GOOD MORNING.

The war with Iran entered a more complicated phase over the weekend, and what happened early Sunday morning is already shaping what you are seeing in the market today.

After more than 21 hours of face-to-face negotiations that ran through Saturday night and into Sunday morning at a hotel in Islamabad, Pakistan, U.S. and Iranian diplomats walked away without a deal. Vice President JD Vance announced that Iran had "chosen not to accept our terms," saying: "The bad news is that we have not reached an agreement. And I think that's bad news for Iran much more than it's bad news for the United States of America." The core dispute was Iran's nuclear program. Vance said the U.S. needs "an affirmative commitment" from Tehran not to seek nuclear weapons or the tools that would quickly enable one. Iran refused to agree to those terms.

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Within hours of Vance's departure, President Trump escalated. Trump posted on Truth Social that the U.S. Navy would begin blockading every ship trying to enter or leave the Strait of Hormuz, adding that "Iran will not be allowed to profit off this illegal act of extortion." The blockade aims to flip the dynamic by denying Iran the leverage it has been using as a bargaining chip and preventing it from exporting its oil. In a Sunday interview with Fox News' Maria Bartiromo, Trump made clear the policy would be strictly all-or-nothing. "We're not going to let Iran make money on selling oil to people that they like and not people that they don't like. It's going to be all or none and that's the way it is," he said.

This matters directly to your money. The Strait of Hormuz carries roughly 20 million barrels of oil a day along with about one-fifth of global liquefied natural gas, making it one of the world's most critical energy chokepoints. Iran effectively closed the waterway when the war began in late February, sending crude from roughly $67 a barrel to over $100. Last week, a two-week ceasefire brought genuine relief. The S&P 500 gained about 3.6 percent for the week and the Dow advanced 3 percent, their strongest weekly performances since November. That rally was built on the hope that the Islamabad talks would succeed.

Those hopes did not survive the weekend. Oil futures jumped about 7 percent on electronic trading platforms Sunday, as traders priced in the risk that the blockade could turn an already tight oil market into an unprecedented supply shock. If you are watching your account this morning, early trading is likely reflecting that Sunday news.

There is a direct inflation angle here as well. The Bureau of Labor Statistics reported Friday that the annual inflation rate reached 3.3 percent in March, driven almost entirely by a sharp increase in energy costs. Before the war began, crude oil was trading near $67 a barrel. Core inflation, which strips out food and energy, rose a much calmer 2.6 percent for the year, and food prices were essentially flat for the month. That contained core number gave the Federal Reserve cover to stay patient. A fresh oil spike from the blockade could change that calculation going forward.

The practical takeaway is this: do not make large portfolio moves based on a single day of trading driven entirely by geopolitical headlines. The same forces that pushed oil down more than 15 percent in one session last week can reverse direction just as fast. Keep your defensive positions and cash reserves in place and let the dust settle before drawing any conclusions about where things are headed.

The Washington Examiner noted that the March inflation reading confirmed the war in Iran is driving up prices that had been steady for much of the past year, worsening affordability that was already a top concern for voters before the conflict began. Core inflation showed no acceleration, suggesting this is an energy-driven shock rather than broad-based price pressure, which means it could fade if oil prices pull back. But with a blockade now in place, there is real risk that energy costs stay elevated or move higher again in April. Economists have warned that higher energy costs could continue pushing up food, apparel, and transportation prices this year, in part because a spike in diesel prices raises costs for everything that moves by truck, plane, or ship. The next official read will be the April CPI report, due May 12. That number will tell the clearest story yet about whether the weekend's escalation is changing the broader inflation picture.

The Federal Reserve held its benchmark interest rate steady at its March meeting, with rates sitting in a range of 3.5 to 3.75 percent. The central bank penciled in one cut for 2026, and its next meeting is scheduled for April 28 and 29. That projection was made before Sunday's blockade announcement. If oil stays elevated and inflation remains above the Fed's 2 percent target, policymakers may push that cut further out or remove it entirely for the year. Fed Chair Powell has acknowledged that "nobody knows" how the economic impact of the war on inflation will ultimately play out. For retirees, the silver lining of a higher-for-longer rate environment is that short-term Treasuries and CDs continue to offer meaningful yields. If you have not already built a short-duration ladder with your fixed-income holdings, this is a reasonable time to discuss that with your advisor.

Major financial institutions including JPMorgan Chase and Goldman Sachs are scheduled to report first-quarter earnings this week. Financial stocks are a meaningful holding in many dividend-focused retirement portfolios. Analysts have noted that banks should report solid results thanks to strong trading activity driven by market volatility and geopolitical uncertainty during the quarter. However, what executives say about the second quarter will matter more than the headline numbers. If bank leadership expresses caution about loan demand, consumer spending, or credit quality heading into spring, that tone can weigh on the broader market even when reported earnings look strong on paper. Listen especially for any commentary about how sustained energy costs and the Iran conflict are affecting their customers and lending conditions.

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