Overnight we had a brief wobble in risk around confusion on who is actually at the negotiating table with Iran. That seems to have been clarified, and we remain in a fragile ceasefire …at least for now. Into the weekend there’s a growing debate on the path forward.

Goldman’s Delta One desk head Rich Privorotsky wrote this morning that his “base case is we are more likely than not to get some headlines about talks resuming…probably via Pakistani channels” and sure enough that’s precisely what happened, with the latest barrage of headlines timed to come just before the market opened and push the S&P to a new all time high.

But as Privorotsky writes talking, is easy; resolution is much harder. The issue from here is that inventories are rapidly depleting and everyday you are not open it compounds the problem. We’re seeing it clearly in products: gasoline, heating oil, gasoil all pushing to fresh highs. 

So yes, we have gotten another relief rally on “talks”…but without a concrete outcome this dynamic is more negative than it would have been in weeks prior. Betting markets are now assigning only a low probability ( low teens) to a near-term resolution in the Strait of Hormuz by mid May. As such, going long Dec 26 Brent is still the best expression in Goldman’s view.

Yet stocks, for now, just don’t care, and maybe that’s fair enough: Goldman observes that Q1 numbers have been in the category of amazing with the focus still squarely on AI driven demand. Pre-releases from ENR with blowout orders and strong numbers from Intel reinforce the same message – more compute, more power, more infrastructure. The story is evolving beyond GPUs…memory and broader AI “scaffolding”  ie CPU + optics are emerging as the real bottlenecks. That’s consistent with what you’re hearing across the supply chain: DRAM, packaging, power, cooling.

Here Privorotsky takes a look at the recent “interesting” job cut announcement at Meta and Microsoft (mid-single digit %): while these are superficially positive for margins, it raises a tension: if they’re cutting costs while input prices for data centers are rising, you likely still get upside pressure on capex. Hard to see a world where AI demand accelerates and capex doesn’t follow.

Given all these cost inputs are ballooning is the market about to finally pose some serious question on cost pressure/ ROI from the hyperscalers?

Next, the Delta-One head looks at technicals, and says that a lot of what we’re seeing feels reflexively tied to energy. His models say late cycle tightening (generally one of the worst quadrants for risk, i.e. curve flatter and yields higher).

And, as we have pointed out every day in the past month, there’s a disconnect between the front end and equities that probably resolves if energy rolls over, unless it doesn’t.

Elsewhere, vol is holding firmer at low levels; Europe looks short gamma, while the US after the sharp bounce likely sits back in long gamma territory. Looking ahead, positioning is where it gets more fragile, with the NAAIM exposure index out overnight now back to 94. Can add that to a series of indicators that are showing folks sharply risk on again.In other words, we are heading into month-end at elevated levels, with a large rebalance at end of month – one of biggest sell imbalances on record. Meanwhile, with 18 straight up days for the SOX, there is a lot in the price. 

Putting it all together, Goldman’s Delta One head warns that markets are high and so is energy, and more improtantly, this isn’t a clean shock you can reverse quickly. Logistics matter – tankers out of position, refining constraints, and tight product markets mean the impact lingers even if headlines improve. It is interesting to see survey data like the Gallup economic confidence index is extremely weak, which is a notable divergence between markets and households.

Trading wise, it still feels like the next headline dominates (just look at stocks today). Early this morning, Privorotsky predicted correctly that “if you had to guess, the most likely near-term catalyst is “talks back on” over the weekend…which probably means higher first, and then reassess.”

But zooming out, Privo warns that there’s less techncial impulse to buy here, and the asymmetry is starting to tilt the other way…so I have been and remain cautious at these levels.