The Monday Report – 13 April 2026

Twenty-one hours of US-Iran talks in Islamabad have ended fruitlessly. Iran says the US made “excessive” demands, while Washington says Tehran refused to commit to not pursuing nuclear weapons. Comments from both sides underline firm non-negotiables, but the door to further talks may remain open.

Whilst indications are that the two-week ceasefire agreed last week has not yet broken down, at best it remains fragile: on Sunday, President Trump announced via social media an immediate blockade of all traffic in the Strait of Hormuz, enforced by the US Navy and unspecified other countries. Iran said any military vessels approaching the Strait would be considered a violation of the ceasefire.

Reuters reports at least three laden crude carriers exited the Strait of Hormuz over the weekend. Three empty carriers had entered, but two turned around after the peace talks failed. This marked the most meaningful flow of shipping through the Strait since the ceasefire began.

Meanwhile, in an announcement predating the threats and counter-threats over a blockade, the US said it sent two destroyers into the Strait to prepare for mine clearing; Iran denied this had happened.

Turning to the data, US inflation re-accelerated in March, but the problem remains energy, not core. Headline CPI surged 0.9% m/m, the biggest gain since mid-2022, driven almost entirely by a record 21% jump in gasoline prices.

Strip that out and core CPI printed 0.2%, below expectations, with shelter inflation continuing to cool and most services behaving themselves. Energy pass-through will keep headline prints elevated, but domestically generated inflation still looks contained.

US consumer inflation expectations also jumped. Universiti of Michigan one-year expectations surged to 4.8%, driven by energy prices and geopolitics, while 5–10-year expectations rose to 3.4%, still elevated but well below last year’s peaks.

Headline sentiment fell to a record low 47.6, with expectations collapsing to early 1980s levels. The survey is noisier post-methodology change and likely overstates the gloom, but the direction is hard to ignore.

Canada’s labour market flat-lined in March. Employment rose a modest 14k, the unemployment rate held at 6.7%, and gains were again driven by part-time jobs. Wage growth ticked higher but remains noisy and uncorroborated. There’s nothing here to force the Bank of Canada’s hand, with less than a 20% chance of a hike priced before September.

China’s inflation split widened again. Headline CPI slowed to 1.0% y/y, dragged down by food and services, while PPI rose 0.5% y/y, ending a 41-month deflation run as higher oil and metals prices fed through at the factory gate. The Iran-related energy shock is reflating input costs, but weak domestic demand and intense price competition continue to block meaningful pass-through to consumers.

Global bond markets softened into the weekend, with Treasuries edging cheaper and curves mildly steeper as oil and geopolitics stayed in focus. US yields rose 1–2bp across the curve ahead of CPI, with 10-year yields around 4.29%. Yields dipped a little on the data releases but then slowly tracked upward for the rest of the session. Bunds and Gilts underperformed. Bear steepening dominated, reinforced by a tepid US 30-year auction. Front-end pricing remains cautiously dovish, with just 6bp of cuts priced this year, mostly in December.

Equities capped their strongest week of the year with a quieter finish.The lack of a US-Iran deal is likely to dent risk sentiment early this week, but attention quickly pivots to a busy first week of Q2 earnings, led by the major US banks.

Iran Quick Take: Blockade Brinkmanship, RBC Capital Markets, Helima Croft extract

Once again, high stakes negotiations between the US and Iran deadlocked over Washington’s zero uranium enrichment demand, setting the stage for further escalation in the 6-week war and prolonged supply disruptions in advance of summer driving season.

We have consistently maintained that the chances of a negotiated settlement were exceedingly slim if neither the US nor Iran moved off its entrenched enrichment position. In the absence of a negotiated deal, the White House is essentially left with the option of a strategic retreat that would leave Iran with de facto control over the Strait or a military escalation aimed at eliminating the Tehran tollbooth.

By announcing an impending blockade of the Strait, President Trump may be signaling that he is not prepared to cut his losses just yet.

In pursuing this strategy, President Trump may be calculating that China will become more active in negotiations if it faces a cutoff of Iranian cargoes to its refineries.

However, it’s unclear how deeply China wants to wade into the war at this stage, given that it built up large strategic energy reserves in advance of the conflict and may be realizing some strategic gains by having the US redirect military assets away from Asia towards the Middle East.

Also, it may prove to be a far more challenging undertaking to blockade Iran than Venezuela, and we would anticipate Tehran will increase attacks on regional energy facilities, including critical de-risking infrastructure, if President Trump backs his threat with action.

While market participants continue to watch for a greater Houthi entrance into the conflict, we think the Iranian-backed militias in Iraq are an underappreciated risk, especially given their apparent role in last week’s attacks on Kuwaiti and Saudi infrastructure, including the East-West pipeline.

It will be key to watch whether the breakdown in talks and announcement of the blockade will materially move market sentiment.

Since the start of the war, we have maintained that conflict duration would ultimately determine price trajectory.

However, given President Trump’s proactive effort to manage timeline sentiment, there remains a significant segment of the market that reacts far more to social media messages than the absence of molecules moving through the Strait of Hormuz.

Given the scale of the actual supply losses, White House message management has been far more effective in establishing a flat price ceiling than we anticipated at the outset of the war.

That said, the physical market warning signs continue to flash red, with differentials broadly strengthening further last week as physical market participants fail to envision near-term relief for ongoing tightness.

Moreover, if President Trump does indeed back his blockade threat with actual boats, a convergence between the paper and physical markets may soon come.

The Pulse of the Market, RBC Capital Markets, Lori Calvasina

A Rundown on How We’re Thinking About the Outlook for the US Equity Market

The fog emanating from the war in Iran is particularly thick for the forecasting community today.

We have written extensively in our last few Pulse reports about how US public companies are in the early days of understanding the war’s ripple effects, and that many have noted that they haven’t seen direct impacts yet.

As we head into 1Q26 reporting season, we think the US equity market is entering an important phase of the discovery process for how the war will ultimately impact the US economy and company profitability.

Uncertainty in forecasting is unusually high and is likely to remain so for an extended period of time. That being said, with a messy ceasefire in place, we thought it was a good time to reflect on how we’re thinking about the outlook for US equities from here. As has become our style, we are attempting to stay more focused on numbers than narrative.

Our 12-month S&P500 price target remains 7,750. This implies a gain of 13.6% from the April 9th close.

Our price target is maintained on a rolling 12-month-forward basis (it is not a December 31st estimate) and is updated monthly, with our latest refresh captured in early/mid-April 2026.

At the time of this publication, 7,750 was in line with the median of the outputs of our investor sentiment, valuation/EPS, earnings yield gap, GDP, and Fed models.

Our models range from roughly 7,200 at the low end to more than 7,800 at the high end. Relative to our last update published in early March, which leveraged late-February data, our sentiment model is sending a stronger signal while our GDP test is sending a weaker signal.

Our valuation/EPS model (which signals fair value at the end of 1Q27 of 7,759) is also sending a less constructive signal, but this is due to the fact that we have removed consensus macro and EPS assumptions from our modelling.

Macro assumptions have been slow to adjust to recent geopolitical developments, and bottom-up consensus EPS forecasts have been moving up,  and we have replaced them with more conservative/onerous metrics of our own (including an EPS assumption for the next four quarters that haircuts the current bottom-up consensus by -5%, and bakes in headline inflation of 3.3% in early 2027, no Fed cuts, and 10-year yields that move up to 4.5% into our P/E assumption).

Overall, the story that our models tell is that the S&P500 can stay on a path headed to 7,750 over the course of the next year, supported by a recovery in investor sentiment from deeply bearish levels, and a solid earnings growth, and economic backdrop that don’t incur too much damage (as a whole) from recent disruption to energy markets and the Middle East.

We will keep a close eye on these assumptions in the months ahead and plan to adjust our forecast as needed if it appears that these assumptions are no longer valid.

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