Yesterday, equity indices finished in the green. The S&P 500 rose by 0.02% and the Nasdaq 100 strengthened by 0.07%. The Dow Jones Industrial Average added 0.36%.

Today, markets moved into the red. The five-day rally was interrupted after fresh strikes between the US and Iran around the Strait of Hormuz. The MSCI All Country World index pulled back by 0.2% from its record high, Asian markets lost about 1%, and futures point to further declines in the US and Europe. The dollar strengthened, Treasuries fell, and the 10-year yield rose by three basis points to 4.51%.

Brent crude jumped by about 3% to roughly $97/bbl after US airstrikes on an Iranian military site and the imposition of new sanctions on ships transiting the Strait. The US described the strikes as defensive; Iran said that the target was a US air base and reported a retaliatory strike. Kuwait reported repelling missile and drone threats. In short, the conflict flared again at the very moment the market believed a deal was close.

Investor patience is clearly wearing thin. The cycle of "positive headline — escalation — fresh positive headline" has repeated for weeks, and markets are reacting more sharply. Notably, US President Donald Trump said he was dissatisfied with the pace of talks and reiterated that no single country would control the Strait of Hormuz — a core sticking point that has blocked a deal from the start: Iran wants a role in regulating transit, which the US and its allies find unacceptable.

Gold lost 1.4% to settle at about $4,390/oz as the dollar and yields rose. Bitcoin fell to a six-week low. The correlation between the US dollar and oil remains near a multi-year high — the market continues to trade the war primarily through those two assets.

Thursday's main event will be the April PCE price index — the Fed's preferred inflation gauge. In March, the PCE price index was 3.5% year-on-year; economists expect a rise to 3.8% for April — nearly double the Fed's 2% target. Against this backdrop, Fed signals have become more hawkish. Fed Governor Lisa Cook recently said that inflation is moving in the wrong direction and she is prepared to raise rates if the trend persists. Fed Vice Chair Philip Jefferson allowed for a slowdown in inflation toward year-end but acknowledged that risks remain tilted to the upside.

Technically, the S&P 500 analysis suggests that the immediate task for buyers is to overcome the resistance level of $7,518. Doing so would validate upside momentum and open the path to $7,547. Maintaining control above $7,574 would further cement buyers' positions. On the downside, buyers must defend the $7,494 area. A break below that level would likely push the index back to $7,474 and open the way to $7,451.