Citadel: Iran tail risk trimmed; stocks and bonds to rally

Citadel Securities says the worst-case tail risk from the Iran conflict has been substantially truncated, leaving stocks and bonds poised for a rally, the firm wrote in a client note on April 13, 2026.

Nohshad Shah, a strategist at Citadel Securities, wrote that Iran’s leadership is focused on regime survival and that China has incentives to press for de-escalation. In the note, he wrote, “we appear to have substantially truncated the tail of the worst-case scenario” and added the conflict’s “end game” may be approaching as costs rise for both Washington and Tehran.

Shah acknowledged risks remain, including a U.S.-led blockade of the Strait of Hormuz, but wrote that a resolution is beginning to take shape. He argued the shifting incentives make extreme outcomes less likely, which could reduce risk premia across asset classes if tensions do not escalate further.

On Monday, the S&P 500 rose 1.02% to 6,886, nearly erasing its losses since the conflict began in late February. The Nasdaq Composite climbed 1.23%, the Russell 2000 gained 1.5% and the Dow Jones Industrial Average added 0.6%. The S&P extended a winning streak that began the prior week, its longest since October 2025.

JPMorgan Chase strategists recommended buying pullbacks and projected a possible V-shaped rebound over a three- to 12-month horizon while noting near-term volatility may persist. Tom Lee, chairman of BitMine, projected the market had likely bottomed and said the S&P could reach record highs later this year.

Analysts cautioned that geopolitical outcomes remain uncertain and short-term volatility could continue. Citadel framed the current state as a reduction in the probability of the worst outcomes rather than a full resolution, and markets remain sensitive to new developments.

The Iran conflict intensified in late February, prompting sanctions and a U.S.-led naval posture in the Gulf, including actions affecting shipping through the Strait of Hormuz. Recent diplomatic signals from regional and global actors and the economic and political costs of prolonged confrontation have led some market participants and advisory firms to reassess risk exposure.