Although US-Iran negotiations failed to reach an agreement and Trump's announcement to blockade the Strait of Hormuz dampened risk sentiment, the temporary ceasefire still drove a noticeable relief rally in markets this week. The Goldman Sachs macro trading team believes that the most severe tail risks have significantly narrowed, and the market has formally entered a &#34;new crisis phase.&#34;
Goldman Sachs macro traders Rikin Shah and Cosimo Codacci-Pisanelli pointed out that while details and stability of the ceasefire remain questionable, Iran's demonstrated willingness to negotiate is a key signal that helps cut extreme downside tail risks. Regarding the stock market, this shock is overall characterized as an inflation shock rather than a growth shock. If the &#34;peak stress&#34; has passed, stocks may refocus on forward-looking perspectives, trading on expectations of double-digit earnings growth.
On the front of central bank policy, the ceasefire has reduced the urgency for major central banks to take emergency action, but the pass-through of energy prices to inflation continues, and hawkish tendencies have not fully dissipated. Among them, the probability of Fed rate hikes is the lowest. However, tail risks associated with a large-scale rate hike cycle have been significantly reduced, and interest rate volatility is expected to continue falling.
<h2>Tail Risks Narrow, Stock Markets Show Resilience</h2>
The ceasefire news drove global stock markets to record their largest single-week gain in over two years last week. Despite the failure of weekend negotiations, Monday's market decline was relatively restrained. The core feature of this week's market is the relief rally following the ceasefire. Previously, uncertainty regarding Iran's reaction drove negative sentiment, forcing a significant accumulation of risk premiums, with commodities and short-end interest rates hit first.
Of particular note is that during this turbulence, stock markets showed stronger resilience compared to physical commodities. Reviewing historical experiences such as the pandemic and tariff shocks, stock markets possess the ability to shift time horizons and navigate short-term uncertainties—provided the path ahead becomes clearer.
Regarding oil price prospects, the baseline scenario expects energy flows through the Strait of Hormuz to resume by the end of this weekend, with Persian Gulf exports gradually returning to pre-war levels within about a month. Brent crude oil forecast prices for the third and fourth quarters of 2026 are $82 and $80 per barrel, respectively, which is largely consistent with current market pricing.
Analyst Daan Struyven pointed out that for oil prices to fall to $70 by year-end, five conditions must be met simultaneously: rapid reopening of the strait, no permanent damage to production capacity, continued smooth inflow of sanctioned Russian and Iranian crude into the market, US and Russian output significantly exceeding expectations, and weak demand. The realization of this combination of conditions is difficult, meaning downside risks for oil prices remain relatively limited.
<h2>Fed May Hold Steady</h2>
Markets maintain the judgment that the Fed is least likely to raise rates, which is consistent with current pricing. The US economy is far less sensitive to oil prices than in the 1970s, and the federal funds rate remains 50 to 75 basis points above the estimated midpoint of the Federal Open Market Committee's neutral rate.
From market signals, FOMC pricing suggests rates will likely remain unchanged throughout the year, with a small rate cut premium at year-end; US breakeven inflation rates show no signs of runaway inflation expectations, and dollar front-end interest rate volatility has given up about 50% of last month's gains. Market expectations suggest that if Warsh becomes the next Fed Chair, the threshold for rate hikes will remain high.
Last week's strong non-farm employment data alleviated immediate concerns about the labor market, with three-month trend wage growth approaching the breakeven level calculated by Goldman Sachs' commodity research team. Overall, the likelihood of growth risks emerging in the US recently is low, front-end interest rates should remain flat in the short term, and realized volatility will stay low.
However, long positions in US interest rates for 2027 can still serve as a hedge against downside growth risks—current market pricing for rate cuts remains insufficient, and fiscal support for growth will gradually fade later this year.

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Goldman Sachs believes the market has shifted from "unpriced extreme panic" to a phase of "orderly pricing of known risks." Iran's demonstration of willingness to negotiate has significantly narrowed the probability of extreme tail scenarios. The shock to the US stock market is characterized as inflation-driven rather than growth-driven, reducing the necessity for emergency central bank action. Under the baseline scenario, Brent crude oil prices are forecast at $82 and $80 per barrel for the third and fourth quarters, respectively; the threshold for a significant decline is high, and downside risk is limited

- Despite the lack of agreement in U.S.-Iran negotiations, a temporary ceasefire has led to a notable rebound in global markets, indicating a potential shift to a "new phase of crisis."  
- Goldman Sachs reports that the most severe tail risks have significantly narrowed, with the market viewing the disruptions primarily as inflationary rather than growth-related.  
- Although the Federal Reserve is unlikely to raise interest rates imminently, risks associated with a large-rate hike cycle have decreased, suggesting stable short-term interest rates.

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"Is the Worst Over?" Goldman Sachs Traders: Market Enters New Phase, Tail Risks Fading