‘As long as the Strait of Hormuz stays closed, markets remain on a knife-edge,’ Deutsche Bank warns

Good morning. On Fortune’s radar today:

- The “six-week” war enters week 11.

- Markets: Record highs on “a knife-edge.”

- Wall Street admits it was wrong about the U.S. economy.

- Trump’s dismal poll ratings.

- How big is the backlog in the Strait of Hormuz?

- When men use AI it’s good, but when women use it, it’s bad, a depressing survey shows.

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THE MARKETS

Stocks take a breather after record highs in the U.S. and South Korea

- S&P 500 futures were flat this morning. The index rose 0.84% on Friday to set a new record high, at 7,398.93.

- In Europe, the Stoxx 600 was down 0.16% in early trading and the U.K.’s FTSE 100 was up 0.13% before lunch.

- Asia: South Korea’s KOSPI was up 4.32% to set a new all-time high. The index is up an astonishing 81.51% year-to-date. Japan’s Nikkei 225 was down 0.47%. India’s Nifty 50 fell 1.1%. China’s CSI 300 gained 1.64%.

- Brent crude was $104 per barrel this morning, up from a low of $94 the day before.

- Bitcoin was at $80.8K.

IRAN

“As long as the Strait of Hormuz stays closed, markets remain on a knife-edge”

No end in sight: As we enter the 11th week of the “six-week” war against Iran, hopes are fading that the U.S. and Tehran will come to terms anytime soon. President Trump yesterday blasted Iran’s response to his peace proposals as “TOTALLY UNACCEPTABLE.” He accused Tehran of “playing games” with the U.S., but added, “They will be laughing no longer!”

"I don't like their letter. It's inappropriate. I don't like their response," Trump told Axios. "They have been tapping along many nations for 47 years."

Tehran wants compensation for war damage and control over the Strait of Hormuz, according to the BBC.

“It’s not over”: Separately, Israeli Prime Minister Benjamin Netanyahu told CBS that the war won’t end until Iran’s nuclear and military capabilities are completely eliminated: “It's not over, because there's still nuclear material, enriched uranium that has to be taken out of Iran. There are still enrichment sites that have to be dismantled. There are still proxies that-- Iran supports. There are ballistic missiles that they still want to produce. Now, we've degraded a lot of it. But all that is still there, and there's work to be done.”

What Wall Street is saying: “The basic problem for markets remains—reopening the Strait of Hormuz depends on Iran, there is little information about the Iranian government’s position, and information from other sources (including the U.S.) cannot be considered reliable,” Paul Donovan said in a note this morning.

“The absence of any meaningful kinetic activity for over a month suggests to me a firm U.S. preference for reaching a deal. … It remains an unusual conflict with little action now for a month. In simple terms though, as long as the Strait of Hormuz stays closed, markets remain on a knife-edge. Polymarket currently assigns a 50% probability to it fully reopening by 30 June,” Deutsche Bank’s Jim Reid said.

"Last week's optimism that a Middle East peace deal could be reached ahead of President Trump's visit to China ... has been dashed," Chris Turner at ING said in a note. "Barring some intense behind-the-scenes pressure from China to secure a deal, the market will continue to price an impasse, higher oil prices and a wave of global inflation."

- China: Trump is scheduled to meet Xi Jinping later this week.

THE JOB MARKET

The American economy is “so much better than what the doom crew has been saying”

Last week’s U.S. jobs number came in waaay above expectations—115,000 new roles created—and economists have reset their assessments of the economy pretty dramatically. Just weeks ago, the talk was of a possible recession or stagflation. Today, the uplands are so broadly sunlit that most analysts say future interest rate cuts from the Fed are now likely pushed off into the far distance. Here’s a sampling of their commentary:

- “The economy is so much better than what the doom crew has been saying.”—Chris Zaccarelli, chief investment officer at Northlight Asset Management.

- “This report should give investors confidence that stagflation or recession fears are unfounded, especially if the Iran conflict is nearing a resolution.”—John Luke Tyner, portfolio manager & head of fixed income at Aptus Capital Advisors.

- “Not too hot and not too cold, no change in the unemployment rate all adds up to likely no more rate cuts in the near term. This report does push away fears of a recession any time soon.”—Brian Mulberry, chief market strategist at Zacks Investment Management.

- “Steady labor conditions alongside rising inflation risks are raising the bar for rate