Written by: Andy O

The Iran war has not officially ended, but from the moment U.S. warships entered and effectively blocked related waterways in Hormuz, the nature of the conflict has changed. It is shifting from "military strikes" to "forcing Iran to capitulate." What will determine the market direction next is whether Iran will be forced to accept a very undignified agreement after losing the leverage of Hormuz. Trump's repeated TACO gave Iranians the illusion, ignoring the fact that Iran lacks the ability to confront the U.S., either militarily or economically.

1. The U.S. begins to fulfill its blockade threat

The U.S. has deployed more than a dozen warships to implement a substantial blockade on shipping related to Iran. According to Trump, the focus of the blockade is on Iranian-related vessels, not on completely halting all ships in the Persian Gulf. This means that the U.S. goal is not to kill global oil trade outright but to more precisely cut off Iran’s remaining sources of financial revenue, continuing to push Iran towards an economic cliff. A Chinese oil tanker headed for Iran has already been advised to turn back, indicating that this is not just rhetoric but has entered the physical enforcement stage. Many have previously stated that Iran's biggest card is the Strait of Hormuz. This is not wrong. But note that the premise for the card of Hormuz is that the U.S. dares not truly navigate its warships in to exert hard control. Once the U.S. decides to risk rising oil prices and inflation backlash by personally enforcing the blockade and controlling the situation, Iran's biggest strategic leverage is effectively halved.

2. The momentum for peace is increasing.

While a final agreement is unlikely to be signed in the short term, the underlying forces driving the situation toward "limited peace" are indeed rising. 1, The economic pressure within Iran is no longer just ordinary hardship; it is nearing a tipping point. The strongest momentum for peace now is not the U.S. TACO, nor European pressure, but Iran itself is reaching a breaking point. The Iranian central bank has warned that if this continues, inflation could soar to 180%, two million jobs might be lost, and the economy could retreat by decades. For any regime, once internal economic stability begins to collapse, so-called toughness must ultimately yield to maintaining stability.

2, It is now clear that senior U.S. officials do not want to drag the war on indefinitely. Trump has repeatedly sent signals expressing a desire for the war to end, mentioning that someone from Iran has reached out, and that many issues are "almost settled." These statements may not all be credible, but they at least indicate one thing: The White House now prefers a "promotable agreement outcome" rather than a long-term quagmire that consumes oil prices, inflation, and votes.

3, The capital market is already anticipating a positive turn. The S&P 500 has wiped out the declines since the onset of the Iran war, while the Nasdaq and Bitcoin are strengthening. Behind this is capital betting early: it is highly likely that negotiations will eventually return to the table. The logic of the capital market is very realistic — as long as there is no complete loss of control, as long as Hormuz does not become permanently paralyzed, as long as there is still a window for U.S.-Iran discussions, capital will first adjust its "worst-case scenario" expectations. Now there is a clear divergence between oil prices and the stock market: oil prices reflect current risk, while the stock market is reflecting future and optimistic expectations for negotiations.

3. Is this "real peace"?

The fundamental contradictions in the Iran negotiations have still not been resolved. 1, The Iranian negotiating representatives likely do not have final decision-making authority. Vance has stated this very clearly; the Iranian delegation at the talks in Pakistan simply does not have the capacity to make final decisions. Those truly able to make the decisions can only be at a higher level, maybe even the supreme leader himself. This means that even if the atmosphere at the negotiating table is good, it does not guarantee that an agreement will be reached. Because what Iran needs to concede is not some small detail, but the nuclear issue, national security strategy, and regime legitimacy. This kind of matter cannot possibly be resolved in a matter of days within internal decision-making processes.

2, The U.S.-Iran divergence over the nuclear issue remains structural. What the U.S. wants is: a long-term halt to the enrichment program (30 years), the removal of stockpiles, and ideally, directly castrating Iran's future nuclear capabilities. What Iran wants is: to retain some space, only agreeing to a shorter window (5 years), using dilution instead of total surrender. This is not an ordinary dispute where "details can be discussed further." One side wants you to surrender your guns, while the other only wants you to hand over fewer bullets. Such structural contradictions cannot be resolved through a few rounds of nice rhetoric.

3, The next round of talks does not even have a concrete arrangement finalized. Right now, whether it's the U.S., Pakistan, or Turkey, all are working hard to promote the next round of face-to-face talks. Note the phrase "promote the arrangement for the next round," not "already prepared to sign." This indicates that the situation is still at the stage of diplomatic rhetoric and tactical probing, and far from actual outcomes. 4, The real impact of the blockade may be more cautious than political statements suggest. Trump can report how many ships passed through yesterday and downplay the impact. But what the market sees is something else: are vessel owners willing to continue sending ships? Will insurance companies dare to continue underwriting? Will shipping costs spike? Will oil prices rise again due to continued expectations of Iranian supply interruptions? If the blockade transitions from a verbal threat to a persistent physical reality, then the secondary shock to oil prices and inflation will no longer be a story but a reality. This is also why FOMC officials have already warned that once oil prices stay above $90, the risk of inflation spillover and deteriorating consumer sentiment will increase. 5, The network of proxies remains the biggest tail risk. Hezbollah openly refuses to give the U.S. any face, while reports are emerging from the Houthis about possible actions in the Mandeb Strait. This situation is more dangerous than many realize. Because Hormuz is the lifeline of global energy, and the Mandeb Strait is the throat of global shipping. If both points encounter problems at the same time, the impact will not only be on oil but on the entire global trade system. If there are attacks in the Mandeb Strait too, all current market optimism based on the expectation that "the situation will gradually ease" will be instantly undermined.

4. Conclusion:

Since the first day of the war, my underlying judgment hasn't changed: from the perspective of conventional war capabilities, Iran does not have the ability to confront the U.S. and Israel head-on. What Iran can truly execute is not conventional warfare, but "asymmetric warfare": leveraging proxy networks, utilizing maritime chokepoints, and manipulating global energy prices to counter-threat their opponents. However, now that the U.S. has decided to bring warships in and take control of the situation, it has effectively dismantled Iran's strongest geostrategic leverage. Therefore, I believe that the Iran war has essentially entered its final phase at the strategic level. What remains uncertain is not whether Iran can turn the tide, but whether the hardliners in the Iranian Revolutionary Guards are willing to admit defeat with dignity. If they refuse to concede, there is a risk of misfire, escalation of proxy forces, and localized conflict. If they concede, the regime will undoubtedly face significant internal turbulence, as this would practically mean being forced to accept major concessions on the nuclear issue under U.S. control of Hormuz.

This would have a tremendous impact on internal Iranian politics and could lead to a regime change.

5. What does this mean for the market?

In the short term, the outlook is slightly positive, while there remains high volatility risk in the long term. The reason for the short-term optimism is simple — the market will continue to trade on the premise that "the war is nearing its end, the probability of peace talks is rising, and risk appetite is reviving." As long as there is no simultaneous escalation in Hormuz and the Mandeb Strait, short-term sentiment still has support. But the long term may not necessarily be a good thing. Because if this important Middle Eastern stronghold of Iran is severely compromised, the geopolitical landscape will undergo deeper changes, rewriting future energy dynamics, alliances, and regional balance. Is Iran really willing to surrender and abandon its nuclear capabilities?

6. Investment Strategy

My strategy has not changed; it remains the same idea: For the A-shares market in the short term, I will continue to look at the CSI 1000 to determine positions. As long as it remains near the 20-day moving average and maintains above it, I will still hold a bullish outlook in the short term. Directionally, I will continue to consider short-term opportunities in two types of stocks: The first type, undervalued stocks with performance upgrades. The second type, stocks with clear price increase logic and the most direct profit elasticity. Because in the current environment, the most certain factors have never been about storytelling but performance. Especially for price increase themes; once price transmission begins to materialize, it is the direction that the market is most likely to reinforce. The strategy is also simple: hold long positions above the 20-day moving average and exit if it falls below the moving average.

This short-term approach has not changed from last week to today. For those who enjoy short-term trading, just execute according to discipline; don’t chase trends one moment and then get scared off by news the next. As for long-term investment, my view remains unchanged:

Now is not the best buying point. The truly comfortable long-term buying points usually occur not when the market is debating whether there will be a fight or a negotiation, but after risks are fully priced in.

So, be patient and don’t rush.

Finally, to summarize:

The current real situation is not "peace is coming," but "the willingness for negotiations is increasing, but overall it is still in a state of negotiating while exerting pressure." The U.S. uses the blockade of the strait for maximum pressure, while Iran counters with proxies and delay tactics. The market has already priced in optimistic expectations prematurely but has left insufficient margins for "shipping disruption, secondary impacts on oil prices, and breakdown of nuclear negotiations." Moreover, if Iran indeed surrenders, is that truly a good thing for China? (In the context of losing South America and Middle Eastern geostrategic allies.)

So in terms of operations, in the short term, one can continue to use moving averages for long positions; long-term remain cautious. Do not overestimate Iran's capacity to turn the tide, nor underestimate the tail risks of hardliners fighting for their existence.

This is what needs to be clearly understood in today's market.

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