Risk Watch | Saturday, May 9, 2026, 3:45 p.m. ET

TL;DR

US and Iranian forces exchanged fire in the Strait of Hormuz on Thursday and Friday, May 7-8. Iran fired missiles at the UAE. The US disabled two Iranian-flagged tankers. Trump insists the ceasefire remains intact, and Rubio said Washington was awaiting Iran's response to a peace proposal by Friday evening. As of Saturday afternoon, Tehran has not replied. Brent crude settled above $101 on Friday. The next 24-72 hours, and specifically whether Iran responds this weekend, will likely set the tone for Monday's market open.

What Happened in the Hormuz Strait

The Strait of Hormuz, the narrow waterway through which roughly 20% of the world's oil supply normally flows, remained a flashpoint this week as the US-Iran conflict entered its most volatile stretch since the informal ceasefire was declared in early April.

On Thursday, US forces said they intercepted what they described as unprovoked Iranian attacks on American naval vessels attempting to cross the strait. US Central Command said it eliminated inbound threats and struck Iranian military sites used to stage those attacks.

On Friday, Iran launched missiles at the UAE, and US forces responded by firing on and disabling two Iranian-flagged tankers that the US military said were attempting to violate the American naval blockade of Iranian ports. Four US ships were escorting a Maersk container vessel through the strait at the time, in what has become a recurring US Navy escort operation.

Despite the exchanges of fire, President Trump told reporters Friday evening that the ceasefire remained in effect. Secretary of State Marco Rubio, speaking from Rome, said Washington was still expecting a formal response from Iran to a proposed peace memorandum. "We're expecting a response from them today at some point," Rubio said. "I hope it's a serious offer."

Trump added: "I'm getting a letter supposedly tonight." As of Saturday afternoon ET, no such response has been publicly confirmed. According to The Hindu's live coverage, Iran is reviewing the proposal at what officials describe as its "own pace."

Why Markets Moved

Crude oil prices ended Friday's session higher after three straight days of declines. Brent crude (the international benchmark used to price roughly two-thirds of global oil supply) settled at $101.29 per barrel, up 1.23% on the day. West Texas Intermediate (WTI, the US benchmark) gained 0.64% to $95.42. Both benchmarks were still down roughly 6.3% for the week, as earlier optimism about a Hormuz reopening drove steep mid-week losses.

The International Energy Agency has warned that the conflict is removing approximately 14 million barrels per day from global oil supply. Shell's CEO and other oil executives, speaking on earnings calls over the past two weeks, said Iran's blockade has cumulatively resulted in the loss of nearly one billion barrels of oil from the market. The shortage, they noted, is growing worse with each day the strait remains effectively closed to commercial shipping.

US equities, by contrast, continued to diverge from oil. The S&P 500 and Nasdaq closed at record highs on Friday, posting their sixth consecutive week of gains. The rally was driven primarily by artificial intelligence stocks and a stronger-than-expected April jobs report. Markets appear to be pricing in a near-term deal, with equities largely ignoring the energy disruption.

Implications for Traders

Oil and Energy Futures Traders

Oil markets are in a near-impossible forecasting environment. Brent has ranged between roughly $99 and $114 in just the past seven days. Each diplomatic update, military exchange, or leaked memo creates an outsized intraday move. The tight squeeze around $100 reflects a market that sees roughly equal probability of a deal-driven drop (toward the low $80s) and a breakdown-driven spike (toward $115-$120). Hormuz-linked shipping stocks and tanker operators have remained similarly volatile.

US Equity and Index Futures Traders

Wall Street's record-high run has so far absorbed the oil shock, supported by strong earnings in the AI sector and resilient labor data. The macro backdrop is explored in more detail in our earlier post on how the Iran war is delaying Fed rate cuts into late 2026. However, that divergence is fragile. If Iran rejects the US proposal outright, or if another significant military exchange occurs over the weekend, index futures could face selling pressure at Monday's open. The S&P 500 currently sits at elevated valuations relative to historical norms for periods of meaningful commodity supply disruption.

Crypto Traders

Bitcoin and crypto assets have shown a high correlation to equities during this conflict cycle. If risk-off sentiment materializes Monday, crypto is likely to follow equities lower. A deal announcement, on the other hand, could benefit both simultaneously. Bitcoin has been trading in the $80,000-$90,000 range in recent weeks, with macro sentiment the dominant price driver.

Potential Positives vs Negatives

Positives (from current standoff):

  • Active diplomatic channel remains open. A one-page peace memo is reportedly in transit through Pakistan mediators.
  • Trump personally said the ceasefire is intact and he expects Iran's response imminently.
  • Deal optimism has already pushed oil down roughly 6% this week, implying significant further downside for crude if a deal is confirmed.
  • Lower oil prices would reduce inflation pressure and potentially revive expectations for rate cuts in 2026.

Negatives (from current standoff):

  • Iran has not responded and is described as reviewing the proposal at its own pace, suggesting Tehran may be using time as leverage.
  • Fresh military exchanges happened just 48 hours ago, raising the risk that the ceasefire collapses before a deal is signed.
  • The IEA's estimate of 14 million barrels per day offline represents a structural supply shock with no quick fix even if the strait reopens tomorrow.
  • Rubio publicly expressed skepticism about Iran's willingness to deal: "I'm not sure you can reach a deal with these guys."

What Could Happen From Here

Base Case: Deal Inching Forward, Markets Stable

Iran responds this weekend with a qualified acceptance or a counter-proposal. The ceasefire holds. Oil drops toward $90-$95 on relief. US equities open flat to modestly higher Monday. Crypto holds steady. Confirmed by: Iran formally acknowledges the US memo through Pakistan; no new military engagements. Invalidated by: Iran rejects the proposal or another Hormuz exchange occurs.

Upside Case: Deal Announced, Oil Drops Sharply

Iran accepts the framework over the weekend. A formal announcement is made Sunday or early Monday. Brent falls toward $80-$85 rapidly as the supply premium is unwound. US equities rally further (commodities disinflation supports rate-cut expectations). Crypto likely rises with equities. Confirmed by: Joint statement from US and Iranian officials, or a public Hormuz transit announcement. Invalidated by: Rejection from Iran's Supreme Leadership or Revolutionary Guards who have publicly opposed the terms.

Downside Case: Talks Collapse, Oil Spikes

Iran formally rejects the proposal or another escalation occurs this weekend. The ceasefire breaks down. Brent spikes toward $110-$115. US equities face a Monday gap-down. Volatility (VIX, which measures expected stock market volatility) likely rises sharply. Crypto follows equities lower. Confirmed by: Iranian state TV rejecting the US proposal; new IRGC Hormuz blockade enforcement; US military response. Invalidated by: Rubio announces talks are back on track.

What to Watch Next (Next 24-48h)

  • Iran's response to the US proposal is the single biggest near-term catalyst. Any announcement this weekend will move oil futures and set Monday's market tone.
  • Brent crude in Asian and European pre-market Sunday evening is the first live price signal as weekend developments are digested.
  • US CENTCOM press releases for any further Hormuz military activity over the weekend.
  • Trump and Rubio social media for real-time diplomatic signals. Both have used public statements to move markets this week.
  • Pakistan as mediator: Watch for any signals from Islamabad about whether the memo was delivered and formally received by Tehran.

Frequently Asked Questions

Q: Why does the Strait of Hormuz matter so much for oil prices?
The strait is a narrow sea passage between Iran and Oman. Roughly 17-20 million barrels of crude oil pass through it each day in normal conditions, making it the world's most important oil shipping chokepoint. Disruption there raises global energy costs immediately.

Q: How would a US-Iran peace deal affect oil prices and stocks?
A confirmed deal and Hormuz reopening would likely push Brent crude down sharply (possibly toward the low $80s from current $101) as the supply risk premium is unwound. Cheaper energy is generally positive for equity valuations and could revive expectations for Federal Reserve rate cuts in 2026.

Sources

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