The Cboe Volatility Index collapsed 44% over the three weeks ending April 17, 2026, and hit a nine-week low of 16.87 on Friday as Iran reopened the Strait of Hormuz. U.S. President Donald Trump said Tehran had agreed to never close the waterway again.
That move put the market’s fear gauge into rare territory. A TradingView event study found seven prior episodes since 1970 in which the three-week VIX rate of change fell at or below negative 40%, and the current reading of negative 43.74 makes this the eighth. Six of the seven completed episodes were followed by positive S&P 500 returns a year later, with a median 12-month gain of 16.51%.
The pattern is not flawless. In December 2021, the VIX spiked on the emergence of the Omicron variant and then collapsed as the strain proved less severe than feared, but the S&P 500 still fell 3.81% over three months, 22.26% over six months and 16.43% over the following year, with a maximum drawdown of 24.8%.
Still, the broader record leans higher. Across all eight episodes, the S&P 500 averaged a gain of 0.87% in the following month, 5.09% over three months, 6.97% over six months and 14.37% over the following year. For now, the sharp drop in the cboe volatility index looks less like a warning signal than a market moving quickly past a fresh geopolitical shock.
