Whether US-Iran Negotiations Are Real or Fake, Wall Street Has Already Obtained Clear Signals from Trump's Five-Minute Rally

On Monday, just minutes after Trump announced on Truth Social that he was abandoning plans to bomb Iran’s energy infrastructure, oil prices plummeted over 13%, U.S. Treasury yields dropped sharply, and U.S. stocks surged before the market opened.

Although less than an hour later, Iran denied Trump’s claims of ongoing negotiations, this did not reverse the overall market trend on Monday. Analysts point out that the market’s reaction was driven by a very clear signal: at least Trump himself is eager to end this war, which he initiated over three weeks ago and that has pushed the global economy to the brink of crisis.

Some analysts say that if the issue cannot be resolved within the next 7 to 10 days, we may see a global economic shutdown similar to the pandemic period. Today’s statements indicate that Trump realizes the real economy may face a “cliff-like decline.”

Trump’s actions triggered a volatile rebound lasting about five minutes, marking one of Wall Street’s most turbulent trading days since the U.S. and Iran went to war. This scene also recalls April last year, when Trump’s tariffs against “global America” pushed financial markets to the edge, only to quickly shift course afterward.

Media citing insiders report that, similar to then, Trump’s recent statements are partly aimed at reassuring anxious investors unsettled by market turbulence, to prevent a new round of sharp sell-offs at the start of the week.

After the market opened on Monday, the S&P 500 rose as much as 2.2%, its biggest gain since May. The two-year U.S. Treasury yield briefly tumbled 22 basis points to 3.79%. Brent crude oil plunged below $100 per barrel, the dollar weakened, and European equities and bonds turned from losses to gains and closed higher.

However, beneath the surface, doubts remain about whether Trump can easily end the conflict. As this sentiment spreads, early gains across various assets have been gradually given back. Investors generally suspect that Trump’s Monday statements are more about short-term market stabilization. By the close, the S&P 500’s gains had narrowed to about 1.2%, and the rally in U.S. bonds also slowed.

This market behavior highlights that mere verbal reassurance is insufficient to convince investors who are already prepared for long-term Middle East instability. Some worry that this situation is no longer entirely under Trump’s control—unlike tariffs, which could be halted at any time—and that those who felt reassured by his market-sensitive responses may have misjudged the situation.

In Trump’s first year back in the White House, traders gradually formed an expectation: whenever policies triggered a market plunge, he would quickly pivot. This phenomenon is known as the “TACO trade” (Trump Always Cowers Off), which also fostered a “buy the dip” mentality—whether threatening trade wars, proposing to take over Greenland, or criticizing the Federal Reserve.

But the Iran conflict has weakened this belief. Over the past few weeks, the escalation has continued: Trump sometimes claims victory is near, other times criticizes allies for not supporting him; Iran remains firm, blocking the Strait of Hormuz and cutting off critical global energy supplies.

The impact of Middle East tensions became more evident last week. Rising energy prices have added new inflationary pressures, prompting traders to bet that global central banks will be forced to raise interest rates further. This has intensified the risk of stagflation—weak growth combined with rising inflation—and caused global bond markets to lose over $2.5 trillion in market value, possibly the largest monthly decline in over three years.

It also underscores that the war is affecting other policy goals of the Trump administration—including lowering mortgage rates, reducing oil prices, and projecting economic strength ahead of the U.S. midterm elections this year.

Despite Trump’s repeated attacks on Fed Chair Powell for not cutting rates, as of last Friday, the two-year Treasury yield has risen more than 0.5 percentage points since the Iran conflict began, reflecting market concerns about inflation constraining policy space.

Some analysts note that while Trump is clearly trying to suppress oil prices, perhaps once again, it is the bond market that is forcing him to make concessions.

After last Friday’s stock decline and the S&P 500’s longest weekly losing streak in a year, Trump posted on social media that he was “very close” to achieving his goals and was considering reducing military operations in the Middle East.

He then threatened that if Iran does not reopen the Strait of Hormuz within 48 hours, he would attack its power facilities. But by Monday, he announced a five-day pause and claimed progress in negotiations—claims Iran denied.

Many see Trump’s inconsistent stance and inaccurate statements as undermining his credibility in financial markets, severely disrupting market positioning. Some analysts state:

The hardest thing to predict isn’t the war itself, but the White House’s communication style and how markets react to it. Markets can’t tell whether this is a credible sign of nearing the end or just another near-complete bluff.

The truth depends on perception, and Trump’s unpredictability adds layers of uncertainty on top of uncertainty, which limits the ability of confident bears to push markets lower further. This back-and-forth is buying the market time while also restraining overconfidence—good or bad.

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