Market Commentary

FROM MILITARY STRIKES TO THE TENTATIVE DEAL — THE YEAR'S MOST VOLATILE WEEK

The week closed with what could be the conflict's turning point: Trump announced Friday that the Strait of Hormuz naval blockade "will now be lifted" and headed to the Situation Room for a "final determination" on an Iran deal. Per White House sources confirmed by CNN and Axios, the memorandum of understanding (MOU) would contemplate a 60-day ceasefire extension, immediate Strait reopening with no tolls, Iran mine clearance within 30 days, progressive lifting of the U.S. naval blockade, and Iran's commitment to never develop nuclear weapons. Enriched material would be "unearthed" and destroyed in coordination with the U.S. Trump conditioned: "no money will be exchanged, until further notice." Iran's lead negotiator Ghalibaf responded that they "have no trust in guarantees or words — only actions are the measure."

However, the week preceding this announcement was the year's most volatile. Markets opened Tuesday (after the Memorial Day holiday) with echoes of U.S. strikes conducted over the weekend against Iranian vessels deploying mines and missile launch positions. Wednesday, the situation escalated when the U.S. executed fresh airstrikes near the Strait of Hormuz. Iran responded Thursday by launching drones and missiles at a U.S. air base, calling the strikes "a flagrant violation" of both the ceasefire and international law. Trump declared Iran is "negotiating on fumes" and left open the possibility of ordering forces to "go back and finish it."

The contrast between Thursday and Friday is remarkable: in less than 24 hours, the scenario shifted from Iranian attacks on a U.S. air base to an announcement of blockade lifting and MOU negotiations. If this deal materializes, it would be the most relevant catalyst since the war began on February 28.

EQUITIES — NEW ALL-TIME HIGHS DESPITE THE ESCALATION

The divergence between equities and Digital Assets was the week's central story. Despite military strikes, U.S. indices hit new highs. Tuesday: S&P 500 +0.61% to 7,519.12 (record), Nasdaq +1.19% to 26,656.18 (record). Wednesday: Dow record at 50,644.28 (+0.36%). Thursday: despite Iran's strikes on a U.S. air base, the S&P 500 closed at 7,563.63 (+0.58%) and Nasdaq at 26,917.47 (+0.91%) — both new ATHs. Equities absorbed the military escalation; Digital Assets did not.

APRIL PCE — 3.8% ANNUAL, HIGHEST IN NEARLY 3 YEARS

The Personal Consumption Expenditures index, the Fed's preferred inflation gauge, was released Thursday. Headline PCE printed 3.8% annually and 0.4% monthly — the highest reading in nearly three years. Combined with April CPI at 3.8% and PPI above 6%, all three April inflation indicators point in the same direction: Iran conflict-linked inflation is more persistent than the market had priced. This significantly reduces the probability of rate cuts at Warsh's first FOMC meeting in June.

OIL — EXTREME VOLATILITY

WTI oscillated between ~USD 87 (Wednesday, on deal rumors) and ~USD 95+ (Thursday, after Iran's strikes on the U.S. air base). Brent closed at ~USD 93–96. Friday, oil prices fell after Trump's announcement. The U.S. Strategic Petroleum Reserve (SPR) recorded its largest single-week drawdown in history, approaching 43-week lows.

Bitcoin (BTC): Trades around USD 74,163, posting its worst week since the war began in February. BTC fell below USD 73,000 Wednesday after the U.S. strikes on Iran, triggering ~USD 1 billion in liquidations (93% longs). The decline broke the USD 75,000–77,000 support zone that had held during prior weeks. The divergence with equities (which hit records) indicates regulated institutional capital treated BTC as a risk asset to liquidate, while equities benefited from resolution expectations. Trump's Friday announcement could reverse this dynamic in coming sessions. Support at USD 70,000–72,000; resistance at USD 75,000–77,000.

Ethereum (ETH): Trades around USD 2,037, recovering the USD 2,000 level on Friday after falling below that psychological threshold mid-week for the first time since Week 13. ETFs posted -USD 223.60MM with BlackRock's ETHA accumulating -USD 147.40MM. However, a Standard Chartered report published Thursday offers a relevant medium-term perspective: the bank compared ETH's current situation to Amazon during the 2001 dot-com collapse, noting that Ethereum's internal network metrics (transactions, TVL, stablecoin share) remain near all-time highs despite a ~57% price decline since August 2025. 54% of all stablecoins operate on Ethereum, and Standard Chartered projects the stablecoin market cap will grow 6x to ~USD 2T by 2028. The bank maintains its target of USD 4,000 for end-2026 and USD 40,000 for 2030. Support at USD 1,900–1,950; resistance at USD 2,100–2,150.

Solana (SOL): Trades around USD 83.00, with the largest percentage decline (-6.0%). ETFs were essentially flat (+USD 1.10MM). The positive flow streak from Weeks 19–21 was interrupted, signaling that even SOL-differentiated capital reduced exposure given the severity of the escalation. Support at USD 78–80; resistance at USD 85–87.

The week produced the most severe liquidation event since the war began: ~USD 1 billion in leveraged positions were liquidated in the 24 hours following Wednesday's strikes, with 93% corresponding to long positions. This indicates a massive portion of the market was positioned for a bullish continuation, and the military escalation forced violent exit of those positions.

Funding rates collapsed to deeply negative territory Wednesday and Thursday — the lowest levels since Week 13 (war's start) — indicating extreme bearish positioning in perpetual contracts. BTC broke below USD 73,000, its lowest level in months, before partially recovering Friday on Trump's announcement.

Implied volatility surged to ~65%, a level not seen since February. Put demand concentrated aggressively at USD 70,000 and USD 65,000 strikes. The USD 75,000–77,000 zone, which had been support for weeks, now functions as resistance.

Trump's Friday announcement of blockade lifting could trigger a significant reversal of accumulated bearish positioning, similar to the Week 14-to-15 transition when de-escalation generated the quarter's largest short squeeze.

BTC: The -USD 1,290.30MM in just 3 sessions (shortened week due to Memorial Day) represents the year's worst episode, surpassing Week 21's -USD 1,151.10MM spread across 4 sessions. Wednesday was devastating: -USD 733.40MM (IBIT -527.80MM — the largest single-day IBIT outflow in history, GBTC -104.80, FBTC -60.30). Tuesday posted -USD 333.60MM and Thursday -USD 223.30MM. IBIT accumulated -USD 898.10MM in 3 days. Over the past two weeks, IBIT has lost more than USD 1,800MM — an institutional capitulation of historic magnitude. The catalyst was direct: U.S. military strikes on Iran destroyed the expectations of an imminent peaceful resolution that had underpinned positive flows during Weeks 17–19.

Institutional context — JPMorgan: the "debasement trade" cools: In a report published Thursday May 28, JPMorgan analysts led by Nikolaos Panigirtzoglou noted that simultaneous outflows from BTC and gold ETFs do not reflect a rotation between assets, but rather a generalized retreat from the "debasement trade" — the strategy of buying limited-supply assets (BTC, gold) as hedges against inflation, currency weakness, and geopolitical instability. According to JPMorgan, investors appear to be positioning ahead of a U.S.-Iran deal that would reduce the pressures justifying the trade. BTC ETFs have accumulated ~USD 2.07B in net outflows in May — the largest monthly exit of 2026. The same cooling trend is visible in CME futures markets, where institutional positions in both BTC and gold have weakened simultaneously.

ETH: (-USD 223.60MM), accumulating more than -USD 800MM in one month. BlackRock's ETHA concentrated -USD 147.40MM. Thursday was the worst session: -USD 121.40MM (ETHA -80.40). Fidelity's FETH accumulated -USD 34.10MM. ETH's fall below USD 2,000 marks a relevant psychological and technical level.

SOL: The positive flow streak from Weeks 19–21 (which accumulated +USD 69MM) was interrupted with an essentially flat week (+USD 1.10MM). The severity of the military escalation was enough to halt even the differentiated institutional rotation toward SOL that had been observed.