Hair-raising 11 hours! Trump “waved the baton” — the financial markets were thrown into stormy turmoil

In the past 11 hours, the Iran–U.S. standoff moved from “imminent trigger to action” to an emergency stop, causing major volatility in financial markets: U.S. stocks turned from down to up, and oil prices surged high before plunging again.

Let’s sort out the link between the Iran–U.S. conflict–related events from the past half day and how the financial markets performed:

Based on reports from media including CCTV News, Trump repeatedly threatened Iran, saying that the final deadline for reaching a ceasefire agreement is 20:00 U.S. Eastern Time on April 7 (8:00 Beijing time on April 8); otherwise, Iran’s entire country could be completely destroyed overnight. On Tuesday at 8 p.m. Beijing time, he posted another threat to Iran on social media, saying, “Tonight, a civilization will perish completely, never to return.”

Driven by this news, U.S. stocks clearly fell in the early session on Tuesday: the Nasdaq briefly dropped by more than 1.7%, and the S&P 500 Index’s decline also once reached 1.1%, while international oil prices kept climbing.

In the afternoon session, as U.S. Vice President Vance said that military objectives had been completed, and sources said that negotiations between the U.S. and Iran had made a slight bit of progress, oil prices pulled back somewhat.

The decisive moment came as U.S. stocks neared the close, when Pakistan’s Prime Minister Shehbaz posted on social media that he asked Trump to extend the “final deadline” by two weeks, and also asked Iran to open the Strait of Hormuz for two weeks as a show of goodwill.

White House press secretary Levitt said Trump had received the plan proposed by Pakistan and would respond. A senior Iranian official said that Iran is actively considering the “two-week ceasefire” request put forward by Pakistan.

In the final minute, the S&P and the Nasdaq turned from danger to rise, both achieving a “five-day winning streak.” As of the close, the S&P 500 Index rose 0.08%, the Nasdaq Composite rose 0.1%, and both have been up for five straight trading days.

After the close of U.S. stocks, Trump also issued a major statement at 6:30 a.m. Beijing time on Wednesday, saying that he agreed to suspend bombing and attacks on Iran within two weeks, provided that Iran agrees to fully, immediately, and safely open the Strait of Hormuz. Iran’s Supreme National Security Council also said it accepted the ceasefire proposal put forward by Pakistan.

Driven by this news, all three major U.S. stock index futures rose by nearly 2% after hours, including Nasdaq futures, whose gains briefly expanded to nearly 3%. International oil prices, meanwhile, fell sharply on the news: both Brent crude futures and West Texas Intermediate crude futures briefly dropped by around 16%; as of the time of this release, the declines were slightly narrowed.

Gold and other precious metals rose in early trading: international spot gold surged sharply, hitting 4,857.46 U.S. dollars per ounce at one point during the day. As of the time of this release, the gain had narrowed slightly to 2.34%, at 4,816.09 U.S. dollars per ounce. Spot silver rose 4.2% to 76.02 U.S. dollars per ounce.

Overall, it’s hard not to think of Trump’s “TACO playbook.” No wonder—against the backdrop of Iran’s hardline standoff and steadily falling poll approval ratings, TACO seems to be Trump’s only option.

“TACO trade” (Trump Always Chickens Out), meaning “Trump always backs down at the last minute,” describes the mindset of Wall Street traders: whenever “certain events” cause financial markets to fall too hard, Trump backs off—for example, multiple earlier instances such as the trade war Trump launched, his threats to seize Greenland, and his criticism of the independence of the Federal Reserve.

The Strait of Hormuz is still the focus

Although the two-week ceasefire is underway, the Strait of Hormuz (through which 20% of global oil supply must pass) remains the focal point of the dispute.

Trump emphasized that the “fully, immediately, and safely opening” of the Strait of Hormuz is a precondition for the ceasefire. Iran, in turn, stressed the relevant items in its “ten-point plan” submitted to the United States: coordinating with Iran’s armed forces to control passage through the Strait of Hormuz; establishing a security transit protocol in the Strait of Hormuz to ensure Iran has a leading position.

Facet’s Chief Investment Officer Tom Graff of the asset management firm commented that investors should expect oil prices to remain above pre-war levels for the long term, and that the upside is “quite significant.” He viewed Iran’s move to blockade the strait as a form of “bargaining chip.”

He noted that although Iran may want to reopen the strait on its own terms rather than on the U.S.’s terms, a permanent closure of the strait is not beneficial to any side, including Iran itself. Graff said he does not believe that closing the strait for months or longer is sustainable; at some point, the situation will turn.

Uncertainty is still very high

Sameer Samana, global head of equities and real assets at the investment research institute of Wells Fargo, said: President Trump’s negotiation strategy is to maximize the creation of uncertainty, which runs counter to the market’s tendency to dislike uncertainty.

“We believe this strategy will continue throughout his entire term, because he needs to negotiate and renegotiate about various scenarios and agreements—so the market should keep this in mind,” he added.

Doug Peta of BCA Research, a market research firm, also said that because new developments keep coming in, the risk of new market volatility events hitting the stock market makes it difficult for traders to stay out of it.

“Uncertainty is extremely high, because the U.S. might exit the conflict within the time needed to share a post on Truth Social, or it might escalate the conflict significantly—and the differences in outcomes are so vast,” he added.

（Source: Caixin Finance）