The Week the War Ended and the Fed Took Over

This was the week one story ended and another began.

The U.S. and Iran reached a peace agreement Sunday. Trump ordered an end to the naval blockade. The Strait of Hormuz began reopening. A formal signing is expected Friday in Switzerland.

The market spent three months trading war headlines. By Wednesday afternoon it had nothing left from the Middle East to price.

That left one variable.

The Fed.

Kevin Warsh held rates at his first meeting as chairman. Then he raised the dot plot, declined to publish his own forecast, and removed forward guidance from the statement. The bond market called it hawkish. The equity market called it nothing and rallied anyway.

Here are the six things that mattered most.

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The agreement came together quickly.

Trump called the deal complete Sunday. He ordered an end to the U.S. naval blockade. He authorized the reopening of the Strait of Hormuz. The signing ceremony is set for Friday in Switzerland.

The terms expanded over the week.

The framework includes a Lebanon ceasefire, the release of $25 billion in frozen Iranian assets, and 60 days of nuclear negotiations. A separate $300 billion private reconstruction fund will invest in Iranian energy, logistics, manufacturing, and infrastructure. More than $150 billion has already been committed by investors across the Gulf, Asia, Africa, South America, and the United States.

The structure is the point.

Washington refused direct compensation. Iran wanted roughly $400 billion. The reconstruction fund became the compromise. More investment from more parties means more incentive on both sides to finish the agreement.

Markets responded immediately. Brent fell from $84 to $79 by Thursday. WTI dropped below $75. U.S. gasoline fell below $4 a gallon for the first time since March. The first physical signs followed. Three Saudi supertankers carrying six million barrels crossed Hormuz this week. Vice President Vance said 12 million barrels passed overnight Thursday, the highest volume since the conflict began.

Investor Signal

The war that drove markets for three months ended in 72 hours. The peace dividend is now reaching consumers through lower fuel prices. The structural inventory deficit will take much longer to resolve.

The Fed held rates at 3.50% to 3.75%, exactly as expected.

The projections were not expected.

The median 2026 rate outlook rose to 3.8% from 3.4% in March. Nine of eighteen officials now expect at least one hike before year-end. The two-year Treasury yield jumped 16 basis points to 4.22%. The 10-year climbed above 4.49%.

Warsh added three more changes.

He declined to submit his own dot, becoming the only one of nineteen officials without a published forecast. He removed forward guidance from the Fed statement. He announced five internal task forces focused on communications, the balance sheet, inflation, employment, and productivity.

The message was simple. Less forecasting. More flexibility.

Markets interpreted it as hawkish. The Dow fell 507 points Wednesday. The S&P 500 lost 1.21%. The Nasdaq dropped 1.34%.

Then Thursday reversed almost all of it. The Nasdaq gained 1.91%. The S&P 500 rose 1.08%. Stocks chose to focus on lower oil and resilient earnings rather than a higher dot plot.

Investor Signal

The Fed did not hike. It made future hikes easier to imagine. The bond market heard a hawkish Fed. The equity market heard a Fed that still did nothing.

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SpaceX (SPCX) opened Friday at $135 and closed its first week as one of the most valuable companies in America.

The stock gained 19% on debut. It added another 20% Monday. By Tuesday it briefly passed both Amazon (AMZN) and Microsoft (MSFT) in market value. The valuation reached $2.94 trillion intraday before settling near $2.65 trillion.

Then SpaceX acted like a mega-cap.

The company announced a $60 billion all-stock acquisition of Anysphere, the parent of AI coding platform Cursor. Cursor competes directly with OpenAI and Anthropic. The deal strengthens SpaceX's enterprise AI position alongside its earlier xAI acquisition.

The acquisition revealed the real benefit of a successful IPO.

Currency.

SpaceX is using stock to buy strategic AI assets within days of going public. That capability does not exist in the private market. Thursday the rally finally paused. SpaceX fell more than 6%, its largest decline since IPO.

Investor Signal

SpaceX is no longer an IPO story. It is becoming one of the largest consolidators in AI. The frenzy is cooling into a valuation debate.

Bitcoin climbed above $66,000 Monday on the peace deal rally. By Thursday it was back below $63,000.

The path between the two prices revealed the structural problem.

Treasuries now yield above 4%. Bitcoin offers none. A hawkish Fed raises the opportunity cost of holding a non-yielding asset. Gold fell 2.2% Wednesday. Silver dropped 4%. Crypto moved with them.

The flow data confirmed it.

June ETF outflows reached $4.4 billion, pushing cumulative 2026 flows negative for the first time since launch. Bitcoin and Ether ETFs lost a combined $111 million Thursday alone. The institutional bid that drove the 2025 rally has not returned.

BlackRock (BLK) launched the iShares Bitcoin Premium Income ETF in the middle of the week. The covered-call product trades upside for a mid-to-high-teens yield. That is the market admitting bitcoin needs income to compete with cash and bonds.

The miner economics also turned. JPMorgan (JPM) estimates bitcoin production costs near $78,000 while bitcoin trades around $63,000. Roughly 20% of miners are now operating unprofitably. Mining difficulty fell 10% earlier this month.

Strategy (MSTR) added another 1,587 bitcoin for roughly $100 million, raising its cash reserve to $1.1 billion while still buying. Its STRC preferred stock briefly fell to $83 before recovering. Below par value, new issuance becomes harder.

Investor Signal

Bitcoin is trading yields, not headlines. The long-term infrastructure is intact. The short-term demand engine has not restarted.

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The Nasdaq fell 1.15% Tuesday while the Dow closed at a record.

That contrast is the story.

Financials gained 1.5%. Industrials added 0.7%. Technology fell 2.3%. The Philadelphia Semiconductor Index dropped 5.7% after a powerful three-day run. Advanced Micro Devices (AMD) lost more than 7%. Micron (MU) fell 6%. Broadcom (AVGO) dropped 4%.

This was not retreat. It was rotation.

Capital moved from expensive chip names into banks, industrials, and infrastructure. Lower oil helps every sector except energy. Higher rates favor financial earnings. The Iran reconstruction fund is a direct catalyst for industrial and infrastructure capital deployment.

The pattern reversed Thursday when the Nasdaq rallied 1.91% on Intel's (INTC) 10.6% surge and broader semiconductor strength. Intel entered risk production for its 18A-P process and moved closer to potential Apple (AAPL) manufacturing work.

The takeaway across both sessions is the same. The AI trade still works. It no longer has to carry the whole market alone.

Investor Signal

The AI cycle has not peaked. Investors are simply willing to own other things alongside it for the first time in months.

The Fed held rates and signaled hikes are possible.

The Bank of England held rates and signaled the same.

The European Central Bank raised rates last week and lifted its inflation forecast to 3.0% for 2026. The Bank of Japan delivered another hike at its meeting this week.

The pattern is not coincidence.

Inflation remains above target across the developed world even after oil prices collapsed. Labor markets remain tight. AI-related construction is creating localized wage pressure that national data has not fully captured.

Central banks are increasingly worried that another inflation mistake would do more damage than slower growth. Markets began 2026 expecting multiple rate cuts. Now investors are debating how many hikes remain.

The shift is global.

Investor Signal

The Iran deal lowered oil prices. It did not end the inflation problem central banks are fighting. Higher rates are now the dominant macro variable across every major economy.

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This was the week the spring ended and the summer began.

For three months investors traded missiles and oil tankers. By Wednesday they were trading dot plots and bond yields again.

The market made a choice. It chose to absorb a hawkish Fed because oil was falling. It chose to fund SpaceX's $60 billion acquisition because the AI cycle still works. It chose to sell bitcoin because Treasuries pay 4%. It chose to buy industrials because the war is ending.

Next week the same market has to decide whether Wednesday was the start of a new hiking cycle or simply a reminder that inflation is not fully defeated.

The war story is ending. The rate story has taken its place.