When two shocks meet: A framework for reading markets under pressure

By Isaac Jonas | 2h ago

That dynamic — earnings strength versus geopolitical disruption — is the defining investment framework of this quarter. Understanding it will help you make better decisions about your money, wherever you sit in the world.

Last Sunday night, US stock futures dropped sharply. Dow futures fell over 500 points. The reason was straightforward: peace talks between Washington and Tehran, held in Islamabad last weekend, had collapsed.

Vice President JD Vance departed Pakistan without a deal. President Donald Trump announced a naval blockade of the Strait of Hormuz. And just like that, one of the most critical shipping corridors in the world — responsible for roughly 20 percent of global oil supply — was back in crisis mode.

By Monday morning, however, something interesting happened. Markets stabilised. The S&P 500 traded modestly higher. Nasdaq gained. The Dow was flat. If you only read the headline about the failed talks, you would have expected a bloodbath. Instead, you got something quieter and more instructive: a market that is learning to process dual shocks simultaneously.

The US-Iran war, which began in late February 2026, produced one of the most violent VIX spikes in recent memory. The CBOE Volatility Index — Wall Street’s so-called fear gauge — peaked at a closing level of 31.05 on March 27. That number matters because historically, a VIX above 30 signals markets in genuine distress, not just caution. Investors were re-pricing risk across the board: energy shot higher, equities sold off, and the classic “war trade” rotations kicked in — money moved out of growth and into commodities and defensive sectors.

When Trump announced a two-week ceasefire in early April, markets delivered their own verdict instantly. The Dow surged 1,325 points in a single session, its best day since the tariff reversals of 2025. WTI crude dropped 16 percent in that same session. The VIX collapsed from above 30 to below 20 within days. These moves were not random. They reflected a re-calibration: the probability of a prolonged conflict had declined, so the risk premium embedded in asset prices was released.

Now the ceasefire has broken down and the blockade is back. But the VIX today sits around 21 — not 31. That gap is the market’s way of saying: we have seen this movie before, and we are less panicked the second time around. The key variable is duration. A short-term blockade that resolves in days will likely be absorbed. A sustained closure of the Strait of Hormuz for weeks or months is a different beast entirely, with direct consequences for oil prices, global inflation, and central bank policy.

At the same time this geopolitical drama is unfolding, the first-quarter earnings season is beginning. And the early numbers are, by most measures, strong. Goldman Sachs reported its second-highest quarterly profit on record. FactSet data suggests S&P 500 companies could post earnings growth of 13.2% for Q1 — which would mark the sixth consecutive quarter of double-digit year-over-year earnings growth. If that holds, it matters enormously for how markets move through the rest of the year.

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Here is why: geopolitical shocks test investor sentiment. Earnings test investor logic. When sentiment is shaken but logic holds — when corporate profits are genuinely growing even as a war disrupts shipping lanes — the market tends to find a floor faster than headlines suggest. The investor who panics during the geopolitical headline and sells often misses the earnings-driven recovery that follows.

Goldman Sachs is a useful case study in this. The bank reported exceptional profits, yet its stock fell on earnings day. Why? Because within a strong overall result, fixed income trading revenues disappointed. The market did not reward Goldman for what it got right. It punished Goldman for what fell short of expectation. That is how markets in elevated uncertainty environments work: the bar for “good enough” is higher, and the forgiveness for disappointment is lower.

When geopolitics and fundamentals are in tension simultaneously, I find it useful to structure thinking around three questions rather than reacting to daily headlines.

The first question is: what is the market actually pricing? The VIX at 21 versus 31 tells you the market has absorbed some shock but retains elevated caution. Oil near US$95 per barrel tells you energy markets are taking the blockade seriously. Tech stocks recovering 13% from the March 30 low tells you investors are beginning to look past the war and toward AI and earnings-driven growth. These three signals are pointing in different directions, which means there is genuine disagreement in the market about what happens next.

The second question is: what would change the dominant narrative? For this market, two things would most sharply re-price assets in either direction. A genuine peace agreement between the US and Iran would likely send oil down sharply, equities up broadly, and the VIX below 15. A breakdown of the ceasefire into full-scale resumed conflict — with oil above US$110 per barrel for a sustained period — would reignite inflation fears, force central banks to delay rate cuts, and send risk assets lower. Neither outcome is certain.

The framework is not to predict which happens but to know in advance how you would respond to each.

The third question is: what do the fundamentals say independent of the noise? Here, the answer is relatively constructive. Six consecutive quarters of double-digit earnings growth is not the profile of an economy in structural distress. US consumer spending has held up. Corporate balance sheets remain in reasonable shape. The technology sector, after the disruptions of 2025, is finding a new leadership configuration: semiconductors surging, software lagging, AI infrastructure investment continuing. These are not recession signals.

For readers investing from Zimbabwe or the diaspora, the dual-shock environment creates specific considerations. A prolonged Strait of Hormuz closure means sustained high oil prices, which feeds into global inflation and keeps pressure on central bank rates in the US, UK, and Europe. That matters for the cost of USD-denominated debt, for remittance purchasing power, and for the attractiveness of US equities versus cash.

Gold above US$4 700 per ounce and Bitcoin above US$73 000 are also telling signals. Both reflect a market seeking stores of value outside the dollar system during a period of elevated geopolitical uncertainty. Neither is a recommendation. Both are data points about how global investors are allocating capital when they are uncertain about the macro path.

The clearest lesson from the past six weeks of market action is one that applies regardless of your portfolio size: the investors who do best in volatile environments are not those with the best predictions. They are those with the clearest frameworks for what they own, why they own it, and what would cause them to change their mind. Headlines will keep coming. The question is whether your decision-making process is more stable than the market mood.