The U.S. and Iran agreed to a two-week ceasefire last night — with a commitment to open the Strait of Hormuz — and oil prices plunged, the biggest one-day fall for Brent crude since the 1991 Gulf War.

Why it matters: Investors seemed to see it coming, even as many others agonized over President Trump's threat to eliminate Iran's "civilization," and stocks barely flinched yesterday, just as they have declined only modestly since the war started.

The latest: Asian markets rallied overnight, and European markets were sharply higher today.

• S&P 500 stock index futures were up 2.7% this morning, while Nasdaq futures were up 3.5%.
• U.S. Treasury yields retreated as inflation worries eased.

Friction points: It's not totally clear what Iran's pledge to open the strait will mean in practice, at least initially. The question is: Will shippers feel secure enough to navigate passage?

• "Ship operators' confidence that they won't be attacked is the one and only litmus test to assess whether energy flows are likely to resume," Clayton Seigle, an oil analyst at the Center for Strategic and International Studies, told Axios' Ben Geman and Chuck McCutcheon last night.
• Shipping giant Maersk told Reuters this morning that it did not have the certainty to resume normal operations.
• The AP is reporting that the deal allows Iran and Oman to charge fees for transit through the strait.

The big picture: It is only a two-week agreement. And the economic fallout from the biggest oil disruption in history is hardly over.

• Economies, particularly in Asia, are shell-shocked and facing shortages. The hits to critical energy infrastructure could take months or longer to repair.
• The global energy market could now be changed forever. The situation is your latest reminder that the stock market is not the economy or even a gauge of public opinion.

By the numbers: The S&P 500 is down about 4% from the start of the Iran war, having bounced back from when it briefly flirted with a correction.

• And now there's buoyancy and an expectation for a solid season of corporate earnings about to get underway.

Reality check: It's been a pretty volatile few weeks, and many institutional traders have felt frustrated by the wild rhetoric and conflicting messages from the White House.

• "This market is neither investable nor tradeable due to headline risk, rumor and policy unpredictability," RSM chief economist Joseph Brusuelas told Axios last week.

Zoom out: "Is it just a kicking [of] the can down the road, moving the goalposts, TACO Tuesday, or whatever metaphor we'd like, to only to have tempers flare and bombs drop again? Who knows?" writes Brian Jacobsen, chief economic strategist at Annex Wealth Management. "But it's good enough for now to elicit a positive response from the markets."

The bottom line: It was a TACO Tuesday after all — investors just had their orders in early.

The oil futures market was the place where investors rode out all the war's ups and downs — prices remain far above pre-war levels.

• The physical oil market remains in turmoil, writes Axios' Ben Geman. Physical barrels of crude reached the highest recorded price of $144.42 a barrel, according to S&P Global Energy Platts.

What to watch: Gas prices in the U.S. could start reversing by the end of the week, per one widely cited gas analyst.

Moody's chief economist, Mark Zandi, was playing around with Claude Code last weekend and came up with a new recession indicator: the Vicious Cycle Index.

Why it matters: It's sending a warning sign about the job market and the economy.

The intrigue: Zandi thinks the current unemployment rate isn't telling the full story of the job market.

• A clearer measure should also consider a longer-term view on labor force participation or the share of the population either working or looking for work.
• That rate has been declining faster than the unemployment rate — a sign that people are getting discouraged with the job market, he says.

By the numbers: The unemployment rate in March was 4.3%, just 0.1 percentage point higher than a year ago, according to federal data released last week.

• But the labor force participation rate has fallen more — about a half percentage point from last year.

Zoom in: The drop-off for older Americans was even steeper and is now at its lowest since 2005.

Where it stands: "Just like job growth has gone flat, participation has declined, and so the unemployment rate is understating slack in the labor market," Zandi says. "Workers are feeling discouraged."

• Looking backward, it appears his new index has always correctly signaled a recession in the past, he says.

How it works: The job market weakens, and people worry they're going to be unemployed. They pull back spending. That makes the economy worse, then more consumers pull back — and suddenly you're in a vicious cycle.

Yes, but: Zandi emphasizes that this is new and that he's looking for comments on how it works.

• "I'm still experimenting, and I don't want to put too much weight on it."

Reality check: The U.S. is not in a recession: Consumer spending is holding up, and capital investment is doing well, thanks in large part to the AI data center boom.

• Moody's own model forecasts the odds of a recession at 45%.

The big picture: Recession indicators don't work like they used to, as Axios' Courtenay Brown reported back in the summer of 2024.

Between the lines: Zandi's indicator modifies the Sahm rule, which holds that the economy is likely in a recession when there is a 0.5 percentage point increase in the three-month average unemployment rate over the prior 12 months.

• The rule didn't pan out back in 2024. A surge of new entrants into the job market — immigrants — were pushing up the unemployment rate.
• That wasn't a distress signal. It was an indication that more folks were looking for work.

"I'm still playing with Claude. It's so much fun," Zandi says. "If I come up with a better formula, I'll let you know."

The bottom line: Watch out. The economists are vibe coding.

Big Insurance caught a big break this week from the White House.

The big picture: After saying that it wanted to keep federal payments to private Medicare plans roughly flat next year, the Trump administration reversed course and gave the insurers a $13 billion pay bump.

• The pay increase was on the high end of investor expectations, and the stock prices of insurance giants Humana and UnitedHealth, which administer those plans, spiked on the news.

Flashback: Their stocks had tumbled in January after the initial plan.

Friction point: The Medicare pay bump is a welcome reprieve for health insurers, but they remain a big target for lawmakers.

What to watch: There's a change in how Democrats are talking about health care, Axios Vitals reports today, and it could spell big trouble for industry profits should the party regain power any time soon.