Hormuz Whipsaw and the $300B AI Quarter

Iran opened the Strait of Hormuz on Thursday, crashed oil 10% in a single session, then re-closed it Friday with IRGC gunboats firing on Indian tankers. Equities ignored the chaos — the S&P 500 extended its winning streak to 13 sessions and the NASDAQ hit all-time highs. Meanwhile, Q1 2026 venture funding numbers landed: $300B total, with AI consuming 81% of it. The Fed remains stuck between rising energy inflation and slowing growth, and crypto sat out the party entirely.

Markets scoreboard

Asset	Mon Open	Fri Close	Weekly Change
S&P 500	6,886	7,126	▲ 3.5%
NASDAQ-100	25,384	26,672	▲ 5.1%
BTC	$74,773	$75,140	▲ 0.5%
ETH	$2,388	$2,316	▼ 3.0%
SOL	$86.16	$84.80	▼ 1.6%
Gold (XAU)	$4,787	$4,855	▲ 1.4%
Oil (WTI)	$96.50	$83.85	▼ 13.1%
US 10Y	4.30%	4.26%	▼ 4bp
US 2Y	3.78%	3.71%	▼ 7bp

The S&P gained 3.5% on the week, extending its winning streak to 13 sessions — the longest since 2021. JPMorgan beat Q1 expectations with $16.5B in net income (+13% YoY) and EPS of $5.94, setting the tone for financial earnings. Goldman Sachs, Bank of America, and Morgan Stanley followed with solid numbers. TSMC reported revenue of $35.5B (+39% YoY), confirming that AI chip demand remains on an upward slope.

The rally survived geopolitical whiplash largely because the net effect of Iran’s moves was a cheaper oil price. WTI fell from $96.50 on Monday to $83.85 by Friday’s close — relief for inflation-watchers even if the situation remains fragile. Yields dropped across the curve, with the 2-year falling 7 basis points to 3.71%, suggesting the bond market is pricing in slower growth or a reopened rate cut window.

Gold climbed to $4,855, staying near all-time highs. The simultaneous rally in equities and gold is unusual and suggests markets are hedging both outcomes: a deal that sparks risk-on rotation and a collapse that sends oil back toward $120.

Iran: open, closed, and tankers under fire

The Strait of Hormuz opened for commercial traffic on Thursday for the first time since March 4, when Iran initially closed it. Twelve vessels transited. Oil dropped 10% in a single session.

Then it reversed. Friday morning, IRGC naval forces fired on two Indian oil tankers attempting passage. India summoned Iran’s ambassador. Iran declared the Strait re-closed. WTI whipsawed from above $110 earlier in the week to $84 by close — a 48-hour round trip that caught short sellers and long holders equally off guard.

The broader ceasefire (brokered the previous week, covered in the W15 report) continues on paper but expires around April 23. No follow-up talks are scheduled. Trump signaled military escalation, calling an emergency Situation Room meeting. The Lebanon 10-day truce, brokered April 16, is already fraying — an IDF unit was ambushed in southern Lebanon on Saturday, killing one soldier and wounding nine.

The conflict’s second-order effects are accumulating. March CPI surged to 3.3% YoY (from 2.4% in February), with gasoline up 10.9%. Core PCE hit 3.1%. The Minneapolis Fed pushed back on the narrative that tariffs explain all excess inflation, pointing to energy pass-through from the war.

AI: $300 billion in one quarter

Q1 2026 venture capital funding hit $300B, an all-time record. AI consumed 81% of it. Foundational AI alone attracted $178B across 24 deals — double the entire 2025 total.

Three rounds dominated the quarter: OpenAI at $122B (post-money valuation $852B, led by Amazon, NVIDIA, and SoftBank), Anthropic at $30B (Series G, $380B valuation), and xAI at $20B ($200B valuation). OpenAI also acquired Hiro Finance for autonomous personal finance and announced a $10B joint venture with private equity firms at 17.5% guaranteed returns.

Smaller but notable: Parasail raised $32M (Series A) for AI inference infrastructure, serving 500B tokens per day. Elicit raised $22M for LLM-powered scientific research. AMI — Yann LeCun’s new company — closed a $1.03B seed round, the largest in European history, building “world models” for physical AI. Fei-Fei Li’s World Labs raised $1B for 3D world models backed by NVIDIA and AMD.

On the model front, Z.ai released GLM-5.1 under MIT license — an open-source model capable of sustaining 8-hour autonomous engineering tasks that beats proprietary models on SWE-Bench Pro. Meta shipped Muse Spark for multimodal reasoning with 10x efficiency over Llama 4. OpenAI rolled out an enterprise bundle combining ChatGPT, Codex, and APIs to counter Anthropic’s Claude Code momentum.

The AI Transparency Act (H.R.8094) also advanced this week, requiring training data and risk disclosure for large models. Combined with Friday’s attempted firebombing of Sam Altman’s home by an anti-AI attacker, AI regulation is moving from hypothetical to imminent.

Crypto and DeFi

Crypto underperformed equities by a wide margin this week. BTC gained a modest 0.5%, ETH dropped 3%, and SOL fell 1.6%. The Fear & Greed Index sat at 12 (extreme fear) on Monday and only recovered to 21 by Friday — a stark divergence from equities pushing all-time highs.

The institutional infrastructure story was more interesting than the price action:

Deutsche Börse invested $200M in Kraken, a major TradFi vote of confidence. Kraken is advancing IPO plans for later this year.
Charles Schwab announced it will launch spot crypto trading for retail clients.
Stablecoin transaction volume hit $7.5T in March, surpassing the ACH network ($7.2T) that handles 93% of US salary payments. A quiet but significant milestone.
RWA tokenization reached $27.65B in total value (March 31), up 4x from $6.6B one year ago with 711K asset holders.
Bitwise filed for a spot Hyperliquid (HYPE) ETF — the first DeFi futures platform ETF filing.
Fireblocks launched “Earn” — institutional onchain lending via Aave and Morpho.
The CLARITY Act cleared its content disputes and now faces only procedural hurdles. Treasury Secretary Bessent and Coinbase CEO Armstrong both endorsed it publicly.

On the negative side, Monday’s report covered the aftermath of the Drift Protocol $285M exploit — the largest DeFi hack of 2026. A North Korean group (UNC4736) spent six months socially engineering Drift contributors before executing an admin key takeover. Drift secured $147.5M in recovery funding led by Tether, and the token recovered 15%.

The contrarian signal: extreme fear with simultaneously improving institutional infrastructure is historically a setup for sharp reversals. The last time Fear & Greed held below 15 for multiple days (January 2025), BTC rallied 40% in the following six weeks.

Geopolitics and macro

Beyond Iran, several other stories shaped the global picture:

Live Nation/Ticketmaster ruled illegal monopoly. A federal jury found Live Nation operates as an illegal monopoly, with a breakup now possible pending the judge’s ruling on penalties. Concert and ticketing stocks reacted sharply.

Meta cutting 10% of its workforce (~8,000 jobs) in an AI-first restructuring. The layoffs target non-AI roles as Meta pushes resources toward its AI products and infrastructure. This follows their $21B CoreWeave compute deal from the prior week.

Kevin Warsh’s Fed Chair confirmation hearing is set for Monday — the first major market catalyst of the coming week. Markets expect a hawkish lean from Warsh, who has historically favored tighter policy.

The Fed remains boxed in: rates at 3.50-3.75%, March CPI at 3.3%, oil volatility making forecasts unreliable, and tariff-driven goods inflation persisting. Goldman Sachs sees two more cuts to 3.0-3.25% by year-end, but only if oil stays below $90 and inflation moderates. The April 28-29 FOMC meeting is expected to hold steady with near-certainty.

Morgan Stanley raised its S&P 500 12-month target to 7,800, projecting 17% earnings growth. That target assumes no further escalation in Iran and a gradual tariff normalization — two assumptions that got less certain this week.

Quick hits

Allbirds pivoted from shoes to AI compute infrastructure via a $50M deal, rebranded as NewBird AI. Shares soared.
BBC announced cuts of up to 2,000 jobs (~10% of UK staff) due to licence fee pressure.
India’s Uttar Pradesh raised minimum wage after violent protests in Noida’s factory districts.
A Gaza-bound flotilla of 60+ boats departed Barcelona to attempt breaking the blockade.
UK pledged 120,000 drones to Ukraine at the Berlin Defense Contact Group.
OpenAI hit 900M weekly active users and $2B/month in revenue — 15B tokens served per minute via API.
The US effective tariff rate sits at 11.8-18%, the highest since the 1940s. Section 122 tariffs (10%) expire in ~150 days without Congressional extension.
Pope Leo XIV visited Angola, declining to comment on US politics.

What to watch next week

Kevin Warsh confirmation hearing (Monday): His tone on inflation and rate policy could snap the Nasdaq’s winning streak or extend it.
Iran ceasefire expiration (~April 23): The binary event of the month. If it lapses without extension, oil retests $100+. If extended or formalized, oil heads toward $75.
FOMC meeting (April 28-29): No rate change expected, but the statement on inflation persistence and any mention of potential hikes will set summer expectations.
Earnings: 3M (Tue), AT&T and ServiceNow (Wed), Tesla and Intel (Thu). ServiceNow will signal enterprise AI spending; Tesla provides a read on the consumer.
MAG 7 earnings begin April 29: The real market test for sustainability of the rally. Microsoft, Meta, and Alphabet lead off.
Bitcoin Conference Vegas (April 27-29): Watch for corporate treasury announcements and policy statements.