Stalled Peace Talks Lead to Stock Market Retracement, Can Bitcoin Hold the $80,000 Level?
The Prospects of US-Iran Talks Plunge into Chaos Again.
The day before, after Axios exclusively reported "both sides close to reaching an agreement," the market briefly basked in optimism, with the S&P 500 hitting a historical high, and the Nasdaq simultaneously hitting a record high. On Wednesday, the S&P 500 surged 1.46% to 7,365.12, and the Nasdaq skyrocketed 2.02% to 25,838.94, both reaching new all-time closing highs.
This positive sentiment did not last for 24 hours.
On Wednesday, an Iranian Foreign Ministry spokesperson stated that the Washington-proposed peace plan is "still under review," and the core of the proposal, pausing uranium enrichment and reopening the Strait of Hormuz, both key demands, remain unresolved. Iran's uranium reserve red line remains unchanged. The previous day's accumulated bullish confidence was quickly wiped out by this news. Risk sentiment reversed course. All three major U.S. indices closed lower, with the semiconductor sector leading the decline, and small-cap stocks under particular pressure.
Core Narrative: Peace Agreement Still Far Away
The market's interpretation of this war has become highly binary: either peace agreement or continued conflict.
This week's diplomatic rhythm has created a rather significant volatile beat. On Monday, Trump announced the suspension of "Project Freedom" escort missions, with Pakistan as a mediator releasing positive signals, and on Tuesday, Saudi media even predicted a breakthrough in the right of passage through the Strait of Hormuz "within a few hours," causing oil prices to plummet. WTI oil briefly fell over 5% intraday, Brent fell below $97.
However, Iran promptly cooled down. The Iranian Foreign Ministry made it clear that uranium enrichment is a red line, not a bargaining chip. Concurrently, the Islamic Revolutionary Guard Corps announced the establishment of a new "control system" for the Strait of Hormuz, implying that even if passage is opened in the future, it will be Iran's selectively controlled choice, rather than an unconditional restoration.
Meanwhile, the U.S. Treasury Department announced additional sanctions on Iran's related oil network that day, and the U.S. military reportedly used force against an Iranian oil tanker violating the blockade in the strait, demonstrating that economic pressure and military deterrence are proceeding in parallel, showing no sign of the U.S. government easing its stance.
Polymarket data shows that the probability of reaching a peace agreement by May 15 has dropped to 15%, and at the time of writing, it stands at 20%.
As a result, the oil price charted a violent V-shape.
During the session, Brent futures briefly fell to $96.73, a drop of over 12%. After the news of the talks gradually soured, the bulls re-entered the market, and Brent closed around $100, with WTI closing near $90.5, both barely holding onto key integer levels.
Of note, the prompt Brent (spot) price has fallen below the Brent nearby futures, signaling a reversal in the spot price premium structure. This implies that the current physical oil market is relatively well supplied, showing a structural deviation from the geopolitical risk priced in the futures market.
Meanwhile, outside the strait, U.S. crude oil exports hit a record high last week, with global buyers accelerating their shift to U.S. supply to avoid Middle East transportation risks.
Furthermore, Aldo Spanjer, Energy Strategy Director at a Paris-based bank, directly exited the energy trading market, stating, "The outcomes are too binary, with headline news triggering stop-loss orders. This has happened five times this week alone, making trading nearly impossible." Scott Shelton, an energy analyst at TP ICAP, referred to the current situation as a "risk desert," with only hedge positions remaining in the market.
Can Bitcoin Hold the $80,000 Key Level?
Now, turning to the asset most closely watched by the crypto community, Bitcoin.
Against this backdrop, Bitcoin continues to face pressure, with spot prices dropping approximately 1.56% on the day, finding support near $80,000.
In contrast to previous panic selling episodes, this pullback exhibits a relatively healthy structure. On-chain data indicates that long-term holders' positions have risen to 78.3% of circulation, exchange balances have hit a seven-year low, and whale addresses have net purchased around 270,000 BTC in the past 30 days. BlackRock's Bitcoin ETF holdings have increased to around $62 billion, stabilizing the institutional ownership structure.
On the Ethereum front, the overall sentiment this week has benefited from the market's heightened expectations for U.S. crypto regulatory legislation. ETH has seen a cumulative 5.6% increase in the past five days, fluctuating in the $2,360–$2,412 range, maintaining a market cap of around $233 billion.
Noteworthy is that April of this year saw the strongest net inflows into the U.S. spot Bitcoin ETF since October 2025, with net flows reaching $24.4 billion. The institutional pipeline remains open, aligning with Bitcoin's relative resilience amid macro turbulence at the moment.
From a narrative perspective, the impact of the Middle East situation on the crypto market is showing structural differentiation. As oil prices surge and inflation expectations rise, increasing the probability of a Fed rate hike, Bitcoin faces pressure. However, simultaneously, capital from some Middle Eastern regions is rapidly moving assets to decentralized channels to mitigate potential sanction risks and banking system liquidity constraints. On the same day the U.S. Treasury Department added further sanctions to Iran's oil network, on-chain data showed a slight uptick in anonymous coin mixing transaction volume. This is not a conclusion but merely a signal worth continuous observation.
On the cryptocurrency legislative front, market participants are also optimistic about the implementation of the regulatory framework in the United States. The Stablecoin and Digital Asset Market Infrastructure Act in both the House and the Senate is advancing. If passed this year, it will provide compliance support for further institutional investment.
US Stocks Experience High Volatility, Semiconductor Sector Sees Correction
Thursday marked the second directionless trading day of the week.
The S&P 500 closed down 0.38% at 7,337.11 points; the Dow fell 313.62 points (-0.63%) to 49,596.97 points; the Nasdaq showed a relatively modest decline, down only 0.13% to close at 25,806.20 points. The small-cap Russell 2000 index dropped 1.63%, posting the largest decline among major indices for the day.
All sectors ended in the red, with the energy sector experiencing the heaviest losses while consumer staples showed relatively more resilience.
There was notable divergence within the technology sector. Tesla rose by 3.28%, NVIDIA by 1.76%, Microsoft by 1.68%, Meta by 0.64%; Apple fell by 0.03%, Alphabet by 0.01%, and Amazon by 1.39%. The combined index of the seven tech giants edged up by 0.69%, standing out as one of the few bright spots of the day.
The semiconductor sector took a hit. The Philadelphia Semiconductor Index fell by 2.72%, AMD by 3.07%, and TSMC ADR by 1.28%. While Qualcomm and Fortinet beat earnings expectations, and Datadog's analyst day provided some support for the software sector, with software index poised to see its fourth consecutive week of gains, this couldn't mask the systemic sell-off in the chip sector.
Goldman Sachs' trading desk data added an intriguing dimension: high-beta momentum portfolios saw a staggering 8% decline, while the S&P 500 and Nasdaq 100 both fell by less than 0.5%. This scissor gap ranks among the top ten extreme values of the past five years for a single day, and it has occurred five times so far in 2026.
Furthermore, the VIX fell by 1.78% to 17.08, showing a rare divergence from the stock market's decline. Normally, a market drop leads to an increase in the fear index; however, both are moving in the same direction downward at the moment. The market might be waiting for tomorrow's (Friday's) nonfarm payroll data and is hesitant to take a directional bet in the short term.
Recent earnings releases from U.S. companies have been quite representative. Arm Holdings announced its FY2026 Q4 earnings after market close on May 6, with an adjusted EPS of 60 cents, revenue of $14.9 billion, both slightly beating analyst expectations. Licensing revenue grew by 29% year-on-year, and royalty revenue increased by 11%.
The financial report itself was not bad. However, during the earnings call, the management mentioned a supply bottleneck for the company's latest AGI CPU data center chip, with an additional $1 billion in demand that could not be realized as revenue in the meantime. Raymond James analyst Simon Leopold directly stated, "Supply constraints constrained the management from raising revenue guidance."
The stock price surged by 13% in after-hours trading, only to give back all gains. Upon Thursday's opening, it dropped over 10%, becoming one of the biggest decliners among tech stocks that day. This marked the third time in the past year that Arm saw a "post-earnings rally" turn into a "next-day plunge."
Following Arm, CoreWeave took the stage. Q1 actual revenue exceeded expectations, with revenue backlog inflated to $99 billion, and NVIDIA injected another $2 billion in the quarter. However, Q2 revenue guidance fell below market expectations, and the full-year 2026 capital expenditure was raised to $31 billion to $35 billion, doubling from $14.9 billion in 2025, causing the stock price to drop by over 10% in after-hours trading.
CoreWeave's losses are real, the debt is real, but so are its orders: $99 billion in revenue pre-orders and NVIDIA's increasing stake. However, there is visible skepticism whether this future money can outpace today's capital expenditure.
Fed Hawkish, Friday Nonfarm Payrolls Data
Looking at the Fed, there was a slight hawkish shift in the short-term interest rate market on the day, with the probability of a surprise rate hike by year-end rising to about 20%. However, the market generally viewed this as noise, as labor data remained strong, with initial jobless claims rising only slightly to 200,000 at the beginning of the week, indicating no substantial cracks in the job market.
The 10-year U.S. Treasury yield rose by about 4.8 basis points to 4.393%, moving higher in sync with oil prices.
The offshore renminbi briefly rose above 6.80, hitting a four-year high, before slightly retreating to 6.8078 at the New York session's close. The U.S. Dollar Index rose by 0.08%, reaching 98.10.
On the gold front, spot gold briefly touched a two-week high above $4,700, closing up by 0.22% at $4,701.61 per ounce. Amid inflation concerns from rising oil prices and safe-haven demand due to peace talk expectations, gold found its place. Silver saw a larger increase, with COMEX silver futures closing up by 3.02% at $79.64 per ounce and spot silver breaking above $82 intraday.
In European stock markets, the STOXX 600 fell by 1.02%, the UK's FTSE 100 dropped by 1.55%, the French CAC 40 declined by 1.17%, and the German DAX slipped by 0.99%.
The uncertainty in Hormuz has not dissipated. The next market trigger will be Friday's nonfarm payroll data. The initial jobless claims inched up to 200,000 people earlier this week, still below the market expectation of 206,000, indicating mild layoff pressures in the labor market. With the probability of a Fed rate hike before year-end reaching around 20%, the nonfarm payroll data will be the next repricing focal point.
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