Progress Amid Conflict Equals Market Rally

PUBLISHED APRIL 2026

Capital markets rallied and oil prices fell in mid-April after Axios reported significant progress in U.S.-Iran peace negotiations. Treasury yields fell 6-8 basis points, past recent lows, and West Texas Intermediate dropped to nearly $75 a barrel—well of its $112 high in March—before prices rebounded amid uncertainty over whether the U.S. and Iran were actually returning to the table. 

The issues still being discussed include the U.S. unfreezing Iranian assets, the length of a moratorium on Iran’s nuclear enrichment, and what happens with Iran’s current stockpile of uranium. Agreeing to end the war is easier than agreeing to the same version of peace, but there appears to be promising positive momentum. 

Yields on almost all benchmark tenors are now slightly lower vs. the end of March. The Treasury curve can further steepen (bull) if talks deliver on investors’ optimistic expectations. A 4.20 percent rate has functioned as resistance for 10-year treasuries over the past month, but it could revert to being support, as it was for the final months of last year, if a concrete agreement is announced soon. 

Subsequent social media posts from President Trump and Iran’s foreign minister about the Strait of Hormuz fully reopening failed to cause any additional market response. The U.S. insists on maintaining its naval blockade, Iranian officials believe this is a violation of the ceasefire, and Reuters reported that the U.S. Navy told ships they should still avoid the area. Ship traffic will be slow to normalize, even after a final agreement is reached, because of the risks incurred from so many conflicting signals. 

Fatih Birol, executive director of the International Energy Agency, told the Associated Press that Europe will run out of jet fuel in “maybe six weeks or so.” Airfares are already increasing and flights are being cut. KLM and easyJet, for what it is worth, said they are not currently facing any fuel issues. Even if the six-week estimate overstates the urgency, it shows how much economic scarring can happen, especially abroad, with each day that global energy disruptions continue. Higher prices and shortages in places more dependent on Gulf energy could halt economic activity enough to tip some countries into recession. Also, it will take weeks before traffic normalization in Hormuz leads to refined petroleum products becoming accessible again.

An Ominous Signal

Moving from international events to domestic matters, fresh data from the Centers for Disease Control and Prevention reveal that the U.S. fertility rate recently dropped to the lowest level ever recorded. About 3.6 million babies were born in the U.S. in 2025, translating into 53 births for every 1,000 women of reproductive age.  

The longer-term economic implications? That figure is nearly 20 percent lower than two decades ago, with half of all American women now reaching the age of 30 without becoming mothers. 

Times have certainly changed. It was not that long ago that demographers were worried about overpopulation and economic scarcity. In fact, that seemed to be the prevailing worldview for decades, and only inverted over the last several years.   

Many women are now waiting longer to have children, creating less than a replacement rate, and some are choosing not to have kids at all. If the clampdown on immigration also continues, the total U.S. population may peak around 2029 or 2030, while beginning what could become a permanent decline thereafter. A declining population would have many profound effects, especially if that trend was ongoing.   

Since the Baby Boom after World War II, America has primarily lived in a youth and growth culture that encouraged risk-taking and new businesses that built our economy. The country may now be pivoting toward a geriatric culture, with the so-called “gray economy” and “Boomer economy.” A growing affordability crisis is only compounding the birth rate outlook for the young, creating a likely demographic contraction that may have real and enduring consequences. 

Labor shortages are already surfacing in multiple industries, and in fact have been hampering operations in health care and construction for more than a decade. While automation and robotics may offset some labor shortages, they also represent an employment impediment. 

A smaller pool of young workers is also causing concern over the financial health of the Social Security’s trust fund, and whether it will be sustainable to provide for future needs. Serious long-term effects have yet to be realized, but if the demographics follow the current trajectory, this might cause sustained economic stagnation similar to what Japan has experienced over the past two decades.