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A Remarkable Rally — But Fragile Foundations
The equity markets recently delivered a genuinely remarkable session, with the S&P 500 closing above both its 20-day and 50-day moving averages while pressing against the 100-day moving average as resistance. Within the context of a four-month trading channel, the index is now approaching the upper boundary — a zone that could either signal a decisive breakout or become a ceiling for a pullback. E-Mini S&P 500 futures are trading near the upper end of the year-to-date anchored volume-weighted average price measured from the highs, reinforcing the idea that this rally, while impressive, faces meaningful overhead supply.
The key upside level to watch sits around 5,820 on the S&P 500, while 5,700 serves as near-term downside support. With the VIX still hovering near 21, the options market is pricing in roughly 1.3% daily swings in either direction — a clear sign that uncertainty remains elevated despite the optimistic price action.
The Ceasefire Question and Why It Matters
Much of the market's near-term trajectory hinges on the durability of a newly announced ceasefire in the Middle East. The first 72 hours of any ceasefire are historically the most precarious, and this one is no exception. Strikes continued even after the announcement, and a significant point of contention has emerged: whether Lebanon is included in the agreement. Iran and Pakistan initially indicated that Lebanon was part of the ceasefire, while the United States and Israel have denied this. That kind of fundamental disagreement over scope could easily become the fault line along which the entire arrangement collapses.
If the ceasefire holds and a broader deal materializes, it would likely fuel a continuation of the equity rally. If it breaks down, markets should brace for a meaningful retracement to the downside.
Crude Oil: Testing $100 and the Strait of Hormuz Problem
West Texas Intermediate crude is flirting with the psychologically significant $100 per barrel level, and the technical picture still supports a bullish or ascending channel that has been intact since early March. A case can even be made for WTI reaching $120 if the channel holds and geopolitical tensions persist.
However, the futures market and the physical market remain disconnected. While futures saw a dramatic drop of roughly 14% on ceasefire optimism, physical market prices remain elevated due to ongoing logistical constraints and infrastructure risk. A drone strike was attempted on Saudi Arabia's East-West pipeline — though buried infrastructure limited the damage, the incident underscores the vulnerability of critical energy assets. If the Red Sea port that serves as a terminus for that pipeline were to become a target, approximately 7 million barrels per day could be taken offline.
Traffic through the Strait of Hormuz is only beginning to trickle back, moving from roughly four to five tankers and bulk carriers — but the cargo transiting the strait is predominantly grain and manufactured goods, not oil. The Iranian Revolutionary Guard Corps has announced an alternative route for tankers to avoid mines, which could be interpreted as a conciliatory gesture, but structural deficits in oil transit through the strait persist. Major commodity trading firms and Chinese buyers are placing orders, yet the fundamental question remains whether tanker operators are willing to accept the risk.
Adding to the cost structure, discussions between Iran and Oman about a toll of roughly one dollar per barrel through the strait would translate to approximately $2 million per VLCC tanker carrying 2 to 2.2 million barrels. This toll, if implemented, would create a persistent premium on Middle East oil benchmarks that could last months or even years.
Energy companies reporting earnings are already showing the strain, with upstream production figures coming in lighter than expected as Middle East disruptions directly impact output and byproduct availability. The floor for any meaningful pullback in crude sits in the $72 to $75 range, but a sustained geopolitical risk premium appears likely to keep prices elevated well above that level.
CoreWeave and Meta: The AI Infrastructure Outsourcing Trend
On the technology side, CoreWeave announced an expansion of its existing long-term agreement with Meta, now valued at approximately $21 billion and running through December 2032. The deal provides Meta with additional computing capacity and represents a significant tailwind for CoreWeave, which relies on these long-term structural agreements to underpin its data center operations and capacity rollouts. The expanded arrangement will initially involve NVIDIA's Vera Rubin platform, positioning CoreWeave at the cutting edge of next-generation AI infrastructure.
The broader significance of this deal lies in what it reveals about hyperscaler strategy. The primary risk for "neo-cloud" providers like CoreWeave has always been that hyperscalers — Meta, Google, and others — would eventually build out enough internal capacity to cannibalize third-party providers. Meta's decision to expand its outsourcing rather than bring this capacity in-house signals that, at least for now, the demand for AI compute is growing faster than even the largest technology companies can build for themselves. This is a powerful validation of the neo-cloud model and suggests that the AI infrastructure buildout still has substantial runway ahead.
Looking Ahead
The coming days represent a critical inflection point across multiple fronts. The ceasefire's first weekend will test its viability. Oil markets will react in real time to any escalation or de-escalation around the Strait of Hormuz. And equity markets, having recaptured key technical levels, will either confirm a breakout or begin consolidating below resistance. The convergence of the 100-day moving average with the 20-week moving average on the S&P 500's weekly chart suggests that if this is a true market cycle, the current zone is historically a consolidation point — one that often precedes further downside before a genuine recovery takes hold. Keeping a close eye on developments across all these fronts will be essential for navigating what promises to be a volatile stretch ahead.