At what oil price will Trump "back down"? Traders have figured it out!

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Investors are looking for the “pain points” that could prompt Trump to change his policy on Iran war, as his social media posts are causing sharp fluctuations in the oil market.

Since initiating Middle East conflicts, Trump has often increased threats against the Iranian regime during weekends when markets are closed, hinting at peace when oil prices rise. These signals are part of his administration’s efforts to curb gasoline inflation in the months leading up to the midterm elections—when affordability issues will become a key voter concern.

This pattern highlights the importance of conflict progression in the oil market and the White House’s at least partial success in preventing runaway crude prices so far.

“Clearly, (Trump) is afraid of high gasoline prices… surpassing $4 a gallon is a political killer,” said Jorge Montepeque, oil analyst at Onyx Capital Group. “On the other side of the ledger is his pride. He can’t be seen as a failure.”

Brent crude hit above $119 per barrel on March 9 and has been highly volatile in recent weeks, due to Iran’s attacks on ships crossing the Strait of Hormuz and energy facilities in the Gulf region.

U.S. consumers and businesses are starting to feel the impact: gasoline prices have risen over a third, approaching $4 per gallon, while diesel prices—crucial for industry—have exceeded $5.

A senior energy trader pointed out a clear pattern: whenever U.S. oil prices approach $95 to $100 per barrel, government conciliatory rhetoric intensifies, and speculation about possible government intervention in the oil market heats up. Currently, U.S. oil prices are about $10 lower than Brent. They said this “verbal intervention” has so far helped keep prices in check. But they also warned that if physical shortages begin to appear, markets could surge significantly.

Some traders believe that given the scale of disruption caused by the Iran conflict, prices should be higher, but few dare to challenge the interventions—via social media posts and TV interviews—by Trump, which they see as aimed at suppressing prices.

White House spokesperson Taylor Rogers said, “These claims are completely false. President Trump has been fully transparent with the American people about these temporary, short-term disruptions. He is focused on doing the right thing—eliminating threats from the Iranian terrorist regime to the U.S. and our allies.”

Since last year’s back-and-forth on tariffs—when he repeatedly reversed course, giving rise to the term “Trump Always Cowers” (TACO)—investors have become accustomed to Trump’s unpredictable decision-making style. But conflicting messages over the past week have taken his unpredictability to a new level.

Since last Friday, the U.S. government has threatened to release hundreds of millions of barrels from strategic petroleum reserves, deployed elite paratroopers of the 82nd Airborne to the Middle East, and threatened to “destroy” Iran’s power plants, while hinting that peace negotiations with unidentified Iranian officials are progressing smoothly.

Mike O’Rourke of Jones Trading in New York said, “With so many competing headlines—some pointing to escalation of the Iran war, others to de-escalation—we’ve entered a realm of fiction.”

Meanwhile, borrowing costs in the U.S. have risen to nearly 12-month highs, as rising oil prices boost inflation expectations and traders acknowledge that the Federal Reserve may not cut rates this year. The benchmark 10-year U.S. Treasury yield has increased about 0.4 percentage points this month, its worst performance since late 2023.

Speculation about when the next “TACO moment” will arrive has become Wall Street’s latest obsession. Maximilian Uleer, head of cross-asset strategy at Deutsche Bank, developed a “Stress Index” this week as an indicator of “upcoming U.S. rhetoric or strategic shifts.”

The index considers changes in Trump’s approval rating over a month, one-year inflation expectations, the performance of the S&P 500, and U.S. Treasury yields.

Uleer said, “If the index rises, the likelihood of a strategic shift by the U.S. government increases. If all four pain points are hit, the motivation to adjust is very high.” The index is currently near its highest level since Trump’s return to the White House.

Monica Defend, head of research at Amundi Investment Institute, said Trump has become “much more sensitive” to U.S. Treasury yields during his second term. “Once the 10-year Treasury yield approaches 4.5%, the government gets very nervous, and usually takes action. As an investor, you need to anticipate this.”

Other investors are just waiting for the chaos to pass, too worried about being caught off guard by Trump’s next post on Truth Social. One chief investment officer of a North American hedge fund said, “We’re all doing the same thing—nothing. You can’t short oil because it could easily surge to $150. Or the war could end in five minutes.”