Partner, Portfolio Manager
Equity markets are on track to finish a remarkable week, with key indexes like the S&P 500 and Nasdaq flipping positive on a year-to-date basis.
This positive shift began in earnest following the ceasefire announcement last week and was surprisingly uninterrupted by peace talks stalling last weekend.
The Volatility Index (VIX) has fallen below 20. We remain cautious at these levels, only because the geopolitical uncertainty is far from sorted, even if the market is pleased with the current negotiations timeline.
Let’s review key updates in the Middle East before shifting to important Federal Reserve developments.
The Latest in the Middle East
The breakdown in talks between senior US and Iranian officials shows that both countries are still far from reaching an agreement. Iran has been restricting the flow of goods through the Strait of Hormuz as a means to bring the US to the negotiating table through economic leverage. The US responded this week by deploying a naval blockade on the Strait.The Foundation for Defense of Democracies (FDD) estimates that the Iranian economy has already lost 40% of its pre-war GDP and that the US blockade will cost the Iranian economy the equivalent of $435 million in economic activity per day.
Oil revenue is a key lifeline for Iran, and the longer this blockade continues, the more likely it is that Iran will have to start shutting off its oil field pumps, which could compound the economic pain.
The FDD estimates that, without exports, Iranian oil storage may be at capacity in less than 13 days, which means it won’t take long for shutoffs to become a real conversation.
The US may need to be patient as the effects of the blockade take hold, but we’ve already seen progress made on other fronts of the war. Thursday afternoon, Israel and Lebanon agreed to a 10-day ceasefire, which may help reopen US-Iran peace talks.
On the whole, markets seem comfortable looking past this activity. We continue to believe that caution is warranted, but it is reassuring to see stocks rallying.
One indicator we’re watching closely is crude oil futures on the CBOE. As of Thursday, December 2026 contracts were priced at $76.58 a barrel, highlighting the broader consensus that a significant de-escalation is coming soon.
We will continue to monitor these developments closely.
Powell’s Final Month As Fed Chair?
Remember when the Fed was a hot topic back in January? It quietly slipped into the background as geopolitical events escalated, but the Fed will move back into the spotlight as we draw closer to May 15, the day Jerome Powell’s term as Chairman expires.Kevin Warsh, Trump’s nominee to be the next Fed Chair, finally has a Senate hearing scheduled for next week on April 21. High-ranking members of the Senate Banking Committee, most vocally Sen. Tom Tillis (R-NC), have stated that they will not be advancing the process to confirm Warsh until the Department of Justice investigation related to Powell is fully concluded.
This week, the Fed started appearing in headlines again after the administration—via the DOJ and direct comments from the President—was back to provoking Powell.
Powell has responded to the administration’s attacks previously, saying at his post-FOMC meeting press conference in March:
“If my successor is not confirmed by the end of my term as Chair, I would serve as Chair [for the time being] until he is confirmed. That is what the law calls for, that’s what we’ve done on several occasions—including involving me—and that’s what we’re going to do in this situation. And while I’m at it, on the question whether I will leave while the investigation is ongoing: I have no intention of leaving the Board until the investigation is well and truly over, with transparency and finality.”
As you may recall, an incredibly important part of this process will be whether Powell decides to stay on the Federal Reserve Board of Governors after his chairmanship. He can remain on the Board for two additional years, however it has been more commonplace for the Chairman to also resign from the Board.
If Powell were to stay on the Board, President Trump said on Wednesday, “I’ll have to fire him… I’ve wanted to fire him, but I hate to be controversial.” This could set off another highly specific and technical legal trial.
For now, we’ll be watching the hearing next week for a preview of what Warsh’s Fed will look like. Given the uncertainty around the war and oil prices—and the low likelihood of Fed action in the next few months as a result—this drama may take a back seat. Delays in the Iran negotiations timeline will be impactful, so we hope discussions will progress in a timely manner.
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