Important Morning Note: "Reprieve, Not Resolution"

Despite this morning's impressive rally, the ceasefire agreement itself is anything but a risk-on greenlight for markets -- other than for the obvious initial flow/position-driven spike higher (recall our past missives on sentiment, options dealer positioning, etc).

Here's our PWAI overview of the latest developments and our core allocation response this morning:

Markets are moving sharply higher today as reports emerged that the U.S. and Iran have reached a ceasefire framework, triggering a broad unwinding of the conflict risk premium that has weighed on global markets since late February. Our portfolio is well-positioned for this environment: international and emerging market holdings — particularly our South Africa and Latin America positions — are among the session's strongest performers, as investors return to commodity-linked economies that had been punished during the conflict.

Gold remains firm, and our mining exposure is outpacing gold itself, which is exactly the dynamic we expected when risk appetite recovered. The one area feeling pressure is energy — oil prices are pulling back as the supply-disruption fear recedes, which creates a short-term headwind for our energy holdings. That said, it's important to remember these positions were held for long-term energy fundamentals, not purely as a conflict trade, so we are monitoring the situation carefully rather than reacting. Overall, today's session reflects the kind of relief-rally scenario we had anticipated, and the portfolio's construction — diversified across real assets, international equities, and selective U.S. sectors — is performing in line with how it was constructed.

While today's moves are encouraging, we want to be clear-eyed: a ceasefire framework is not the same as a resolved situation. The Strait of Hormuz, Iran's nuclear program, and regional dynamics remain live variables, and we are managing the portfolio accordingly — capturing today's opportunity while keeping our hedges in place.

Here's BCA's take:

Hormuz Watch: Reprieve, Not Resolution

A near-term reprieve in the Iran conflict will not erase medium-term and strategic tensions. President Trump held off from escalating attacks on Iran late Tuesday for another two weeks. Our Trump Pain Point Index has fallen from its March highs, but remains elevated versus past episodes, underscoring the still-significant economic and political costs of the Iran war.

Even with another extension, the Strait of Hormuz question will remain unresolved, and attacks on GCC energy infrastructure will likely continue, with repercussions rippling through the global economy over the next few months. Iran and the US face different constraints. Iran will not risk total destruction of its civilian infrastructure, as discontent toward the regime was already elevated before the war. In the US, public support for the conflict is weak as the midterms approach. Trump was re-elected on the back of several waves of discontent, with inflation as the electorate’s main concern, but higher gasoline prices and mortgage rates are worsening affordability after years of above-target inflation.

In the longer run, no short-term deal can resolve the strategic tension between the US and Iran over the nuclear program. Our Geopolitical strategists have also argued that a Hormuz “toll” would not be sustainable or acceptable for the US. Both stocks and bonds could rally on a near-term ceasefire deal, but medium-term risks would remain. One dangerous medium-term scenario for risk assets is that Trump gives up on the midterms and focuses on cementing his legacy through regime change in Iran, which would be extremely disruptive for the global economy by preventing a swift resolution of the Hormuz situation.