The entire Iran war drawdown has been erased. Two straight sessions of gains. The Nasdaq's win streak hit ten. Futures are flat this morning. The rally isn't reversing. It's waiting.

WTI dropped sharply on Tuesday after both sides signaled openness to a second round of talks. It's recovering some of that this morning. The blockade is still active. Hormuz is still contested. The market repriced deal probability yesterday. Today it's digesting.

The dollar is slightly firmer. Yields are drifting lower. The VIX continues to fade.

Market Implication:

The index has priced a deal. The ceasefire expires next week. If it lapses without new talks, energy extends, airlines give back the truce trade, and rate-sensitive names lose the floor they rebuilt this week. The sectors that led this rally are the ones most exposed to the deadline.

First, deal probability repricing. Both sides are looking to arrange a second round of talks before the ceasefire lapses. The physical situation hasn't changed. Iran is still controlling its own channel through the strait. What shifted is the timeline estimate. Talks before the deadline versus talks after it collapses. That single distinction pulled oil lower and pushed equities higher.

Second, AI capex confirmation. ASML's guidance raise confirmed the semiconductor demand cycle. Meta reinforced it overnight with Broadcom. Custom AI silicon through 2029, with the industry's first 2nm accelerator. More than a gigawatt of compute in the initial deployment. The demand side isn't the question anymore. ASML's drop on its own raise proves that.

Structural Setup:

AI capex is confirmed and fully priced. Geopolitical risk is the marginal driver. If talks restart, the S&P breaks through its all-time high on relief. If they stall, strong earnings alone can't hold the tape.

The sharper story is banks. JPMorgan and Citi both posted record results Tuesday. The trading desk drove both quarters to historic highs. War volatility was the fuel. Wells Fargo told the other story. Revenue missed. NII missed. The stock fell sharply.

Desks that monetized chaos got rewarded. Lending franchises got punished. Bank of America and Morgan Stanley report this morning.

Sector Read:

Yesterday's banks split on one fault line. Trading revenue versus net interest income. Bank of America and Morgan Stanley complete the picture this morning. If the desk delivers and the consumer book doesn't, the sector is running on war-premium income. Not franchise strength.

Both sides are trying to arrange new talks in Pakistan before it lapses. The US says the ball is in Iran's court. Iran's foreign minister accused the US of maximalism and shifting goalposts. The willingness to keep talking is the only thing holding. The gap between the two positions hasn't narrowed.

The IEA cut its demand forecast this week. It now expects the first annual oil demand contraction since the pandemic. Current prices may not yet reflect the full scale of disruption. Even if peace arrives, restoring supply takes months.

Watch Signal:

The ceasefire deadline is the variable that matters most right now. If a second round of talks is confirmed before it lapses, oil pulls back further. The equity rally extends toward its all-time high. If the deadline passes without progress, the blockade escalates. The IEA just told you the demand damage is already building.

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Margins hit the top of guidance. Revenue came in above expectations. The stock has outpaced the broader tech sector by a wide margin this year. And on the morning it confirmed everything the bulls wanted, it fell.

That's not about ASML. It's about the market. The best company in the AI hardware chain can't rally on its best print. The limiting factor isn't earnings. Meta's Broadcom deal confirmed the demand side overnight. Hyperscaler capex isn't slowing. Custom silicon is accelerating. None of it moved the needle.

The ceiling is geopolitical. Until the conflict risk clears, even the strongest prints in semiconductors trade like a sideshow.

The Read:

ASML's drop on a raise is the clearest tell in this market. The AI cycle is priced. The conflict isn't resolved. If the ceasefire holds and talks progress, semis re-rate. If it lapses, confirmed demand can't outrun a repricing of risk.

Economic Data: Import/Export Prices (March), NY Empire State Manufacturing (April), NAHB Housing Market Index (April), EIA Crude Oil Inventory, Fed Beige Book 

Fed Speakers: Barr, Bowman 

Earnings: ASML (ASML) - reported. Bank of America (BAC), Morgan Stanley (MS), PNC Financial (PNC), J.B. Hunt (JBHT) 

Overnight: Nikkei +1.0%, Shanghai Composite -0.3%, FTSE +0.1%, DAX +1.3%

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Two reports arrive before the open. BAC tests whether the NII weakness spreads. MS tests whether trading desk windfalls are sector-wide. Behind both sits the question this market hasn't answered. The S&P is one session from its all-time high. Earnings can get it there. Only the ceasefire can keep it there. The Beige Book and the deadline are running on the same clock.