After the breakdown of U.S.-Iran ceasefire negotiations, tensions have flared again in the Strait of Hormuz—Goldman Sachs warns that U.S. stocks are now caught in a &#34;final battle.&#34;
According to the Zhuifeng Trading Desk, on April 13, Shreeti Kapa, a strategist for Goldman Sachs' Global Banking &amp; Markets division, released a market commentary titled Equities - The Final Battle, assessing the current geopolitical situation and the direction of U.S. stocks.
During this round of Middle East conflict, the S&amp;P 500 saw a maximum drawdown of approximately 9%, recovering most of those losses within days of ceasefire news. This aligns closely with historical patterns—geopolitical shocks, on average, trigger an 8% decline in the S&amp;P 500, lasting about 18 days. However, the firm believes that before a negotiation agreement is finalized, the market's risk-reward is not ideal.
<blockquote>
The current risk-reward is not ideal: the situation is unresolved, yet the market has returned to near-record highs. While short-term technical fund flows are very favorable, it is difficult to expect genuine buying interest to enter without a complete negotiation agreement.
</blockquote>
<h2>The Battle for Hormuz: History's Verdict Never Favors the Bold</h2>
Goldman Sachs believes that the trajectory of the situation in the Strait of Hormuz will be the &#34;ultimate signal&#34; for judging the outcome of the conflict.
Following the collapse of ceasefire talks, the United States announced a blockade of the Strait of Hormuz. According to a report by CCTV News, U.S. Central Command issued a statement saying that starting at 10:00 AM ET on April 13, it would implement a blockade on all maritime traffic entering and exiting Iranian ports.
Strategist Kapa wrote: The side that controls the Strait of Hormuz is the winner. However, historically, no party has ever achieved its strategic objectives solely by blockading or seizing a key shipping chokepoint.
He cited historical lessons: whether it was the 1956 Suez Crisis, Japan's control of the Strait of Malacca during WWII, or the &#34;Tanker War&#34; of the 1980s, &#34;no party has achieved its strategic objectives merely by blockading or occupying a key strait.&#34; Kapa wrote:
<blockquote>
The victor in a chokepoint crisis is not the side that controls the geography, nor the one with the strongest navy. The victor is the one best at managing escalation dynamics and securing—or at least obtaining—the acquiescence of the major powers that rely on that waterway.
</blockquote>
In 1956, that crucial major power was the United States. In 2026, this role falls to countries such as India, Japan, and South Korea—the largest importers of crude oil from the Strait of Hormuz. Goldman Sachs believes their positions will directly determine whether Iran's blockade creates bargaining chips or leads to isolation, and whether the U.S. blockade can be sustained or becomes untenable.
The report quotes a military maxim:
<blockquote>
In war, the capacity to endure pain is often more important than the capacity to inflict it.
</blockquote>
The firm also warned that while the U.S. may possess complete maritime superiority, it might not be able to clear mines in a sufficiently short timeframe—once supply shocks trigger an economic crisis, the initiative will change hands again.
History's verdict remains consistent: The bold and impulsive never win; the winner is always the most patient side. Kapa suggests that referencing the framework of the Montreux Convention might be a way out—recognizing Iran's geographic leverage while exchanging security guarantees for its willingness to keep the strait open. However, the report states bluntly:
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Every historical precedent shows that military force alone will not produce this result. The only question is how much cost the world must bear before all parties return to the negotiating table—and history says that is the only destination.
</blockquote>
<h2>Market Drawdown Aligns with Historical Patterns, but Risk-Reward Remains Unattractive</h2>
Returning to the market side, during this round of geopolitical conflict, the S&amp;P 500 experienced a maximum drawdown of about 9%, recovering most of the decline within days of the ceasefire news.
This is highly consistent with historical patterns—geopolitical shocks typically cause an 8% correction in the S&amp;P 500 over roughly 18 days, &#34;though the range is wide.&#34; In recent years, most geopolitical shocks have had limited long-term market impact unless compounded by tail risks like recession or monetary policy shocks.
However, the report is not optimistic about the future outlook: &#34;Are we completely out of the woods? I think not, as the weekend's negotiations do not appear to have reached an agreement.&#34;
Its judgment is direct: the stock market's &#34;risk-reward is not ideal.&#34; The reasoning is that the conflict is not yet fully resolved, yet the market has already returned to levels near historical highs. Technical inflows can support the short term, but &#34;it's hard to imagine genuine buying interest appearing without a complete negotiation agreement.&#34;
Price action over the past 6 to 8 weeks has clearly outlined the market's preference structure:
Winners: AI optical networking, AI data centers, storage, and memory-related stocks—these have been the best performers year-to-date, with mild drawdowns during the conflict and the strongest rebounds after ceasefire news. Energy stocks saw a slight correction after the ceasefire but remain strong for the year, confirming the long-term structural demand for physical infrastructure.
Losers: Software, IT services, and &#34;AI exposure&#34; stocks—these were continuously shorted during the conflict, and short-selling intensity increased further after the ceasefire.
<h2>Tech Stocks: One of the Weakest Relative Performances in 50 Years, but Valuation Opportunities are Emerging</h2>
Goldman Sachs strategist Peter Oppenheimer previously noted that the technology sector (hardware and software) is experiencing one of its weakest periods of relative returns in the past 50 years, driven by ROI concerns for hyperscale cloud providers and AI disruption risks.
&#34;Investors are desperate to avoid becoming the Kodak, IBM, Nokia, or BlackBerry of the AI era.&#34;
At the same time, market terminal value assumptions for long-duration growth stocks, such as software, are beginning to falter—these stocks previously benefited from firm confidence in sustained high growth and historically low interest rates, both of which are now shifting.
Even though the broader market is only a few percentage points away from record highs, Goldman's &#34;long-term growth&#34; basket remains more than 20% below its October 2025 peak.
Software stocks account for 30% of this basket, but even excluding software, the median P/E ratio for non-software growth stocks is 29x, a 53% premium to the S&amp;P 500 median, which is near the low end of the range for the past 10 years. The 2027 consensus revenue growth rate for these companies is 3 times the S&amp;P 500 median. In contrast, power infrastructure-related stocks have significantly outperformed year-to-date.
The firm believes that the current valuation compression is creating attractive entry opportunities for investors, and the macroeconomic backdrop (moderate economic growth) is generally favorable for growth stocks as a whole.

The direct negotiations between the US and Iran, brokered by Pakistan, have broken down. The two sides have significant differences on core issues such as the nuclear issue and the Strait of Hormuz. US Vice President Vance returned empty-handed, and Trump immediately hinted at resuming military pressure. How far can the ceasefire agreement go, and will hostilities reignite? What are your thoughts?

The direct negotiations between the US and Iran, brokered by Pakistan, have broken down. The two sides have significant differences on core issues such as the nuclear issue and the Strait of Hormuz. US Vice President Vance returned empty-handed, and Trump immediately hinted at resuming military pressure. How far can the ceasefire agreement go, and will hostilities reignite? What are your thoughts?

Negotiations with Iran stalled; US may launch limited strikes against Iran.

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CBOE

Goldman Sachs believes that until a U.S.-Iran negotiation agreement is reached, the risk-reward for U.S. stocks is not ideal, and a true buy signal has not yet been established. The situation in the Strait of Hormuz is the ultimate signal to judge the direction of the conflict. The endgame for the strait does not belong to the rash—historically, no party blockading a major strait has ever achieved its strategic objectives through "closure" alone; patience and diplomacy are the only way out. In war, the capacity to endure pain is often more important than the capacity to inflict it

- Following the breakdown of U.S.-Iran ceasefire negotiations, Goldman Sachs warns of a "final battle" for U.S. stocks amid rising geopolitical tensions.  
- The S&P 500 experienced a significant pullback of approximately 9% during the latest Middle East conflict but recovered quickly, aligning with historical patterns of geopolitical impacts on markets.  
- Despite technical fund inflows supporting short-term gains, Goldman Sachs cautions that a lack of comprehensive negotiation will hinder genuine buying interest and presents a gloomy outlook on risk-reward in the current market climate.

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U.S. Stocks Face a "Final Battle" as Hormuz Outcome Decides the Game: The Rash Never Win, the Patient Prevail