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The Pakistan meeting was definitely a disappointment for US equities, especially considering the recent rally and the fact that the SPX had rebounded back to the pre-war resistance zone of around 6900-7000. However, this doesn't appear likely to trigger an immediate collapse of the ceasefire (which continues to hold) or escalation in fighting. The core view remains that Trump's escalatory options are so awful they remain unlikely to be exercised.
The highest-level US-Iran contact in nearly half a century occurred in Pakistan over the weekend, with talks stretching nearly 24 hours but ultimately breaking down over fundamental disagreements on Hormuz control, enriched uranium stockpiles, and Iran's right to enrich (FT). Bulls point to the fact that talks happened at all as progress, with Iran's foreign ministry stating "we should never have expected to reach a deal in one session" and promising continued efforts to bring American and Iranian views closer together. However, bears note that VP Vance called the US proposal "best and final," suggesting Washington isn't interested in further negotiation. Three damaging WSJ reports over the weekend suggested the recent military campaign largely failed to achieve key objectives: Iran still controls Hormuz, retains thousands of missiles with retrievable launchers, and its nuclear program survived intact. Israel has dialed back strike intensity and appears to be observing a ceasefire around Beirut, with Israeli, Lebanese, and US officials set to meet in Washington this week. Two US Navy warships entered Hormuz over the weekend for the first time since the war began to sweep for mines, while Saudi Arabia fully restored its East-West pipeline to 7 million barrels per day. A NYT report claimed Iran can't locate all the mines it laid during the conflict.
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