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 cuts and supporting a prolonged pause.”—EY-Parthenon chief economist Gregory Daco and senior economist Lydia Boussour.
• “The labor market is healthy enough to withstand an extended period of steady interest rates as the Fed focuses on the inflation side of its dual mandate. In our May baseline, we’ll push back the next rate cut from June to Dec.”—Oxford Economics lead economist Nancy Vanden Houten.
• “Assuming the U.S. economy avoids downside risks from the Iran War, its next challenge will likely be a labor shortage.”—Bill Adams, chief U.S. economist, Fifth Third Commercial Bank. 

There’s one fly in the ointment … fewer Americans are even trying

The U.S. labor force participation rate fell to 61.8%, the lowest it has been under the Trump administration. The long term trend is down, too. That’s maybe one reason why people feel unhappy even though, technically, we’re living through good times—there are simply more people not working. (One reason the unemployment rate stayed low even though fewer people are working is that not all people who want jobs are counted as “unemployed.”)  

MORE FROM FORTUNE

‘This is the way’: Elon Musk endorses Warren Buffett’s famed 5-minute plan to fix the national debt - Jacqueline Munis

Market guru Yardeni sees S&P 500 hitting 8,250 this year, highest among top Wall Street forecasters, as earnings bolster ‘Roaring 2020s’ - Jason Ma

Forget the Rust Belt or the Sun Belt. The ‘Wired Belt’ may be the next frontier of American political power - Jake Angelo

World’s largest oil company reports 25% profit jump as exports via Saudi Arabia’s East-West Pipeline bypass Strait of Hormuz closure - The Associated Press

The global economy is experiencing the largest capex cycle ever, with nearly $5 trillion seen by the end of the decade—and it’s not all AI spending - Jason Ma

CHART OF THE DAY

Trump’s poll ratings are negative across the board

President Trump's poll ratings are negative on immigration, the economy, trade, and inflation. The cost of living and the war with Iran are likely culprits, according to Deutsche Bank.

NUMBER OF THE DAY

194 million

The backlog in metric tons of all the cargo that has failed to make it through the Strait of Hormuz since it was blockaded. Volumes shipped through the Strait have declined 94% since the war, according to Bank of America Institute. “Even if shipping was to resume shortly, this logjam may take significant time to resolve itself,” BofA’s Liz Everett Krisberg and David Tinsley told clients in a note.

THE FRONT PAGES TODAY

Keir Starmer to promise ‘urgent’ change as he fights for his political future - FT

America's job market optimism gap is the worst in the world - Axios

Fortress Co-Founder Allegedly Extorted by Sexual Partner - FT

Ships’ Signals Go Haywire as Hormuz Strait Tensions Escalate - Bloomberg

What Middle Powers Fear About the Trump-Xi Summit - NYT

Iranian heiress’s sneaky tactic to shield millions from husband in bitter $200M divorce battle - NY Post

ONE MORE THING

Study: Women are judged more harshly for using AI, for no apparent reason

Women are perceived more negatively for using AI than men, a new study has found, using a comically elegant method for demonstrating double standards. In the experiment, people were asked to look at a résumé and were told that the document was created with the help of AI. Half the subjects in the test were given a résumé written by “James Clarke” and the others were given résumés from “Emily Clarke.” James’ résumé received a 97% approval rating while Emily’s identical résumé was rated at 76%.

In the feedback section, recipients of the woman’s résumé said, “She can’t even write a CV herself—not sure she has the skills to carry out the job.” But a comment on James’ résumé said: “He just needed a bit of help putting it together.”

• Solution: Take the names and photos off résumés when considering job candidates.