Relative calm in the markets

Financial markets are discounting the risk of escalation in the Middle East, after more than a day passed without any retaliation from the Iranian side.

Why it matters: Nothing seems to be able to stop the rally that has driven U.S. stocks more than 20% higher since early April.

By the numbers: Most asset classes had a knee-jerk reaction last night that turned calm, orderly — and even slightly risk-on — by this morning.

• Brent oil futures rose about 3% at the start of trading last night to about $80, but gave up most of those gains overnight to flatten out by this morning, a far more sedate move than analysts expected. (The most dire predictions of a surge to $100 a barrel all hung on Iran closing the Strait of Hormuz, which hasn't happened. More on that below.)
• S&P 500 futures opened about 1% lower yesterday, not an abnormal move in the scheme of things. (The market has closed up or down 1% on more than 15% of the trading days so far this year.) But by this morning they reversed amid the calm and were 0.2% higher.
• Bond yields were about 2 basis points higher, with the U.S. 10 year Treasury at 4.39%. Those yields are hovering near the lowest levels of the month, in roughly in the same place where President Trump said they were getting "yippy" in early April.
• Gold, after opening higher yesterday, fell 0.2% this morning and was about $50 off the all-time highs it set recently.
• The U.S. Dollar Index increased 0.6%, well off its recent lows but still down sharply for the year. Analysts at Convera, in a note this morning, said that while "structural dollar weakness" remained, higher oil prices generally supported the currency for now.

• After a volatile 24 hours where bitcoin briefly dip back below $100,000, the cryptocurrency stabilized and was flat just north of $101,000 early today.

What they're saying: "The market will view this Iran threat as now gone and that is a positive for growth in the broader Middle East and ultimately the tech sector," Wedbush analyst Dan Ives said in a post on X yesterday.

• "It will take some time for this conflict to settle, but the market will view the worst is now in the rear-view mirror. Expect stocks up."

What to watch: Markets will be closely watching for any signs of escalation, including Iranian attacks on U.S. bases, further U.S. strikes, or any move that affects oil supplies.