Are the US-Iran negotiations real or fake? At least Wall Street has already received a clear signal from the five-minute surge triggered by Trump.

Why is Trump eager to end the US-Iran conflict to avoid an economic crisis?

On Monday, just minutes after Trump announced on Truth Social that he was abandoning plans to bomb Iran’s energy infrastructure, oil prices plummeted by more than 13%, US Treasury yields dropped significantly, and US stocks surged in pre-market trading.

Although less than an hour later, Iran denied Trump’s claim that negotiations were underway, this did not reverse the overall market trend on Monday. Analysts pointed out that the market’s behavior was clear: at least Trump himself is eager to end the war he started over three weeks ago, which has pushed the global economy to the brink of crisis.

Some analysts stated that if the issues are not resolved within the next 7 to 10 days, we could see a global economic halt similar to that during the pandemic. Today’s statements indicate that Trump realizes the real economy may face the risk of a “cliff-like drop.”

Trump’s actions triggered a sharp rebound lasting about five minutes and marked one of the most turbulent trading days on Wall Street since the US and Iran went to war. This scene also recalls last April when Trump initiated “America against the world” tariffs, pushing the global financial markets to the edge, only to quickly shift course.

Media reports citing informed sources indicated that, similar to then, Trump’s statements this time were partly to reassure anxious investors due to market turbulence, aiming to avoid a new round of severe sell-offs as a new week begins.

After the US stock market opened on Monday, the S&P 500 index rose as much as 2.2%, marking its largest increase since May, the two-year Treasury yield plummeted 22 basis points from its peak to 3.79%, Brent crude oil fell sharply below $100 per barrel, the US dollar weakened, and European stock and bond markets turned from declines to gains and closed higher.

However, beneath the surface, the market still doubts whether Trump can easily end the conflict. As this sentiment spread, the early morning gains across various assets gradually faded. Investors generally suspect that Trump’s statements on Monday were more of a short-term measure to stabilize the market. By the close of the US stock market on Monday, the S&P 500’s gains had narrowed to about 1.2%, and the bond market’s upward trend also eased.

The aforementioned market trends highlight that mere verbal reassurances are insufficient to convince those investors who are already preparing for long-term instability in the Middle East. Some are concerned that this is no longer entirely within Trump’s control; unlike tariffs, which can be halted at any time, those who feel reassured by his sensitivity to market reactions may be misjudging the situation.

In Trump’s first year back in the White House, traders gradually formed an expectation: whenever policies triggered a market downturn, he would often shift direction quickly. This phenomenon is referred to as “TACO trading” (Trump Always Caps Off), which also fueled a “buy the dip” trading mentality—whether it was the threat of a trade war, proposing to take over Greenland, or criticizing the Federal Reserve.

However, the war with Iran has weakened this belief. In recent weeks, the conflict has escalated: Trump has alternately proclaimed victory is near and blamed allies for not providing support; Iran remains steadfast, cutting off global key energy supplies by blocking the Strait of Hormuz.

The impact of the conflict in the Middle East became increasingly evident last week. Energy prices soared, causing new inflationary shocks, and traders began betting that global central banks would be forced to raise rates further. This exacerbated the risk of “stagflation,” where weak growth combines with rising inflation, leading to a loss of over $2.5 trillion in the global bond market, potentially marking the largest monthly decline in over three years.

This also underscores how the war is impacting other policy goals of the Trump administration—including lowering mortgage rates, reducing oil prices, and projecting a robust image of the US economy ahead of this year’s midterm elections.

Despite Trump repeatedly criticizing Federal Reserve Chairman Powell for failing to cut rates, as of last Friday, the two-year Treasury yield had risen over 0.5 percentage points since the Iranian conflict began, reflecting market concerns about the constraints on inflationary policy space.

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

After the stock market declined on Friday, with the S&P 500 recording its longest weekly losing streak in a year, Trump stated on social media that he was “very close” to achieving his goals and was considering scaling back military operations in the Middle East.

He then threatened that if Iran did not reopen the Strait of Hormuz within 48 hours, he would attack its power facilities. But by Monday, he stated he would pause operations for five days and claimed that negotiations were making progress—an assertion denied by Iran.

To many, Trump’s fluctuating stance and inaccurate statements are undermining his credibility in the financial markets, severely disrupting market positioning. One analyst bluntly stated:

The hardest thing to predict is not the war itself, but how the White House communicates and how the market reacts to it. The market cannot determine whether this is a credible signal that the end is near or just another claim of near fulfillment. The so-called truth depends on perception, and Trump’s unpredictability layers uncertainty upon uncertainty, which in turn limits the ability of previously confident bears to drive the market further down. This kind of back-and-forth is buying time for the market while also curbing excessive confidence—regardless of whether it is good or bad.