I just saw a pretty interesting market reaction. On Wednesday, it was basically the classic chaotic “one good piece of news, one bad piece of news” setup.

On the surface, the market was relieved after the U.S. and Iran reached a two-week ceasefire agreement. The U.S. fear index VIX plunged 18% on the spot, and crude oil also slid more than 12%, sparking a wave of optimism among investors—at least for the moment. But less than 24 hours later, Iran announced it would close the Hormuz Strait to oil tankers, and the situation quickly tightened again. This kind of back-and-forth really tests traders’ psychological resilience.

Iranian Parliament Speaker Mohammad Bagher Qalibaf directly accused the U.S. of violating three key clauses in the negotiation framework on the first day of the ceasefire, including Lebanon’s ceasefire, a ban on drones intruding into Iranian airspace, and recognition of Iran’s right to enrich uranium. His position was very clear: under these circumstances, any bilateral negotiations are unreasonable. The White House, however, insisted that Iran’s original 10-point proposal had been abandoned, and that what they’re discussing now is a more feasible new plan—while Trump would under no circumstances retreat from his red line on Iran halting uranium enrichment.

Judging by the market reaction, stocks bought into this “temporary relief” story. All three major U.S. stock indexes surged: the Dow rose 2.85%, the S&P 2.51%, and the Nasdaq 2.8%. Europe went even harder: Germany’s DAX jumped 5.06%, France’s CAC rose 4.49%, and the UK’s FTSE rose 2.51%. Chip stocks were especially strong, with the Philadelphia Semiconductor Index up 6.34%, Teradyne up 11.8%, and Intel up 11.42%.

What’s interesting is that traders are starting to place fresh bets on the Federal Reserve cutting rates this year. The swap market shows that the chance of a U.S. rate cut by year-end—nearly zero at the start of the week—suddenly jumped to 60%. The Federal Reserve’s March meeting minutes also indicated that if oil price shocks impact the labor market, the Iran war could force them to adopt a more accommodative policy. Officials’ consensus expectation is that there will be one rate cut this year.

On the commodities front, gold rose 0.38% to $4,819.4 per ounce, and the U.S. Dollar Index fell 0.52% to 98.99. The crypto market was relatively calm: Bitcoin was trading in a range around $71,098, and Ethereum was at $2,189.

The White House confirmed that the first round of U.S.-Iran talks will be held on Saturday in Islamabad. The U.S. delegation will be led by Vice President Vance, Trump’s special envoy Witkoff, and Kushner. Trump also made a statement on a social platform: any country that provides military weapons to Iran will have a 50% tariff imposed on its goods immediately, with the measure taking effect right away.

Overall, this rebound is more driven by the market’s optimistic expectations about the progress of the negotiations, but uncertainty in the fundamentals still remains. The situation in the Middle East is highly capable of triggering broader effects, and over the coming period it should continue to test where the U.S. VIX and commodities go next.