U.S. stocks face the "final showdown," with the Strait of Hormuz deciding victory or defeat: the reckless never win, the patient laugh last.

After the breakdown of the ceasefire negotiations between the US and Iran, waves rise again in Hormuz—Goldman Sachs warns that US stocks are already caught in a "final battle."

According to Wind Chaser Trading Desk, on April 13, Shreeti Kapa, strategist at Goldman Sachs’ Global Banking and Markets division, published a market commentary titled "Equities - The Final Battle," giving insights on the current geopolitical situation and US stock trends.

During this round of Middle East conflict, the S&P 500 faced a maximum drawdown of about 9%, and basically recovered within a few days after the ceasefire news was announced. This is highly consistent with historical patterns—geopolitical shocks on average cause the S&P 500 to fall 8%, lasting for about 18 days. However, the bank believes that before a negotiation agreement is reached, risk-reward in the market is far from ideal.

Current risk-reward is not ideal: the situation is not resolved, yet the market has already rebounded to near historical highs. Short-term technical inflows are favorable, but without a complete negotiation agreement, it is hard to expect genuine buyers to enter.

Battle for Hormuz: History Never Favors the Bold

Goldman Sachs believes the direction of the Hormuz situation will be the "ultimate signal" for judging the outcome of the conflict.

Following the breakdown of the ceasefire talks, the US announced it would block the Strait of Hormuz. According to CCTV News, US Central Command declared it would impose a blockade on all maritimes traffic in and out of Iranian ports starting 10 am US Eastern Time, April 13.

Strategist Kapa wrote: The party that controls the Strait of Hormuz is the winner. But in history, no party has ever achieved its strategic goals solely through blockading or seizing key shipping choke points.

He cited historical lessons: whether it was the Suez Canal Crisis in 1956, Japan's control over the Strait of Malacca during WWII, or the "Tanker War" of the 1980s, "no party ever achieved strategic goals solely by blockading or occupying key straits." Kapa wrote:

The winner in a choke-point crisis is not the side that controls the geography, nor the one with the strongest navy. The winner is the one best at managing escalation dynamics, and at securing—or at least receiving—the acquiescence of the major powers that rely on this waterway.

In 1956, that major power was the United States. In 2026, the role falls to countries like India, Japan, and South Korea—the largest importers of Hormuz crude. Goldman believes their positions will directly determine whether Iran’s blockade becomes a bargaining chip or leads to isolation; whether America’s blockade can be sustained or is hard to maintain.

Report quotes a war maxim:

In war, the ability to endure pain often matters more than the ability to inflict pain.

The bank also warns that although the US may have full maritime superiority, it might not clear mines quickly enough—once a supply shock triggers an economic crisis, the initiative will shift again.

The verdict of history remains unchanged: The bold have never won, the winner is always the most patient party. Kapa believes that referencing the Montreux Convention framework may be a way out—acknowledge Iran’s geographic leverage, and exchange security guarantees for their willingness to keep the Strait open. But the report bluntly states:

Every historical precedent shows that military force alone will not produce this outcome. The only question is, how much price must the world pay for all parties to return to the negotiating table—and history says, that is the inevitable end.

Market Decline Consistent with History, But Risk-Reward Still Not Ideal

Back to the market, during this round of geopolitical conflict, the S&P 500 saw a maximum decline of about 9%, and regained most of the losses after the ceasefire news.

This closely matches historical patterns—geopolitical shocks on average trigger an 8% pullback in the S&P 500, lasting around 18 days, "but the range is wide." In recent years, most geopolitical shocks have limited long-term impact on the market, unless combined with tail risks like recession or monetary policy shocks.

However, the report is not optimistic about future market trends: "Are we completely out of danger? I don’t think so, because weekend negotiations apparently did not reach an agreement."

The judgment is direct: the stock market’s "risk-reward is not ideal." The reason is that the conflict is not fully resolved, and the market has already returned to near historical highs. Technical inflows may support the short term, but "it is hard to imagine that real buyers would emerge in the absence of a complete negotiation agreement."

The price movements over the past 6 to 8 weeks have clearly outlined the preference structure of the market:

Winners: AI optical network, AI data centers, storage and memory stocks—best performers since the start of the year, mild pullback during the conflict, the strongest rebound after the ceasefire. Energy stocks showed a moderate pullback post-ceasefire, but yearly performance remains robust, confirming the long-term structural demand for physical infrastructure.

Losers: Software, IT services, "AI risk exposure" stocks—constantly shorted during the conflict, and shorting further intensified after the ceasefire.

Tech Stocks: One of the Weakest Relative Performances in 50 Years, Yet Valuation Opportunities Are Emerging

Goldman strategist Peter Oppenheimer previously pointed out that the technology sector (hardware and software) is experiencing one of its weakest stages of relative returns in the last 50 years, due to ROI concerns among large-scale cloud vendors and risks of AI disruption.

"Investors are eager to avoid becoming the Kodak, IBM, Nokia, or Blackberry of the AI era."

Meanwhile, the market's terminal value assumptions for software and other long-duration growth stocks are starting to waver—in the past, these stocks benefited from unwavering confidence in continued high growth and historically low interest rates, both of which are now loosening.

Although the index is only a few percentage points off its historical high, Goldman's "long-term growth stock" portfolio remains more than 20% below its high from October 2025.

30% of this consists of software stocks, but even excluding software, the median P/E of non-software growth stocks is 29x, a 53% premium to the S&P 500 median, near the low end of the past 10-year range. These companies' consensus revenue growth for 2027 is three times the S&P 500 median. In contrast, electricity infrastructure related stocks have significantly outperformed since the beginning of the year.

The bank believes that current valuation compression is creating an attractive entry opportunity for investors, and the macro backdrop (moderate economic growth) overall favors growth stocks.

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