Citadel Securities believes the worst-case tail risk from the Iran conflict has been “substantially truncated,” positioning both stocks and bonds for a rally.
The view, outlined by Nohshad Shah, reflects easing extreme-scenario risks as geopolitical incentives increasingly favor de-escalation.
Rally in Stocks and Bonds Is Coming as War Tail Risks Shrink
Shah wrote in a note that Iran’s leadership is primarily focused on regime survival. At the same time, China has strong incentives to push for de-escalation. Together, these dynamics suggest the likelihood of further military escalation is fading.
“The contours of what follows will become clearer in the coming weeks, but for markets, the most relevant point is that we appear to have substantially truncated the tail of the worst-case scenario,” he said.
Despite the US-led Hormuz blockade, Shah maintains his view that a resolution is taking shape. He suggested the conflict’s “end game” is approaching as both Washington and Tehran face rising costs from prolonged hostilities.
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US equity markets appeared to agree with that assessment. Google Finance data showed that the S&P 500 climbed 1.02% on Monday, rising to 6,886. The index has erased nearly all its losses since the Iran war began in late February.
The Nasdaq Composite gained 1.23%, the Russell 2000 Index rose 1.5%, and the Dow Jones Industrial Average added 0.6%. The rally extended gains from last week, when the S&P 500 recorded its longest winning streak since October 2025.
Previously, BitMine’s chairman, Tom Lee, also projected that the stock market had bottomed and the index could hit record highs this year.
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