Oil flows through the Strait of Hormuz have yet to meaningfully improve, yet markets have taken this latest bout of uncertainty in stride. We continue to watch developments closely, alongside the progression of earnings season and what it all means for positioning.

Despite mixed signals, the trajectory of the US-Iran conflict has changed little in recent weeks. Diplomatic efforts continue, tensions remain elevated, but notably the ceasefire has held up. The recent extension provides additional time for a more durable resolution and, ultimately, the normalization of oil vessel traffic.

Markets have continued to show resilience. Equities have recovered close to pre-conflict levels, while bond yields and oil prices have eased from recent highs. The message from markets is that this is being treated as a contained supply shock, largely tied to energy, rather than something that materially alters the broader economic path. That view is supported, for now, by steady economic data and continued stability in corporate fundamentals, though the impact remains uneven across regions.

At the same time, the backdrop is still fluid. After a sharp recovery in asset prices, some consolidation would not be surprising. For markets to build from here, a few conditions likely need to be met. Continued stability in the ceasefire alongside gradual improvement in shipping flows, economic data that confirms resilience in the face of higher energy costs, and earnings that validate current expectations.

On that front, early results from the US reporting season have been constructive. Both the percentage of companies meeting expectations and the magnitude of those results are running above historical averages. Large financial institutions set the tone with strong trading and capital markets activity, with similar patterns emerging across industrial and consumer sectors. The consistency in results, paired with measured guidance, suggests businesses have managed through recent volatility better than broadly anticipated.

Attention now shifts to the large technology companies reporting later this month. Given their influence on overall earnings growth, trends tied to artificial intelligence investment and demand for computing capacity will play an important role in shaping sentiment from here.  This will be a strong market indicator to keep a close eye on.

In Canada, equity markets have also held up relatively well. While much of the reporting season has yet to happen, expectations for earnings growth remain reasonable. At the same time, the broader outlook continues to reflect a mix of opportunity and constraint. Canada’s resource base and role in global energy and materials markets are well established, particularly in an environment where energy security and supply diversification are increasingly in focus. However, translating that into sustained growth remains dependent on execution, investment, and the pace of project development, all of which tend to unfold over longer timeframes.

Taking a step back, the common thread of support across markets is the willingness to look through near term disruptions. That has supported the recovery in asset prices, but it also means that expectations have adjusted quickly. With valuations rebuilding, there is less room for disappointment should incoming data or geopolitical developments fall short.

We have been mindful of that shift and have maintained a more measured posture. Periods like this tend to reward discipline over reaction. Staying selective, emphasizing quality, and keeping a degree of defensiveness within portfolios has helped manage volatility while preserving flexibility. As conditions evolve, we will continue to look for clearer opportunities to increase exposure, but we are not there yet.

As always, if anything here raises questions or you would like to discuss your positioning in more detail, we are here.