Investors had been betting big on the idea of peace this week. The S&P 500 rallied 3.7% and the tech-dominated Nasdaq 100 4.6% over the last two days, following signs that the Iran war may soon start to wind down — but stories aren't always that simple.

Why it matters: It can be dangerous to read too much into such a short-term market reaction — money flows and technical factors can be more significant than sentiment.

What they're saying: "This week's rally looks less like a clean 'peace dividend' trade and more like positioning catching up to reality," wrote David Miller, chief investment officer and senior portfolio manager at Catalyst Funds.

• "Markets were leaning defensively into geopolitical risk, and as the probability of a worst-case escalation declined even marginally, you saw a rapid unwind of hedges."

Zoom in: That unwinding included a stampede by short sellers to exit their bearish bets, Bloomberg reported, citing traders at Goldman Sachs and JPMorgan Chase.

• Other market strategists said they saw the rally more as a case of investors flocking to stocks they deemed oversold in the recent decline.

What's next: There was always the possibility that it could turn back the other way.

• "The market's volatility may give you opportunities to pare back positions where the optimism has just become too rampant," Robert Robotti, president and chief investment officer of the investment Robotti & Company, tells Axios.

What we're watching: Now that cold water has again been poured on hopes for a swift resolution, will investors learn their lesson?

• Steven Blitz, chief U.S. economist at TS Lombard, noted yesterday that capital markets tend to price toward a return to normality whenever there is a moment of calm.
• The problem with expecting normalcy, he wrote, is that "the Iran War is just one stop on the Trump 2.0 campaign against the status quo, domestic and foreign, with more to come."

Companies simply don't need as much office space these days.

Why it matters: The pandemic triggered a permanent, fundamental shift in how people work.

The latest: Vacancy rates hit a record high in the first three months of the year, per data Moody's shared exclusively with Axios.

By the numbers: 21% of the office space across 79 markets in the U.S., mostly cities, was vacant in the first quarter — up from 17% in 2020.

Zoom in: Although the return-to-office trend was certainly real, plenty of people still work remotely or on hybrid schedules.

• That means office spaces have shrunk — continuing a pre-pandemic shift in which employers leaned toward more collaborative workspaces, with fewer cubicles and personal offices, Moody's says.
• There's also been a surge of interest in pricier premium spaces known as Class A. Some companies are choosing to downsize into these kinds of offices — trading off extra space for prem-o property.
• "Companies are adjusting to decreased office space requirements as flexibility and collaborative environments for in-office days have become the norm," writes Moody's associate economist Nick Luettke.

Follow the money: The slowing labor market and questions over how the AI transition will shake out are also holding back demand for offices.

The big picture: Even after an aggressive return-to-office push by employers, workers spend about a quarter of their working days away from its confines — compared with 7% in January 2020.

Friction point: The still surging vacancy rate is a sign of just how slow the commercial real estate market moves.

• There are long leases in the office sector, five or even 10-year terms, and companies change their arrangements slowly.

Between the lines: The office transformation is similar to what's happened to the retail sector. Brick-and-mortar stores had to adapt to online shopping and become more enticing to shoppers by being more experiential.

The bottom line: The office as we knew it is changing for good.

Oil prices could surge to an unprecedented $200 a barrel if the Strait of Hormuz remains closed, analysts warn.

Why it matters: Trump is weighing ending the U.S. war on Iran without reopening the strait — raising the once unthinkable prospect that this key energy artery could stay shut indefinitely.

• If that happens, oil's recent rise — briefly nearing $120 a barrel — could look modest.

Driving the news: U.S. gasoline prices have jumped 35% since the war began last month, topping $4 a gallon earlier this week.

• Countries more dependent on Middle East oil are already seeing worse, including fuel shortages.

What they're saying: Eurasia Group, a political risk consulting firm, puts 55% odds on the war lasting through May. If Iran damages oil infrastructure, prices could spike above $150 a barrel, it said Tuesday.

• Analysts at Macquarie, a financial services company, last week said oil could reach $200 if the war drags into June, assigning a 40% probability.

"There is no policy option to prevent oil prices from marching up toward $200 a barrel if the Strait of Hormuz remains closed," said Jason Bordoff, founding executive director of Columbia University's Center on Global Energy Policy.

• "It's too large of an amount of supply to the global market."

Daniel Yergin, who hosted the world's premier energy conference in Houston last week, declined to give a specific forecast — but noted: "You do hear $200."

Catch up quick: Roughly 20% of global oil and liquefied natural gas flows through the narrow waterway of the Strait of Hormuz.

State of play: Prices have actually been somewhat contained because of short-term buffers — oil already in transit and releases from strategic reserves. But those cushions are fading.

• "Ships that escaped the Strait of Hormuz before [the war] began have reached port," former Secretary of State John Kerry said last week at the Houston conference. "They're empty now."

How it works: The focus on $200 a barrel "is not an accident," said Kevin Book, managing director of research firm ClearView Energy Partners. It echoes the 2008 record.

• Back then, "economic calamity" ultimately forced demand lower and rebalanced the market, he said.

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