Stocks and bonds can rally in tandem as the Iran conflict moves closer to a resolution that avoids escalation, even as the stalemate around the Strait of Hormuz continues, according to Citadel Securities.

While a formal agreement remains elusive, both the US and Iran have an incentive to eventually reach a deal because the costs of further escalation are too high, Nohshad Shah, head of EMEA fixed-income sales at the firm, wrote in a client note.