TL;DR

Iran submitted a new peace proposal to the US via Pakistan late Thursday, but President Trump rejected it as insufficient. Oil settled sharply lower on the diplomatic news before partially recovering in after-hours trading. US stocks closed at record highs, completing the longest weekly winning streak since 2024, while Bitcoin posted mild gains. Big Oil executives warned Friday that energy markets could be "moving closer to a cliff's edge" if the Strait of Hormuz blockade drags on. The standoff remains unresolved heading into the weekend.

What Happened

Iran passed a new ceasefire proposal to Pakistani mediators on Thursday night. Pakistan then delivered the offer to Washington. The contents were not disclosed publicly, but Pakistani officials confirmed the exchange and said they remained hopeful of a negotiated settlement.

President Trump quickly dismissed the offer. "Iran wants to make a deal, but I'm not satisfied with it," he told reporters Friday. "They're asking for things I can't agree to." He framed his options bluntly: "either blast them away or make a deal."

At the same time, Trump chose to disregard a 60-day congressional deadline under the 1973 War Powers Resolution. In a letter to congressional leaders, the White House argued that a prior ceasefire agreement had "paused the clock" - an interpretation legal experts widely dispute. Trump also suggested the decades-old law was "unconstitutional."

Pakistan's foreign ministry spokesperson Tahir Andrabi said before news of the proposal broke: "The clock on diplomacy has not stopped. We remain hopeful of a negotiated settlement." Islamabad has served as the key back-channel between Tehran and Washington throughout the nine-week conflict.

Iran-US Hormuz Deadlock: Why Oil and Stocks Are Diverging

Oil fell sharply on Iran's proposal before staging a partial recovery. US crude (WTI) settled down 3% to close at $101.94 per barrel. International benchmark Brent crude lost nearly 2% to settle at $108.17. After-hours, July Brent futures recovered to near $111.63.

The initial sell-off reflected a classic "buy-the-peace-rumor" trade. The Strait of Hormuz is the narrow waterway connecting the Persian Gulf to global ocean shipping routes, through which roughly 20% of the world's seaborne oil passes. It remains under severe restrictions since the conflict began.

Equities surged past the oil noise. The S&P 500 and Nasdaq both closed at record highs Friday, completing the longest weekly winning streak since 2024. Investors are simultaneously riding strong corporate earnings and betting on an eventual diplomatic resolution. Apple delivered a fiscal second-quarter beat of $2.01 per share on $111.18 billion in revenue, with shares rising nearly 3% on the day.

Bitcoin rose approximately 1.9% from Thursday levels to trade near $78,244 as of Friday afternoon. April marked the best month for Bitcoin ETF inflows this year, with roughly $2.44 billion added in the first three weeks of the month. Crypto broadly gained alongside equities as risk appetite improved.

US macroeconomic data reinforced the resilience narrative. First-quarter GDP came in at 2.0% growth, helped by AI investment spending, even as elevated energy costs kept year-on-year inflation above 3%. That combination is keeping the Federal Reserve on hold, with rate cut odds declining further. For more analysis on how macro catalysts move oil and futures, see the ChartDojo Oil coverage and Futures market analysis archives.

Implications for Traders

Oil and energy traders: Friday's sell-off and recovery pattern illustrates the whipsaw risk in politically-driven commodity markets. Brent remains structurally elevated as long as Hormuz restrictions hold. Big Oil executives at the Berkshire Hathaway conference warned Friday that the market could be "moving closer to a cliff's edge" if the blockade extends much longer. Air Canada suspended its full-year financial guidance citing jet fuel costs, a sign the economic toll is widening across industries.

Equity and futures traders: Stocks are making an optimistic bet that a deal eventually gets done. The near-term risk is a hawkish surprise - fresh military escalation or a breakdown in the Pakistan back-channel - that could sharply reprice that optimism. Trump's dismissal of the War Powers Act deadline also adds a layer of political uncertainty. On the positive side, strong earnings from Apple and other tech names have given bulls a non-geopolitical reason to stay long.

Crypto traders: Bitcoin is currently moving with risk-on sentiment and is broadly correlated to macro conditions. A renewed oil spike or risk-off shock would likely pull crypto lower. Conversely, a genuine Hormuz deal would be broadly bullish for all risk assets, including crypto. Institutional ETF inflows in April signal underlying conviction remains in place.

Potential Positives vs Negatives

Positives:

  • Iran submitted a proposal at all, indicating Tehran still sees a negotiated exit as an option
  • Pakistan's back-channel remains active and functional
  • US GDP growth of 2.0% in Q1 and strong corporate earnings provide independent support for equities
  • Bitcoin ETF inflows at year-high April levels signal institutional conviction
  • Oil fell on peace hopes, a positive for corporate margins and consumer prices if a deal materializes

Negatives:

  • Trump rejected the proposal outright and showed no urgency toward compromise
  • Trump dismissed the War Powers Act 60-day deadline, removing legislative pressure for a negotiated end
  • Big Oil executives see escalating rather than easing supply risks
  • Air Canada suspended full-year guidance entirely due to fuel costs
  • Inflation remains above 3% annually because of energy prices, reducing Fed flexibility on rate cuts
  • Iran reportedly believes it can outlast US pressure, reducing urgency on Tehran's side to compromise

What Could Happen From Here

Base case - Diplomatic stalemate continues (40%): Talks drag on into June with no breakthrough. Oil holds in the $100-115 Brent range. Stocks consolidate at elevated levels but lack a catalyst for another strong leg higher. Crypto holds near current levels with no decisive move. Confirmed by: successive weekends passing without a new proposal or military escalation.

Upside case - Deal reached (35%): A revised Iranian proposal satisfies Trump's conditions. Pakistan brokers a formal ceasefire and the Strait begins reopening. Oil could drop sharply toward $75-85 Brent in the immediate aftermath. Stocks would likely surge further on a relief rally. Bitcoin and crypto would gain alongside broader risk-on flows. Confirmed by: reports that Iran has conceded on nuclear program terms and Pakistan relays a US acceptance.

Downside case - Escalation (25%): Trump opts for fresh military action after rejecting the proposal, or Iran retaliates against neutral shipping in the strait. Brent could spike toward $120-130. Equity volatility surges. Safe-haven assets such as gold and Treasuries reprice higher. Bitcoin may sell off in the initial shock before potentially recovering if it holds its store-of-value narrative. Confirmed by: reports of new US strikes, Iranian attacks on neutral vessels, or full Hormuz closure.

What to Watch Next (24-72 Hours)

  • Weekend diplomatic signals from Pakistan and Iran on whether a revised offer is being prepared
  • Congressional response to Trump's War Powers Act challenge, and any court action
  • Sunday evening oil futures open (Brent and WTI) - the first pricing window after Friday's settlement
  • Bitcoin ETF flow data early next week as a read on institutional risk appetite
  • Fed officials' public comments on inflation and rate trajectory given continued energy-driven CPI pressure
  • Any reports of Iranian military activity near the strait or escalatory moves from either side

FAQ

What is the Strait of Hormuz and why does it matter?
The Strait of Hormuz is a narrow waterway between Iran and Oman connecting the Persian Gulf to global shipping lanes. Roughly 20% of the world's seaborne oil and a major share of liquefied natural gas (LNG) transits it daily. Restrictions or full closure raise energy prices globally, drive inflation, and pressure corporate margins across many industries.

Why are US stocks at record highs if there is an active war affecting oil markets?
Markets tend to look 6-12 months ahead. Investors appear to be pricing in an eventual diplomatic resolution to the Hormuz conflict, while also riding strong Q1 earnings from Apple and AI-driven tech spending, plus US GDP growth of 2.0%. A prolonged blockade or military escalation could force a sharp reassessment of that optimism.

Sources

Build real skills, not bad habits. Markets like this one reward traders who understand risk scenarios before they play out, not those who react to headlines after the fact. At ChartDojo, AI-powered feedback helps you analyze your trades, spot your patterns, and develop the decision-making edge that separates consistent traders from reactive ones. Start your free trial today.

Header image source: pexels by Marnie Griffiths. License: PEXELS.