The S&P 500 was trying to secure an eighth straight daily rise on Friday. It was up 0.2% by lunchtime but slipped to -0.1% by late afternoon.
Over the past eight sessions, the index rose nearly 8% from its 30 March low. Gains followed an initial ceasefire call on Tuesday evening and hopes of talks between the US and Iran over the weekend.
Geopolitical Developments And Market Reaction
US Vice-President JD Vance was reported to be travelling to Islamabad with other US negotiators for a possible deal with Iran. Israel’s bombing of Lebanon and conditions posted by Iran’s Parliament Speaker, Mohammad Ghalibaf, were cited as obstacles.
Unconfirmed reports said the US had released a hold on $7 billion of Iranian funds in Qatar. Iran was also reported to be keeping the Strait of Hormuz largely closed until terms in a 10-point plan were met.
Only technology and materials were up by the afternoon, while energy, financials and healthcare fell. The Nasdaq Composite was up 0.2%, and the Dow Jones Industrial Average was down 0.5%.
March CPI rose from 2.4% to 3.3% year on year, with energy up 10.9%, while core CPI rose to 2.6%. Michigan consumer sentiment fell from 53.3 to 47.6, and 1-year inflation expectations rose from 3.8% to 4.8%.
The index had gained about 500 points in seven sessions and was trading above 6,800, with RSI at 60. Levels mentioned included 7,000 and 6,720.
Volatility Strategy Considerations
Given the market’s nervous pause ahead of the weekend peace talks, volatility is the main theme for us. The CBOE Volatility Index (VIX), which measures expected market volatility, ticked up to 22 yesterday afternoon, reflecting deep uncertainty about the negotiations in Islamabad. This suggests traders should consider strategies that profit from a large price swing, regardless of the direction.
If a definitive peace deal is announced and the Strait of Hormuz reopens, we should be prepared for a sharp rally toward the 7,000 level on the S&P 500. Traders can position for this by using call options on the SPX or tech-heavy ETFs, as technology has shown relative strength. In this scenario, we would also expect WTI crude futures, which hit a high of $115 last month, to quickly fall back below $100, making puts on energy sector ETFs a compelling hedge.
Conversely, if the talks collapse, the market’s recent gains are at risk, with a probable immediate test of the 6,720 support level from the December 17, 2025 sell-off. This outcome would favor buying put options on the broader market indices. The recent drop in the Michigan Consumer Sentiment to a low of 47.6 shows that consumer confidence is already fragile and would likely worsen with sustained high energy prices, further pressuring equities.
Beyond the headline risk, we see a clear divergence between sectors that offers opportunities for pair trades. The weakness in financials and healthcare, even during the recent rally attempt, suggests underlying economic concerns that predate the Iran conflict. A strategy of being long the NASDAQ 100 while being short the financial sector could perform well, insulating a portfolio from the binary outcome of the geopolitical negotiations.
