A Step Toward De-escalation
Late yesterday afternoon, the White House announced a two-week ceasefire with Iran, brokered by Pakistan. The U.S. and Israel will pause military strikes. Iran has agreed to allow safe passage through the Strait of Hormuz, coordinated with its own military. Face-to-face talks are set to begin in Islamabad on Friday. This is the first real break in the fighting since the war began on February 28, and it is a meaningful one. The guns have gone quiet, the world’s most important oil shipping lane is reopening, and both sides are sitting down at the same table for the first time since the conflict started.
Markets responded quickly. Oil prices fell sharply overnight, with Brent crude dropping roughly 13% from recent highs back near $95 a barrel. U.S. stock futures jumped more than 2%. European and Asian markets posted some of their best days in months, with South Korea up about 6% and Germany up nearly 5%. Treasury yields fell. The relief rally was broad and global, reflecting how much fear had been priced into markets over the past six weeks.
A Pause With Momentum
This is a ceasefire, not a final peace agreement. The initial pause runs for two weeks, and the core disagreements between the two sides have not been resolved. Iran wants sanctions lifted and the right to enrich uranium. The U.S. wants Iran’s nuclear program dismantled and an end to support for regional militias. Those are difficult gaps to close, and the path from here will likely be bumpy.
That said, the direction of travel has clearly changed. A month ago, the two sides were not talking at all. A week ago, they were trading ultimatums. Yesterday, they agreed to stop shooting and start negotiating. Pakistan has shown it can carry messages between the two capitals. If the Islamabad talks make progress, the two-week pause is likely to be extended. For the first time in over a month, the momentum is running in a more constructive direction.
Oil Will Take Time to Normalize
Even if peace holds, the physical damage to Gulf energy infrastructure will take years to repair. Qatar’s Ras Laffan facility, which handles roughly 17% of the world’s liquefied natural gas exports, was badly damaged. Qatar’s energy minister says full repairs could take three to five years, limited not by money but by the fact that only three companies in the world make the specialized gas turbines needed, and all three have multi-year waiting lists. Refineries in Saudi Arabia, Bahrain, Kuwait, and the UAE also took hits. The U.S. Energy Information Administration expects Middle East production will not return to pre-war levels until late 2026 at the earliest.
That matters for markets. Oil prices can fall quickly on good news, but the supply picture has genuinely changed. Gasoline at the pump reached $4.14 a gallon yesterday, up from $2.98 at the end of February. Analysts expect prices to ease in the coming weeks, but a full return to pre-war levels is unlikely while Gulf production remains constrained.
A Quieter Valuation Reset
One point worth making while the headlines focus on the ceasefire. Over the last six months, the S&P 500’s forward price-to-earnings ratio has fallen about 18%. That is a significant valuation reset, and most clients have not noticed it because the price of the index has held up reasonably well. The froth has come out of the market, but it has come out quietly.
Valuation is just price divided by earnings. There are two ways a market can get cheaper. The price can fall, which is the version everyone recognizes because it comes with scary headlines. Or earnings can grow while the price stays roughly flat, which is what has largely happened here. The first way is painful. The second way is the market growing into its valuation through time and rising profits.
For long-term investors, this is a healthier setup than it was six months ago. You do not need a 20% crash to get a 20% discount, and clients who stayed invested have quietly received one without having to live through the crash.
The Bottom Line
Yesterday brought the best news the market has had in six weeks. The fighting has stopped, the Strait of Hormuz is reopening, oil prices are falling, stocks rallied around the world, and diplomats are heading to Islamabad to talk peace. This is not the end of the story, but it is a meaningful step in the right direction. The path from here will likely include setbacks and headlines in both directions, but the trajectory has clearly improved.
Our advice to clients is the same as it was a month ago. The stock market has handled this crisis the way it has handled previous ones: volatility in the short run, recovery in time. Investors who stayed with their plan through the selling are now seeing markets rebound. The portfolios we manage were built for exactly this kind of environment, with diversification across regions, sectors, and asset classes. If your situation or goals have changed, please reach out. Otherwise, the best action remains the one we have recommended all along: stay invested, stay diversified, and let the plan do its work.
-Gryphon Financial Partners Investment Committee
Disclosure: This material is provided by Gryphon Financial Partners, LLC (“Gryphon”) for informational purposes only. It is not intended as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Facts presented have been obtained from sources believed to be reliable, though Gryphon cannot guarantee their accuracy or completeness. Gryphon does not provide tax, accounting, or legal advice. Individuals should seek such guidance from qualified professionals based on their specific circumstances.