The fragile optimism that greeted last week's ceasefire framework between Washington and Tehran lasted precisely six trading sessions. On Tuesday, U.S. forces struck Iranian drone installations near the Strait of Hormuz, and within hours the familiar choreography of geopolitical panic resumed: oil surged, equities retreated, and the VIX climbed back above 20.

Brent crude jumped more than 4 percent to breach $95 a barrel for the first time since early April, while West Texas Intermediate followed close behind. The S&P 500, which had opened higher on solid consumer confidence data, reversed course to close down nearly 1.2 percent. Treasury yields fell as investors sought safety, and the dollar strengthened against a basket of currencies.

The ceasefire that wasn't

Last week's diplomatic framework, brokered with Omani mediation, was always more aspiration than agreement. It called for de-escalation along shipping lanes and a pause in proxy hostilities, but left enforcement mechanisms deliberately vague. The Pentagon characterized Tuesday's strikes as a response to "imminent threats" against U.S. naval assets — language that technically falls outside the ceasefire's narrow scope but effectively renders it moot.

Energy traders had begun pricing in a gradual normalization of Gulf shipping risk, with tanker insurance premiums dipping and forward curves flattening. That repricing is now reversing. Analysts at major commodity desks are revising their summer Brent forecasts upward, with some projecting sustained prices above $100 if hostilities continue.

Broader market contagion

The damage extended well beyond energy. Airlines and cruise operators, already nursing thin margins, sold off sharply on fuel-cost concerns. Industrials with Gulf exposure followed. Even technology stocks, theoretically insulated from oil dynamics, felt the gravitational pull of risk-off sentiment.

The Federal Reserve, which had signaled patience on rate cuts amid sticky inflation, now faces a familiar dilemma: energy-driven price pressures that monetary policy cannot easily address. Chair Powell's testimony next week will be scrutinized for any hint that the central bank views the spike as transitory noise or a more durable inflation input.

Our take

Markets had convinced themselves that the adults were back in the room on Iran policy. Tuesday's strikes are a reminder that geopolitical risk doesn't respect trading calendars or diplomatic press releases. The ceasefire was always a bet on restraint from two governments with limited recent track records of it. Investors who rotated out of energy hedges last week are now paying the tuition for that optimism.