Executive summary
- The ceasefire between the U.S., Israel, and Iran is a meaningful de-escalation, but remains fragile and conditional
- Markets have responded positively, though risk premia suggest investors had already been looking through the conflict
- Energy prices are likely to ease, but remain elevated enough to keep pressure on inflation and growth
- The more important shift is structural, not cyclical, geopolitical fragmentation is becoming embedded
- Markets are still pricing this as a contained shock, not a regime change
A pause, not an end
The announcement of a ceasefire is the clearest signal so far that the conflict may be moving toward de-escalation. Markets have responded accordingly.
But the agreement itself is incomplete.
It hinges on unresolved issues, most notably the reopening of the Strait of Hormuz and the terms under which energy flows resume. At the same time, key elements of the proposed framework, including sanctions relief, uranium enrichment, and the withdrawal of U.S. forces, remain difficult to reconcile without meaningful compromise.
There is still a credible path where this breaks down.
That is the starting point, not the risk case.
Markets were already looking through it
What stands out is how little damage was done to risk sentiment during the escalation.
Across equities, rates, and credit, risk premia moved only modestly and remain low relative to history. Even before the ceasefire rally, markets were not pricing a sustained deterioration in financial conditions.
That tells us something important.
The drawdown we did see was not driven by a loss of confidence. It was a repricing of oil and, by extension, a repricing of monetary policy expectations.
In other words, this behaved more like a macro shock than a financial one.
Energy still does the work
The ceasefire matters because of what it means for energy.
Prices have come off their highs, but the path from here is unlikely to be a straight line back to pre-conflict levels. Disruptions to shipping and infrastructure, even if partially resolved, leave a residual premium in place.
Our baseline view reflects that:
- Oil prices fall, but remain elevated through the year
- Brent averages around $95 per barrel in Q2 before easing toward $80 by Q4
Even the mechanics of reopening the Strait of Hormuz introduce frictions. Transit fees alone could add roughly $1 per barrel, modest in isolation, but indicative of a more complex operating environment.
The transmission is familiar.
Higher energy prices feed into inflation, which in turn shapes expectations for policy and growth. Our current estimates, inflation in developed markets still moves higher from here, peaking between roughly 3.5% and 4.5%, while growth slows but holds.
This is not a benign shock. It is just not a systemic one. The shock is real but is just not a destabilizing one.
Volatility is rising, but risk is not being repriced
There is a disconnect building beneath the surface.
Volatility has picked up, not just during this conflict, but across a series of recent geopolitical events. Yet investors have not demanded materially higher compensation for risk.
Historically, that combination does not tend to persist.
Either volatility fades, or risk premia adjust.
For now, markets are assuming the former. The working assumption appears to be that these are isolated events rather than part of a broader shift.
That may prove too optimistic.
The structural story is still in place
Even if the ceasefire holds, the broader backdrop has not changed.
The global economy is becoming more fragmented. Tensions between major blocs, particularly the U.S. and China and their respective spheres of influence, are not cyclical.
They are persistent.
What that means in practice is straightforward:
- Supply chains remain exposed to disruption
- Energy markets retain a geopolitical premium
- Policy responses become more reactive
Over time, that should be reflected in higher risk premia.
Markets are not there yet.
Portfolio perspective
The shift in narrative has been quick. It usually is.
Markets move from pricing escalation to pricing resolution far faster than the underlying economics adjust. That has been the pattern again here.
From our perspective, a few things stand out.
First, the resilience in risk assets tells us that positioning was never built for a prolonged shock. Investors were already inclined to look through it.
Second, energy continues to be the dominant transmission channel. That has implications not just for inflation, but for how policy expectations are formed and repriced.
Third, the frequency of these episodes is increasing. Even if each one is treated as temporary, the cumulative effect is not.
We continue to approach this from a portfolio construction standpoint that prioritises resilience over precision.
That means maintaining exposure to growth assets but ensuring that the sources of return are not overly reliant on a single macro outcome. It also means recognising that volatility may remain elevated, even if markets are slow to reprice risk.
In this environment, the objective is not to react to each development. It is to ensure that portfolios can absorb them.
Closing thought
The ceasefire reduces the immediate pressure on markets.
It does not resolve the forces that created it.
Markets are increasingly treating this as the end of a conflict. It may instead prove to be another step in a broader transition toward a more fragmented and less predictable global system.
That distinction is where the real risk sits.
Sincerely,
Corrado Tiralongo (he/him)
Vice President, Asset Allocation & Chief Investment Officer
Canada Life Investment Management Ltd.
The views expressed in this commentary are those of Canada Life Investment Management Ltd. as at the date of publication and are subject to change without notice. This commentary is presented only as a general source of information and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax or legal advice. Prospective investors should review the offering documents relating to any investment carefully before making an investment decision and should ask their financial security advisor for advice based on their specific circumstances.
This material may contain forward-looking information that reflects our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of April 9, 2026. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.
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