AXIOMA ROOF™ SCORE HIGHLIGHTS

• US: Q1 GDP data, FOMC meeting, and earnings from Microsoft, Amazon, Apple, Alphabet, and Meta (focus on AI spending guidance).
• Europe: Euro Area inflation and Q1 GDP data. BoE and ECB interest rate decision meetings.
• APAC: BoJ interest rate decision meeting. China’s National People's Congress Standing Committee meting.
• Global: Ongoing diplomatic efforts to end reopen the Strait of Hormuz.

Last week ended with investor sentiment still bearish in four markets, negative in another five, and neutral in Asia ex-Japan.

The war in Iran, now entering its ninth week with a peace deal still out of reach, continues to dominate investor sentiment—though there are signs of bearish fatigue. President Trump tweeted that Iran had offered “a lot, but not enough”, while Iran’s Foreign Minister Abbas Araghchi said he does not believe the US is “truly serious about diplomacy”. The two sides remain far apart, each insisting the other’s plan has all the hallmarks of an indecent proposal.

For investors, a win in Iran is not about reaching for the stars—it’s about fixing the roof (pun intended). Over the past two weeks, the drivers of bearishness have been easing. In the Gulf, headlines shifted from ceasefire extensions to multilateral peace talks, and the guns remained mostly quiet.

On the home front, the DoJ announced it was dropping its probe of Fed Chair Jerome Powell, clearing the way for Senator Thom Tillis to cast the deciding vote on Kevin Warsh’s confirmation as the next Fed Chair—relieving investors’ concerns over an adversarial Fed succession expected on May 15.

These signs of de-escalation have helped the VIX and other volatility measures fall back toward their long-run averages, fueling a bargain-hunting rally that pushed US equities to fresh record highs. Even so, “reversion to the mean” is not a strategy—just a reminder not to build return expectations on a good week.
For perspective, the 1982 Falkland Islands conflict between Argentina and British forces (with US help) lasted ten weeks.

Funny you should bring up the Falklands… 

As the Trump administration tries to cool the embers of the Gulf conflict it helped ignite, it appears to be preparing to strike a fresh spark with its NATO allies. On Friday, Reuters reported on an internal Pentagon email outlining options for the United States to “punish” NATO allies it believes failed to support US operations in the war in Iran—including suspending Spain from the alliance and reviewing the US position on Britain’s claim to the Falkland Islands.

Whether this is coercive diplomacy—or leverage in search of a Greenland-sized concession—is an open question for another day.

If these reports are even partly accurate, they add fresh pressure on Starmer’s government ahead of England’s local elections on Thursday, May 7, 2026—elections Labour is already expected to lose. They also all but guarantee a combustible G7 meeting in Paris in mid-June, followed by an equally lively NATO summit in Ankara on July 7–8.

Rather than closing the geopolitical risk chapter, Washington may reignite alliance risk, reminding markets that geopolitical de‑escalation remains fragile and that complacency ahead of the G7 and NATO summits may be misplaced. 

The worst thing for investors, it turns out, is not knowing. Like the opposite of love is not hate but indifference, the market’s real enemy is not a bad outcome—it’s uncertainty about the path and the timetable. Geopolitical shocks often look binary on paper: a winner and a loser. But in Iran, it’s less US versus Iran than the global economy versus time. With NATO, it’s whether the alliance holds or folds; with Greenland, whether world order bends toward disorder. The stakes are high.

To paraphrase Collingwood, the only clue to what markets can do is what markets have done. Time to dust off those historical geopolitical stress tests.