I just came across a rather contradictory market phenomenon that’s worth paying attention to.

Last Wednesday’s market action can be described as a classic “joy followed by worry.” At the start, when the market heard that the U.S. and Iran had agreed to a two-week ceasefire, it immediately breathed a sigh of relief—VIX, the fear index, plunged 18%, and crude oil also slid more than 12%. It looked like the energy crisis was easing, and investor sentiment visibly improved. U.S. and European stock markets surged across the board: the Dow rose 2.85%, the S&P rose 2.51%, and the Nasdaq rose 2.8%. Europe was even stronger—German stocks rose 5.06% and French stocks gained 4.49%. Chip stocks went straight up: the Philadelphia Semiconductor Index jumped 6.34%, and big names such as Intel and Teradyne all rose by more than 11%.

But this burst of optimism didn’t last 24 hours.

Not long after the ceasefire agreement took effect, Iran flipped the script. After Israel attacked Lebanon, Iran directly suspended tanker passage through the Strait of Hormuz and re-closed the strait. Iran’s parliamentary speaker, Kalibaf, issued a statement accusing the U.S. of violating three key terms of the negotiation framework on the very first day of the ceasefire—failing to achieve a ceasefire in Lebanon, allowing drones to intrude into Iranian airspace, and denying Iran’s right to enriched uranium. He said bluntly that under these circumstances, “a bilateral ceasefire or negotiations are unreasonable.”

It turned out the U.S. was operating on a different set of assumptions. A White House spokesperson, Leavitt, revealed that the root of what the U.S. is relying on isn’t Iran’s “Ten-Point Framework,” but the “Fifteen-Point Proposal” it drafted itself. The core demands include limiting the range of Iran’s ballistic missiles and completely stopping uranium enrichment. She also mocked the idea that Trump would accept an “aspirations list”-style deal from Iran as being downright absurd.

This back-and-forth and unpredictable negotiation situation directly affected financial market expectations. Traders began to reprice the possibility of the Federal Reserve cutting interest rates this year. The swaps market showed that the chance of a U.S. rate cut by year-end jumped from near zero at the start of the week to 60%. The Fed’s March meeting minutes also revealed that most participants believed that if higher oil prices were to hit the labor market, the Iran conflict could push them to adopt a more accommodative policy. The officials’ consensus expectation was that there will be one rate cut this year.

Here’s a detail worth noting—the U.S. 10-year Treasury yield at the time was about 4.29%, down 1 basis point from the prior trading day. This reflected the market’s growing expectations for rate cuts and also influenced the overall bond market trend.

Gold rose 0.38% to $4,819.4 per ounce, showing relative resilience. The U.S. dollar index fell 0.52% to 98.99. The crypto market, meanwhile, was under pressure: Bitcoin fell 1.17% to $71,098, and Ethereum fell 2.22% to $2,189.

What’s most interesting is Trump’s threat. He posted on a social platform that any country that provides military weapons to Iran would have a 50% tariff imposed immediately on the goods it sells to the U.S., with the measure taking effect immediately and without any exemptions. At the same time, he said the U.S. would work closely with Iran to dig up and clear out all deeply buried nuclear “dust,” and would also discuss tariff reductions and sanctions relief. This attitude of both threatening and courting agreement, to some extent, reflects the complexity of the negotiations.

The first round of talks is set for Saturday morning in Islamabad, led by the U.S. team headed by Vice President Vance, envoy Wittekov, and Kushner. Whether there will be a breakthrough depends on this round of negotiations.

Also worth noting: Meta is making big moves as well. Their new super-intelligent team has launched its first AI model, Muse Spark. It breaks from the company’s previous open-source strategy and shifts to a closed-source approach, with no public disclosure of code or design. Behind this is a shift in the stance of tech giants in the AI race—something that’s worth continued observation.