This week, markets moved on a de-escalation that mattered more than the headlines suggested. After several days of rising tension around Iran and the risk of disruption in the Strait of Hormuz, we saw a shift toward a temporary ceasefire and the partial reopening of some shipping lanes. That was enough to change the market’s posture quickly.

It is important to separate what changed from what did not. The conflict itself is not resolved, and the region remains unstable. What changed was the probability of an immediate energy shock. Just days ago, markets were starting to price in a scenario where oil could spike sharply if supply routes were disrupted. There was even talk of $5 to $6 gas in some parts of the country. That would have fed directly into higher inflation expectations, higher interest rates, and tighter financial conditions.

When that risk eased, even modestly, the reaction was just as fast in the other direction. Oil pulled back, inflation expectations stabilized, and rates stopped pushing higher. Equities followed. That is how markets tend to work in these environments. They are not waiting for certainty, they are constantly repricing probabilities. That said, the market now appears a bit ahead of itself in pricing in a quick resolution to the conflict.

As long as energy prices remain contained, markets should stabilize. At best, I would expect some consolidation of recent price moves as markets digest the volatility. The positive is that the broader growth backdrop continues to be more resilient than many expected. At these levels, a wait-and-see approach makes sense, especially as negotiations could take longer than anticipated. Israel also remains a wildcard in how the broader regional situation ultimately unfolds.

At the same time, while one war cooled, another continues to intensify. The competition in artificial intelligence is accelerating, and it is becoming one of the dominant forces shaping capital allocation and long-term expectations. What is happening now goes well beyond a typical software cycle. The scale of investment, the demand for compute, and the race to control data and distribution are turning AI into a full ecosystem buildout.

Interestingly, while major indices rallied roughly 3% this week, the iShares Expanded Tech-Software Sector ETF declined more than 7% and is now down over 29% on the year. That move is significant, especially considering the index is made up of well-established companies like Palantir, Microsoft, Salesforce, Palo Alto Networks, and CrowdStrike.

For more contrarian investors, this is an area worth watching. I have avoided it so far and will continue to do so until there are clearer signs of sustained demand. Right now, momentum remains the dominant factor. Algorithms and systematic strategies tend to amplify trends, pushing money into what is working and away from what is not. That is part of the reason momentum-driven strategies have been outperforming.

That said, periods like this often create opportunities beneath the surface. Some of the best long-term performers tend to come from areas that were previously out of favor. When sentiment shifts and momentum returns, those moves can be sharp. We have seen that dynamic play out many times before, and it would not be surprising to see it happen again within parts of the software space.

Investor psychology continues to play a major role. There is still a willingness to pay for long-term growth, particularly when tied to themes like AI. At the same time, rising competition and elevated expectations are leading to greater dispersion across stocks. Some names are holding up well, while others are reacting quickly when expectations are not met.

From a portfolio standpoint, the approach remains the same. Stay disciplined, avoid reacting to every headline, and focus on how these developments translate into earnings, cash flow, and valuations. We have been gradually broadening exposure through index positions, particularly when markets were moving lower in a more indiscriminate way, while recognizing that areas like energy and software have been moving differently.

The takeaway is straightforward. As long as oil remains contained and the AI buildout continues, the broader backdrop remains supportive. Markets will continue to react quickly to headlines, but the underlying drivers have not changed. Staying invested and focused on long-term fundamentals remains the right approach. As always, volatility should be expected, and a period of consolidation around these levels would not be surprising unless tensions escalate again or negotiations begin to break down.

I’ll be on a family vacation next weekend, so my next update will come out the following week on April 25th.

Have a great weekend!

* AP News: Report on US-Iran two-week ceasefire and shipping lane status (April 8, 2026).

* Anthropic: Details on partnership with Google and Broadcom for multi-gigawatt compute (April 6, 2026).

* TechCrunch: OpenAI retail funding round at $122B valuation (March 31, 2026).

* Yahoo Finance: iShares Software ETF performance (-7% week, -29% YTD) and Palantir market reaction (April 9, 2026).

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