Regardless of Whether US-Iran Negotiations Are Real or Fake, Wall Street Has Already Received a Clear Signal From the Five-Minute Surge Triggered by Trump

At 7:05 a.m. Eastern Time, Donald Trump posted on Truth Social to temporarily halt the threat of bombing Iran’s energy infrastructure. Just minutes later, oil prices plummeted over 13%, U.S. Treasury yields dropped sharply, and traders hinted that the stock market would open soaring.

Although Iran quickly rebutted Trump’s statement within an hour, denying negotiations were underway, Wall Street received a clear message: At least Trump is eager to end this war, a conflict he initiated more than three weeks ago that has pushed the global economy to the brink of crisis.

“If this issue isn’t resolved within the next 7 to 10 days, the global economy could face a shutdown similar to during the pandemic,” said Marko Papic, Chief Strategist at BCA Research. “Today’s statement indicates that Trump realizes the real economy could collapse dramatically.”

Trump’s move triggered a five-minute rally, making Monday the most volatile trading day on Wall Street since the outbreak of the U.S.-Iran conflict. This also recalled last April’s market reversal, when Trump temporarily paused trade war measures, pulling global financial markets back from the edge of collapse.

Sources familiar with the matter said that, like last time, this statement was partly aimed at calming nervous investors affected by the war, preventing another painful sell-off at the start of the week.

After the market opened on Monday, the S&P 500 rose as much as 2.2%, the largest gain since May. The two-year Treasury yield briefly fell 0.22 percentage points from its high to a low of 3.79%. Brent crude oil prices fell below $100 per barrel, the dollar declined, and European stock markets and bond markets rebounded strongly, closing higher.

However, deeper questions remain: can Trump end this war as easily as he started it? As this sentiment grew, early gains gradually faded, highlighting the limited ability of the president’s rhetoric to reassure investors. The market is now preparing for the possibility of prolonged turmoil in the Middle East.

Brad Conger, Chief Investment Officer at Hirtle Callaghan, said, “I’m worried this is no longer something Trump can control, unlike tariffs that could be stopped at any time. Those who feel encouraged by Trump’s quick market reactions are mistaken.”

During Trump’s first year back in the White House, traders developed an expectation: once policy changes triggered a market crash, Trump would quickly pivot. This widely known “TACO” (Trump Always Cowers) trade reinforced the market’s tendency to buy on dips amid threats of trade wars, discussions of invading Greenland, and criticisms of the Federal Reserve.

However, the Iran conflict has weakened this belief. Over the past few weeks, the escalation has continued, with Trump sometimes claiming progress and other times criticizing allies for not supporting the U.S. Iran’s leadership still controls the country and has cut off vital energy supplies by closing the Strait of Hormuz.

This impact became more evident last week. As energy prices surged, potentially fueling new inflation shocks, traders began betting that central banks worldwide would raise interest rates further. This heightened stagflation risks and caused global bond markets to plunge by over $2.5 trillion, the largest monthly decline in more than three years.

It also underscores that this war is undermining other policy goals of the Trump administration, including lowering mortgage rates, reducing oil prices, and demonstrating economic growth ahead of this year’s congressional elections.

Trump has repeatedly criticized Federal Reserve Chair Jerome Powell for not lowering borrowing costs. As of Friday, the two-year U.S. Treasury yield had risen more than 0.5 percentage points since the outbreak of the conflict, reflecting market concerns that inflation will constrain the Fed.

Tom Garretson of RBC Wealth Management said, “Although Trump has clearly been trying to suppress oil prices, perhaps this time it was the bond market that forced his hand.”

After a sharp decline in U.S. stocks last Friday 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 gradually reducing military operations in the Middle East.

But he later threatened that if Iran did not reopen the Strait of Hormuz within 48 hours, the U.S. would attack its power facilities. By Monday, Trump announced a five-day delay in the energy infrastructure strikes, claiming progress in negotiations, though Iran denied any talks were underway.

Many market participants see Trump’s stance as inconsistent, and his long history of false statements, exaggerations, and untruths has undermined his credibility in financial markets.

Mizuho Bank strategist Jordan Rochester said, “The information coming from the White House has seriously disrupted positioning.”

In a client report, he wrote, “The hardest part isn’t predicting the war’s course but predicting how the White House will communicate and how the market will react. Right now, the market is confused, unsure whether this is a credible signal that the conflict is nearing an end or just another ‘almost settled’ moment.”

Investors doubt whether Trump’s Monday comments are merely short-term measures to boost the market. By the close, the S&P 500’s gains had narrowed to about 1.2%. U.S. Treasury yields also retreated.

“Truth depends on perception, and Trump’s unpredictability only increases uncertainty, which suppresses the short-sellers who were confident earlier,” said Michael Kantrowitz, Chief Investment Strategist at Piper Sandler & Co. “All these reversals buy time and prevent overconfidence in the market, whether for better or worse.”