Despite the U.S. government maintaining a military-level blockade of the Strait of Hormuz and seizing a large Iranian transport vessel, coupled with Iran's wavering stance on sending diplomats to Pakistan for a second round of talks, hopes for a breakthrough in ending the latest Middle East geopolitical conflict have diminished. Against a backdrop of unpredictable Middle East tensions and conflicting geopolitical signals from the U.S. and Iran, top Wall Street traders and retail investors appear increasingly convinced that the "TACO strategy" and buying dips in AI computing power themes represent the most effective framework for allocating risk assets. An Iranian Foreign Ministry spokesperson stated that Tehran has no plans to participate in potential negotiations, citing a lack of sincerity from the U.S. side. This has intensified doubts about whether formal talks will occur before a temporary two-week ceasefire expires. Key disagreements remain over Iran's nuclear program and control of the Strait of Hormuz.

The U.S. President announced that his Middle East envoy was headed to Pakistan for Tuesday talks but later resumed aggressive rhetoric, threatening to destroy Iran's infrastructure if no deal is reached. This contrast with his Friday statement about an almost-finalized agreement has reinforced market adoption of the "TACO" strategy, anticipating last-minute retreats from escalatory threats. Market participants increasingly expect short-to-medium term "TACO" opportunities, where investors buy dips during market selloffs triggered by aggressive threats, betting on eventual policy moderation and subsequent rebounds.

Iran's Foreign Ministry denied discussing uranium transfer during talks. Following the U.S. refusal to lift its blockade, Iran reversed its decision to temporarily reopen the Strait of Hormuz, keeping it largely closed and exacerbating global supply concerns. Oil prices surged Monday, with Brent crude rising over 5% to above $95 per barrel. Although Iran expressed reluctance in negotiations, its president emphasized using diplomatic channels to ease tensions, noting continued warfare benefits no party. Israel's temporary ceasefire in Lebanon proved fragile after it struck targets in its northern neighbor on Saturday.

The U.S. Central Command reported seizing an Iranian vessel after it ignored warnings, with naval forces firing rounds to disable it before boarding. The U.S. President claimed the vessel attempted to breach the maritime blockade. Iranian media stated Iran would respond to the seizure and announced new toll rules for the Strait of Hormuz, including banning ships linked to Israel. The U.S. blockade permits vessels with non-Iranian cargo to leave the Persian Gulf but bars departures from Iranian ports, prompting Iran to close the strait. The Iranian Revolutionary Guard Navy warned ships against approaching the strait, labeling such moves as cooperation with enemies. International reports noted multiple attacks on vessels and discovered mines in the strait, raising the risk level to critical.

Global stock markets closed higher last week, with the S&P 500 and Nasdaq reaching record levels despite Middle East tensions, oil supply disruptions, and economic warnings. By Monday's close in Asia, South Korea's KOSPI index rose 0.4% despite geopolitical pressures. Wall Street's bullish sentiment intensified as investors increasingly ignored war-related noise, focusing instead on upward revisions to corporate earnings expectations, particularly for tech firms linked to AI computing infrastructure. The growing belief in the "TACO" strategy—betting on de-escalation—has become a key market trend. Investors are treating geopolitical events as sources of volatility rather than reasons for long-term portfolio shifts.

With the U.S. earnings season commencing, strong profit expansion expectations for AI infrastructure are providing support. Major Wall Street institutions have turned more optimistic, citing potential valuation recovery post-ceasefire, robust corporate earnings resilience, and upward revisions for tech companies in the AI computing chain. A J.P. Morgan economist noted that stock markets price future expectations 6-12 months out, not current events. AI-driven profit expectations are central to market gains, with stocks directly tied to AI infrastructure—such as NVIDIA, TSMC, AMD, and Broadcom—showing high sensitivity and outperformance during rebounds. This reflects record AI capital expenditure by tech giants rather than speculative narratives.

BlackRock upgraded U.S. and emerging market equities to "overweight," projecting 43% earnings growth for the tech sector by 2026. Citigroup also raised its U.S. stock rating to "overweight," citing attractive valuations and growing tech contributions to global earnings. BlackRock strategists看好 semiconductor stocks linked to AI infrastructure in U.S., South Korean, and Taiwan markets. A prominent strategist aligned with J.P. Morgan's view that tech must lead the next bull market phase, while Citigroup forecasts the S&P 500 reaching 7,700 by year-end. The index closed Friday at 7,126.06.