Peace Talks Failed. Trump Threatens to Close the Strait of Hormuz. Here's What Happens Next.

After six weeks of the US-Iran war, both sides sat down in Islamabad, Pakistan for what was supposed to be a breakthrough. It wasn't. After more than 21 hours of direct talks, Vice President J.D. Vance announced Sunday that the United States and Iran failed to reach a deal.

The core breakdown: Washington demanded a verified commitment that Iran would permanently abandon its nuclear weapons program. Iran refused to accept those terms outright, instead pushing a 10-point counter-plan that included demands for the US to end Israel's operations against Hezbollah, release $6 billion in frozen Iranian assets, and grant Iran the right to collect tolls from ships passing through the Strait of Hormuz.

Those last two points — the money and the Strait — are where things got dangerous. Trump responded to the collapse by threatening a US Navy blockade of the Strait of Hormuz, one of the world's most critical waterways. The Strait is a narrow passage between Iran and Oman that carries roughly 20% of all global oil supply — about 17 to 20 million barrels per day. A full closure would be the largest disruption to world energy supply since the 1970s oil crisis.

WTI crude had already reached a four-year high of $115 per barrel on April 10 as markets priced in the possibility that ceasefire talks might fail. With confirmed failure now on the table and a blockade threat active, analysts at Bloomberg are modeling scenarios where oil reaches $150–$200 per barrel if the Strait is physically closed. Vance left one door open, calling the US proposal its "final and best offer" and indicating Washington would wait for Tehran's response — but there is no timeline, and markets cannot wait.

Big Bank Earnings Hit This Week — Strong Q1 Numbers Won't Be Enough on Their Own

In any normal week, six major bank earnings reports would dominate the market. This is not a normal week. The numbers will likely be strong — Q1 was good for banks, with elevated rates boosting net interest income and volatile markets juicing trading desk revenues. But strong backward-looking numbers can easily be ignored when forward risk is this high.

Here is what actually matters in each report this week: not the headline EPS beat or miss, but what bank CEOs say about the outlook. JPMorgan's Jamie Dimon already warned of a "turbulent" environment in his annual shareholder letter earlier this month. Goldman's analysts have called these Q1 results a "definitive litmus test" for whether the financial system can handle the geopolitical shock. With talks collapsed and a Hormuz blockade on the table, every forward guidance statement will be read as a real-time read on how deep Wall Street thinks the damage goes.

What to look for specifically: loan loss reserve builds (if banks are setting aside more money for potential defaults, it tells you they expect economic stress ahead), trading revenue guidance (if volatility persists, trading desks win — but sustained uncertainty hurts investment banking and deal flow), and any direct language about tariff or oil price exposure in their commercial loan books.

Two Forces Fighting Each Other — Which One Wins the Week?

This week sets up as a direct confrontation between two opposing forces. On one side: real, measurable Q1 corporate earnings that are likely to be good, confirming that the US economy was resilient through the quarter. On the other side: a geopolitical situation that just deteriorated sharply overnight, with oil at four-year highs and a Hormuz blockade threat from the President of the United States.

The market has to decide which one to price. In healthy, stable environments, strong earnings win. In crisis environments, macro fear dominates and even good earnings get sold into. Right now we are somewhere in between — and the balance can tip fast depending on a single headline from Tehran, a single comment from Dimon on Tuesday morning, or a single overnight move in oil futures.

The practical setup: expect high intraday volatility, not a clean directional week. Monday opens with maximum uncertainty. Tuesday and Wednesday bank earnings either stabilize sentiment or accelerate selling. Thursday and Friday will likely reflect where the market truly lands once the dust settles from both the earnings and the geopolitical developments.