In another week of high drama, markets ended in a calmer fashion, awaiting this weekend’s direct talks between the U.S. and Iran in Islamabad around the 14-day ceasefire. Oil prices took a big step back from above $115/barrel at the start of the week, with WTI dipping below $100, but also ending well up from the initial dive to the low-$90s following the ceasefire news. With Iran still tightly controlling the Strait of Hormuz, and precious few ships actually moving through, there is still a very large premium built into crude prices. And the damage inflicted on a variety of energy assets around the Gulf has played a role in boosting one-year futures prices by about $10 since the start of the war. Suffice it to say that we are quite comfortable with our call of an $85 average oil price for 2026, even with the ceasefire news.
The conflict began nearly six weeks ago, and despite the wild swings in oil prices over that period, perhaps the big surprise is what little impact the war made on other financial markets (Table 1). As of writing, the S&P 500 has fought its way back to within 1% of pre-conflict levels. Even at its low last Monday, it was down ‘only’ 9% from its record high, not even quite reaching official correction terrain. Compare that to the 19% bludgeoning it absorbed in the six weeks of the initial stages of the trade war almost exactly a year ago. Meantime, after correcting, the Nasdaq is now above pre-war levels, with tech very much back in favour again. The gold-heavy TSX is down about 2% from six weeks ago, but that’s barely a ripple, given that bullion prices are down more than 9% (shattering gold’s reputation as a safe harbour).