MEMO TO ANYONE STILL LONG THE DIP

TO: Global markets
FROM: The weekend
RE: What you missed while you were not paying attention
DATE: Monday, April 13, 2026
CLASSIFICATION: Read before the open

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Twenty-one hours. JD Vance sat across from Iranian negotiators in Islamabad for twenty-one hours. They reportedly agreed on most things. Trade terms, sanctions relief, regional ceasefires, frozen assets — all workable, apparently. Twenty-one hours of actual diplomacy.

Then the word nuclear came up.

The talks collapsed Saturday night. By Sunday morning, Trump was on Truth Social announcing a U.S. naval blockade of the Strait of Hormuz. "Effective immediately, the United States Navy, the Finest in the World, will begin the process of BLOCKADING any and all Ships trying to enter, or leave, the Strait of Hormuz." He added that any Iranian vessel that fires on U.S. ships will be "BLOWN TO HELL." This is how we are doing energy policy now.

Brent is up 8% this morning. WTI climbed as high as $105.40. The S&P 500 futures are down. The Dow futures are worse. Somewhere, a quant fund's mean-reversion model is screaming.

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Let's be precise about what a blockade actually means, because markets have been sloppy with language for six weeks and it keeps burning people.

This is not the same as Iran's closure of the strait. Iran's strategy was to selectively toll and harass — charging passage fees of up to $2 million per vessel to friendly nations, blocking others outright, laying mines in the shipping lanes. It was economic coercion dressed as military posture. The U.S. blockade is categorically different: CENTCOM confirmed it applies to "vessels of all nations" entering or leaving Iranian ports, effective 10 a.m. Eastern today. Vessels transiting between non-Iranian ports can still pass through. The explicit target is Iranian oil export revenue, not global oil flows.

The distinction matters enormously — and markets are getting it wrong in real time.

Brent jumping 8% this morning is partially a category error. The blockade, properly understood, does not add supply disruption on top of Iran's existing closure. It attempts to replace Iran's tolling regime with an American chokehold on Iranian exports specifically. The physical flow question for the rest of the world hinges on whether the strait actually reopens under U.S. naval enforcement — which CENTCOM says is the intent — or whether Iran retaliates and the whole waterway becomes a shooting gallery.

Tehran has vowed to retaliate against any military vessels in the strait. That's the tail risk that's driving the crude spike. Not the blockade itself, but what comes after it.

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The EIA, in its latest short-term energy outlook, had already pencilled in Brent peaking at $115 in Q2 before this weekend happened. Saudi Arabia had separately disclosed that attacks on its oil facilities knocked roughly 600,000 barrels per day offline, with a major pipeline designed to bypass the strait also struck. The cushion everyone assumed existed — the bypass routes, the strategic reserves, the OPEC spare capacity — has been quietly eroding for weeks while the market was celebrating ceasefire headlines.

The EIA's $115 Q2 peak was the base case before a U.S. naval blockade entered the picture.

There is no updated base case yet. That's the honest answer.

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What Vance said on his way out of Islamabad is worth sitting with. "We leave here with a very simple proposal. We'll see if the Iranians accept it." That is the language of a man who believes there is still a deal to be made. Trump echoed it — he said he expects Iran to rejoin negotiations. The blockade, in other words, is explicitly framed as coercive leverage, not a termination of diplomacy.

This is the 1962 Cuban Missile Crisis playbook, except with social media posts and a 45-year-old supply infrastructure that was never designed for this kind of stress. Blockades historically work when the target is economically fragile enough to capitulate, and when the blockading power has the patience to hold. Iran's government assessed the total damage to its own economy at somewhere between $300 billion and $1 trillion since February 28. The regime has already absorbed an almost incomprehensible amount of punishment. The assumption that another turn of the screw produces capitulation rather than escalation is doing a lot of work.

Iran's chief negotiator said the delegation entered Islamabad in "good faith." He stopped short of closing the door entirely. That's a deliberately kept exit ramp, and sophisticated Iran watchers will read it as such. The question is whether the blockade announcement leaves enough political space for Tehran to walk back through it.

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For markets, the immediate priority is simpler: figure out what's actually priced.

WTI at $105 with a naval blockade and the strait still contested is either a screaming buy or a reasonable reflection of genuine physical tightness, depending entirely on your view of escalation probability over the next two weeks. The EIA's Brent-WTI spread is forecast to peak at $15 in April, driven by Asia's disproportionate exposure to Middle East supply. South Korean and Japanese refiners are already paying extraordinary premiums for any available Atlantic Basin barrel. The rerouting costs — Cape of Good Hope, Suez alternatives — are now embedded in diesel and jet fuel prices globally in ways that will take months to unwind even under a best-case resolution.

Goldman Sachs had, pre-war, forecast Brent averaging around $60 for 2026. J.P. Morgan was at the same level. Every institutional analyst has torn up those spreadsheets twice already. There's a reasonable argument that the analysts who made those calls should be institutionally embarrassed — not for being wrong, forecasting is hard — but for the confidence with which they dismissed tail risk on a tinderbox that everyone could see.

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Earnings season starts properly today. Goldman Sachs reports first. The bank's Q1 numbers will almost certainly be strong — markets were functioning in January and February before the shooting started, and Goldman's trading desks have been collecting enormous volatility premiums for six weeks since. Jamie Dimon's letter to JPMorgan shareholders is due later this week, and it will be the most-read document in finance for about 72 hours. Dimon has been unambiguous about geopolitical risk for years. He is not going to pretend Q2 guidance is straightforward.

Watch the guidance language. Watch the loan loss provisions. Watch what the banks say about commercial real estate, which was already stressed before diesel hit $5 a gallon and supply chain costs ratcheted up across every industrial sector. The earnings prints are the rearview mirror. The forward commentary is the road.

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The nuclear question that blew up the Islamabad talks has been the core issue since before the first bomb dropped in February. Iran's incoming hardline leadership, following the death of the previous supreme leader, was never going to trade away the nuclear program in exchange for economic relief. That calculation was baked in. The optimism around the Pakistani-mediated framework was always premised on Iran being economically desperate enough to override the ideological constraint. At $300 billion in verified damage, apparently, the threshold still hasn't been crossed.

Which raises the question nobody is asking loudly enough: if twenty-one hours of talks and a six-week war couldn't get to yes on nuclear, what does the path to resolution actually look like?

Vance left a door open. That's something. But a door propped open with a naval blockade and a Truth Social post threatening to blow people "to hell" is not exactly inviting.

Brent at $103. WTI at $105. The EIA's Q2 forecast of $115 is looking less like a ceiling and more like a midpoint.

Trade accordingly — and this time, maybe don't trust the ceasefire headline until the ships are actually moving.