Markets Defy the Hormuz Blockade — But I'm Stepping Aside for Now

Surprisingly, the NASDAQ has not suffered too badly since negotiations fell apart between the United States and Iran. In fact, it has actually risen. After VP JD Vance walked away from 21 hours of talks in Islamabad on Saturday without a deal, President Trump announced a naval blockade of the Strait of Hormuz, effective Monday morning. The US Navy is now actively blocking all ships entering or leaving Iranian ports — and markets have barely flinched.

The Market Reaction: Remarkably Calm

The markets didn't react too badly to this news. The NASDAQ Composite closed up 1.23% on Monday at 23,183 — its ninth consecutive daily gain and its longest winning streak since 2023. The S&P 500 gained 1.02% to close at 6,886, wiping out its losses from the entire Iran war period. And indeed, this morning as of the 14th of April, the UK markets are up. Specifically airlines — easyJet is actually up 2.87%, Jet2 is up 3%, and IAG is up 1.81%.

Since the blockade was announced on Sunday, the NASDAQ has actually risen slightly — it finished Monday up 1.37% from where it had been trading when the news broke. Fundstrat's Tom Lee told CNBC that the market "has a really good way of discounting outcomes" and is pricing in a favourable resolution, drawing parallels with World War II when the stock market bottomed in May 1942, months before the tide of the war had actually turned.

Late on Monday, Trump gave a hint as to why markets rallied into the close. He told reporters outside the Oval Office that "we've been called by the other side," suggesting Iran had reached out to restart negotiations. That one sentence was enough to send the S&P 500 rallying from its session lows. Today's UK bounce — particularly in airlines — looks like a continuation of that optimism.

Why I've Sold Out of the NASDAQ

I have sold out of my NASDAQ trade. I was holding the position in place because of expectations that the Iranian-US situation would resolve. I do still believe that they will find some answers relatively soon — but I am fearful of some short-term weakness on the markets, on the NASDAQ especially, for this trade.

Here's my problem: I don't really foresee how they're going to come up with a deal together. The American stance on negotiating is a bit confusing. I do think they could more easily come up with an agreement, but the current US administration is too pushy and too bullying in nature to allow the regime to go along with any agreement at this point in time.

Escalation Is the Default Setting

They could have just as easily said that the negotiations hadn't been resolved and not blocked the Strait. They could have said they're going to go into further negotiations. They could even have gone down the route of not bombing Iran further at this point in time and seeing what Iran did next. But instead, they decided to escalate — as the Trump administration has a tendency to do.

I saw that as a particularly bad indicator of what the next step is. I find Trump — even for him — to be very volatile at this point in time. I don't really have a very clear understanding of what he might do next in order to resolve the conflict.

If there isn't a deal announced, I can't imagine there won't be an escalation of further bombing by the US into Iran in the coming week or two. The two-week ceasefire expires on 22 April — barely a week away. And under that scenario, I would anticipate there to be significant pressure on markets downwards.

Why the Calm, Then?

I very much understand why the markets haven't moved downwards since the Iranian deal failed. The blockade was narrower than Trump's rhetoric implied — it targets Iranian ports only, not all Strait traffic. Markets are pricing in a deal eventually happening. And Trump's comment about being "called by the other side" has fuelled fresh optimism that talks could resume quickly, possibly back in Islamabad.

But I think that the upside is a bit weak right now. For a short-term play on the NASDAQ, I don't want to trade on it when I don't have enough of an understanding of what could come next. It's worth noting that oil at $102 a barrel is a very different environment to oil at $70 before the war — and US Energy Secretary Chris Wright acknowledged that energy prices will keep rising until "meaningful ship traffic" gets through the Strait, which he estimated could take weeks.

If the ceasefire collapses and bombing resumes, there will almost certainly be a selloff — and that's when we may see further opportunities for investing long on the markets.