Global Markets Escape Near Death: Trump Post Triggers Stunning 5-Minute Reversal

Why is the market’s trust in Trump’s posts so short-lived?

At 7:05 a.m. Eastern Time on Monday, U.S. President Donald Trump posted on Truth Social, saying he was suspending threats to bomb Iran’s energy infrastructure. Within minutes, global financial markets reversed sharply: oil prices plummeted over 13%, U.S. Treasury yields dropped significantly, and U.S. stock futures surged.

Although less than an hour later, Iran denied Trump’s claims that negotiations were underway, this did not reverse the overall market trend for the day. But the signal Wall Street took from this event was very clear — at least Trump himself is eager to end a war he initiated more than three weeks ago, which has pushed the global economy to the brink of crisis.

Trump’s post triggered a strong rebound lasting about five minutes and became the most volatile trading day on Wall Street since the U.S.-Iran conflict began.

After the U.S. stock market opened on Monday, the S&P 500 rose as much as 2.2%, hitting its largest intraday gain since May; the two-year U.S. Treasury yield fell 22 basis points from its high to 3.79%; Brent crude oil fell below $100 per barrel; the dollar weakened, and European equities and bonds turned from decline to gains, eventually closing higher.

However, as concerns grew over whether Trump could easily end the conflict, gains across various assets gradually eroded in early trading. By the close, the S&P 500’s gains narrowed to about 1.2%, and the rally in U.S. bonds also slowed.

“TACO Trade” Under Test

Marko Papic, Chief Strategist at BCA Research, said that 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. He pointed out that Trump’s statement that day indicated he was aware of the risk of a “cliff-like decline” in the real economy.

Bloomberg, citing sources, reported that, similar to last April when Trump quickly shifted after market volatility caused by trade war tensions, this time his statement was partly aimed at reassuring anxious investors worried about market turbulence, to prevent a new round of heavy selling at the start of the week.

Since Trump returned to the White House, markets have gradually formed an expectation: once policies trigger a market plunge, he tends to quickly pivot. This phenomenon is called the “TACO trade” (Trump Always Cowers), which fosters a “buy the dip” mentality — whether facing trade threats, comments about taking Greenland, or criticisms of the Federal Reserve.

However, the war with Iran has weakened this belief. Over the past few weeks, the conflict has escalated, with Trump sometimes claiming victory, other times blaming allies for not supporting him. Iran has responded by blocking the Strait of Hormuz, cutting off a key global energy supply.

The impact of Middle East tensions became more evident last week. Rising energy prices brought new inflation pressures, and traders began betting that global central banks would be forced to raise interest rates further, increasing the risk of stagflation. The global bond market saw over $2.5 trillion in market value evaporate, possibly the largest monthly decline in over three years.

Repeated Statements Undermine Credibility

Analysts note that the war is affecting other policy goals of the Trump administration, including lowering mortgage rates, reducing oil prices, and projecting economic stability ahead of the U.S. midterm elections this year. Tom Garretson of RBC Wealth Management said that although Trump is clearly trying to suppress oil prices, perhaps once again, the bond market forced him to make concessions.

After last Friday’s sharp decline in U.S. stocks, 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 did not reopen the Strait of Hormuz within 48 hours, he would attack its power facilities. By Monday, he announced a five-day pause and claimed negotiations were making progress — a statement Iran denied.

Many market participants see Trump’s inconsistent stance and inaccurate statements as eroding his credibility in financial markets.

Jordan Rochester, a strategist at Mizuho Bank, said that the White House’s communication style has seriously disrupted market positioning. He noted that the hardest part now is not predicting the war’s course but predicting how the White House will communicate and how markets will react. Markets cannot determine whether this is a credible sign that the conflict is nearing its end or just another “almost fully realized” statement.

“The truth depends on perception, and Trump’s unpredictability only increases uncertainty, which suppresses the previously confident short positions,” said Michael Kantrowitz, Chief Investment Strategist at Piper Sandler & Co. “All these fluctuations buy time and prevent overconfidence in the market — whether for better or worse.”