "when the outlook is more steady"—explicitly conditioning any cut on demonstrated peace in the Middle East and resumed disinflationary progress. Goldman Sachs has characterized the current dynamic as an inflation shock driven by energy rather than a traditional demand-driven downturn, creating a stagflation-like complication for the committee's reaction function.
Key Takeaway
The Fed remains on hold with conditions moderately tight. Core PCE at 3.0% prior to the March energy shock—combined with headline CPI at 3.3%—leaves no credible basis for near-term easing. Markets are pricing near-zero probability of a 2026 rate cut absent geopolitical resolution. April 30th core PCE is the next definitive policy-relevant data point.
Risk and Positioning
Markets dipped modestly yesterday as investors grew nervous about whether the Iran ceasefire would survive — and the market's fear gauge (called the VIX) ticked up to about 19.5, which is elevated but nowhere near the panic levels seen during major sell-offs. One unusual signal worth knowing about: gold prices actually fell about 2%, even as oil surged. That sounds backwards, since people usually buy gold when they are worried, but here's why it happened — rising oil means rising inflation, which makes investors fear higher interest rates for longer, and higher rates make gold less appealing to hold. The reassuring part is that the corporate bond market — a reliable early-warning system for financial stress — has remained calm, suggesting the overall system is handling the uncertainty without cracking.
Key Takeaway
Markets are anxious but not panicking — the Iran ceasefire is the single thing investors are watching most closely.
Tuesday's session produced a risk-off lean without a full-scale defensive pivot. The S&P 500 declined 0.63% as Iran ceasefire anxiety intensified intraday—reports surfaced that Vice President Vance's negotiating trip to Pakistan was paused due to a lack of commitment from Tehran—before President Trump announced a ceasefire extension after the close, contingent on Iran submitting a formal proposal. The VIX settled at 19.49, up 3.34%, reflecting elevated anxiety without a systemic stress signal; the index has held below 20 throughout the ceasefire period, implying markets are pricing a probability-weighted rather than worst-case binary outcome for the conflict. Treasuries provided a partial flight-to-safety bid, with the 10-year yield declining 4.1 basis points to 4.299%, while the 2-year moved just 0.6 basis points, steepening the 2s10s spread modestly to approximately +52 basis points.
Equity positioning reflects a market that has absorbed significant geopolitical and inflationary headwinds with relative composure. The forward P/E on the S&P 500 stands at 20.9x per FactSet's April 17th calculation—above both the five-year average of 19.9x and the ten-year average of 18.9x, but 110 basis points below the 22.0x recorded at year-end 2025, reflecting the partial multiple compression from the Iran shock. With 46 S&P 500 constituents trading at 52-week highs on Tuesday, breadth remains constructive despite index-level softness. Credit markets have not sounded the alarm: per JPMorgan's Q1 2026 review, investment-grade and high-yield spreads have "not widened significantly," which the firm characterizes as a "reassuring signal of underlying market health"—a particularly notable observation given the scale of the geopolitical dislocation since late February.
The most analytically significant cross-asset signal Tuesday was gold's 2.06% decline to $4,720 even as front-month WTI crude surged 4.81%. This counterintuitive divergence—gold selling off during a geopolitical flare—reflects the market pricing a specific transmission mechanism: oil-driven inflation raises the probability of central bank tightening, which elevates real rate expectations and directly compresses the non-yielding precious metal. Gold is now down more than 8% since the Iran war began, not from improved risk appetite, but from rising rate expectations that the conflict itself has triggered. This inversion of the traditional gold-as-safe-haven relationship is the defining positioning paradox of the current cycle, and it will only resolve when either the geopolitical risk premium dissipates or the inflationary channel reasserts gold's store-of-value bid on a sustained basis.
Key Takeaway
VIX at 19.49 reflects ceasefire uncertainty, not systemic stress—credit stability confirms no panic. The gold/oil divergence (gold –2%, WTI +4.8%) is the key risk signal: markets are pricing stagflation, where oil inflation lifts rate expectations and suppresses rate-sensitive assets. Ceasefire collapse targeting $100+ oil would accelerate this dynamic sharply.
Sector and Cross-Asset Analysis
Oil and gas companies were yesterday's clear winners as crude prices surged nearly 5%, with energy stocks benefiting directly from the supply fears tied to the Iran conflict. Tech companies slipped with the broader market, weighed down by the combination of high interest rates — which make future earnings less valuable today — and nervousness ahead of a critical earnings week. On the more encouraging side, major U.S. banks have already delivered solid first-quarter results: JPMorgan noted that consumers are still spending, just not accelerating, which matches a "holding steady" read on the broader economy. The real test for tech and the overall market comes April 28th–30th, when Microsoft, Google, Amazon, and Meta all report — how they describe their business outlook under elevated oil prices and trade uncertainty will set the tone for the rest of spring.
Key Takeaway
Oil and gas companies are winning right now; tech is under pressure — and big tech earnings at month's end will be the next big moment.
Energy was Tuesday's unambiguous sector winner. Front-month WTI crude settled at $93.13, up 4.81% on renewed supply disruption fears as the Iran ceasefire approached its expiration, with the continuous contract (CL1!) at $89.67 reflecting the spread between near-term geopolitical risk premium and the longer-dated supply outlook. The magnitude of that intraday oil move—from early Asian session weakness near $88 to a $93+ close—illustrates just how tightly correlated near-term crude pricing has become with day-by-day diplomatic developments. Energy sector equities, which benefit from elevated realized oil prices on Q1 results and receive a positive earnings revision tailwind from sustained higher prices, outperformed the broader market materially. Technology and growth lagged, with the Nasdaq settling 0.59% lower, consistent with the sector's elevated rate sensitivity at current forward multiples.
Cross-asset dynamics reinforced the stagflationary regime narrative. The dollar index (DXY) advanced 0.36% to 98.41—modest but directionally consistent with geopolitical risk-off flows favoring dollar-denominated assets. The 2s10s spread at approximately +52 basis points represents a positively sloped curve that has emerged from last year's inversion, and its current shape reflects a Fed pinned at the short end while inflation and supply dynamics prevent long-yield compression. International markets showed divergence: South Korea's Kospi gained 2.11% and Japan's Nikkei added 1.15%, while Australia was modestly lower; Asian equity outperformance may reflect different positioning dynamics around oil prices relative to U.S. equities, where the Iran war's inflationary impact is more directly transmitted to consumer balance sheets.
Earnings season remains the constructive counterweight to geopolitical drag. With only 10% of S&P 500 companies having reported as of April 17th, results to date support the ~13% YoY earnings growth estimate, with approximately 73% of early reporters clearing estimates—consistent with historical beat rates. The financial sector delivered broadly solid Q1s; JPMorgan's earnings commentary offered a "consumer intact, not accelerating" read on low single-digit discretionary card spending, aligning with the Beige Book's characterization of activity as unchanged to slightly higher. The pivotal week for the index remains April 28–30, when Microsoft, Alphabet, Amazon, and Meta are expected to report—guidance quality on AI capital expenditure commitments and consumer demand in an elevated-oil, elevated-tariff environment will determine whether the 20.9x forward multiple holds or faces fundamental pressure.
Key Takeaway
Energy outperformed sharply on WTI +4.8%; technology lagged on rate sensitivity at 20.9x P/E. The 2s10s at +52bps reflects curve normalization with the Fed on hold. Big tech guidance April 28–30 is the highest-stakes Q1 event—AI capex and consumer demand commentary under oil and tariff conditions will either validate or challenge the current multiple.
Economic Data & Events
Today's Calendar
- 7:45 AM MT — S&P Global Flash PMI: Manufacturing (measures whether U.S. factories are expanding or pulling back) — Moderate Impact
- 7:45 AM MT — S&P Global Flash PMI: Services (measures business activity across the broader service economy — restaurants, healthcare, finance, and more) — Moderate Impact
- 8:00 AM MT — Existing Home Sales (measures how many previously owned homes were sold last month — a gauge of housing market health) — Moderate Impact
- 8:30 AM MT — EIA Crude Oil Inventories (measures how much oil is sitting in U.S. storage — with oil already above $93 a barrel, this number could push prices noticeably higher or lower) — High Impact today
The most market-sensitive release today is the weekly oil inventory report. With crude prices already elevated and the Iran ceasefire extended just overnight, any sign of tightening oil supplies could push gas prices — and inflation — higher. Behind all of this, the real driver of today's market will be whatever comes out of the Iran negotiations, since diplomacy is moving fast and markets are following every development in real time.
Key Takeaway
Watch the oil inventory report at 8:30 AM MT — in today's market, energy news is the biggest lever on stocks and inflation.
Today's Calendar
- 7:45 AM MT — S&P Global Flash US Manufacturing PMI (April) — Moderate impact
Consensus: ~51.5 | Previous: 51.2 (February) — Note: consensus not verified from primary source; directional estimate only. Watch for any demand softness tied to Iran-related cost pressures.
- 7:45 AM MT — S&P Global Flash US Services PMI (April) — Moderate impact
Consensus: ~53.0 | Previous: ~53.5 — Note: consensus not verified from primary source. Services resilience is the key read given the Fed's emphasis on services inflation as the underlying stickiness driver.
- 8:00 AM MT — Existing Home Sales (March, NAR) — Moderate impact
Consensus: ~4.15M annualized | Previous: ~4.10M — Note: exact consensus not verified. Elevated mortgage rates near 7% continue to suppress affordability; any upside surprise would be notable given the rate environment.
- 8:30 AM MT — EIA Crude Oil Inventories (Weekly) — High impact (elevated, given oil market conditions)
Consensus: Not verified | Previous: Draw/build figures pending — With WTI at $93+, any unexpected inventory build could moderate oil's geopolitical risk premium; a draw would reinforce supply disruption pricing.
Week Ahead
This is the most consequential earnings week of Q1 season, with 93 S&P 500 companies reporting, including major technology and semiconductor names. Iran ceasefire extension announced post-close Tuesday; formal proposals from Tehran due imminently—developments will drive oil and equity volatility intraday. April 30th brings the March core PCE release—the Fed's preferred inflation gauge and the most policy-relevant data point remaining before the May 6–7 FOMC meeting.
What We're Watching
Monetary Policy
Fed is on hold with no credible easing path until inflation approaches 2% and/or the Iran conflict resolves. April 30 core PCE and May 6–7 FOMC are the next decision points. Governor Waller's April 17 signal: cuts only if peace and price stability return together.
Rates & Fixed Income
10Y is consolidating in the 4.0–4.5% range; the 2s10s spread at +52bps reflects curve normalization. Prefer intermediate duration (4–10 years). Key level: a 10Y break above 4.5% would signal inflation expectations re-anchoring higher and pressure equity multiples significantly.
Equities
Forward P/E at 20.9x is above historical averages, making guidance quality—not just Q1 beats—the critical variable. Big tech (MSFT, Alphabet, Amazon, Meta) reporting April 28–30: AI capex commentary and consumer demand guidance under oil/tariff conditions will determine if the multiple holds.
Key Risks
Ceasefire collapse is the primary tail risk: WTI targeting $100–$110 would push headline CPI toward 4%+, pressure the Fed toward hikes, and compress equity multiples. Secondary risk: big tech guidance misses April 28–30. Monitor Iran proposal deadline and EIA oil inventories as near-term signals.
The Bottom Line
President Trump extended the Iran ceasefire overnight, which may give stocks a lift at this morning's open if oil prices ease in response. The big picture is unchanged: every major market move right now follows news from the Middle East, and that is not going to change until a real deal is done.
Treasuries are consolidating at 4.299% on the 10-year after Tuesday's modest 4-basis-point rally, consistent with the 4.0–4.5% range Schwab and other strategists have identified as the likely near-term home for yields given a Fed on hold and inflation above target. Trump's post-close ceasefire extension introduces a gap-up probability for equities at Wednesday's open—oil pricing the news is the first test; if WTI retreats from $93 toward $88–90 on deal progress, rate-sensitive and consumer-facing sectors should lead. Resistance on the SPX sits in the 7,150–7,200 zone, with the pre-conflict January high of approximately 7,302 as the longer-dated technical target; support is at 6,950–7,000. Today's Flash PMI data and the EIA oil inventories report are the scheduled catalysts, but real-time Iran developments remain the overriding intraday variable—this market is trading geopolitics first, data second.
Disclosure — AI-Assisted Content & Regulatory Notice
This briefing was drafted with the assistance of artificial intelligence tools. All content has been reviewed and approved by Thomas MacPherson, Investment Adviser Representative (Series 65) and Chief Compliance Officer, River Rose Financial, LLC, prior to publication. AI systems may produce errors, omissions, or outdated information; readers should independently verify data.
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