Markets surge after Trump says Iran resolution is near
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Photo illustration: Brendan Lynch/Axios. Photos: Al Drago and Jim Lo Scalzo/Bloomberg via Getty Images and Scott Eisen and Anna Moneymaker/Getty Images
Things were on track for a rough start to the week amid the escalation of the Iran conflict that threatens global energy supplies. Then, soon after 7am ET Monday, President Trump dropped an all-caps social media post that suggested that all will be fine, sending markets ripping.
The big picture: That's good news for Monday's prices of risk assets, but it speaks to a more tumultuous backdrop for global commerce that decision-makers across the global economy are only starting to recognize.
- In effect, an entity that has for generations been a source of stability in the world economy — the U.S. government — is now a source of chaos.
- These developments have had echoes of last year's on-and-off "Liberation Day" tariffs, though with vastly higher life-and-death stakes.
Catch up quick: In his post Monday morning, Trump said on Truth Social that "I AM PLEASED TO REPORT THAT THE UNITED STATES OF AMERICA, AND THE COUNTRY OF IRAN, HAVE HAD, OVER THE LAST TWO DAYS, VERY GOOD AND PRODUCTIVE CONVERSATIONS REGARDING A COMPLETE AND TOTAL RESOLUTION OF OUR HOSTILITIES."
- He said that based on the "TENOR AND TONE" of these conversations, he had postponed his previously issued threats of military strikes against Iranian power plants.
Yes, but: Iranian media denied any direct negotiations were underway and called Trump's statements "psychological warfare."
- Trump later told reporters that the U.S. is speaking to a "top person" in Iran, but not its supreme leader. Iran "very much wants to make a deal," he said.
- He said the Strait of Hormuz, which Iran has largely blockaded since the attacks, will be open very soon "if this works" and may be jointly controlled by him and the unnamed Iranian leader.
By the numbers: Despite the mixed evidence on how real these negotiations are, traders worldwide liked what they heard.
- Brent crude oil futures that were trading at around $113 per barrel before the post were under $100 immediately thereafter (and about $98 by midday).
- The S&P 500 was up 2.1% as of 11:30am ET.
- Global bond yields fell as investors priced in less inflation — and less risk of central bank rate hikes — ahead.
Between the lines: The surge in markets appears less a reflection of deep-seated confidence in the accuracy of Trump's proclamations than relief at the evidence that he is seemingly taking an off-ramp rather than escalating things further.
- If you're trading oil or stocks of the Asian nations that depend on raw materials shipped from the Persian Gulf, you don't really care about the finer points of whatever political arrangement results in Iran loosening its grip on the Straits.
- You just want the shipping lanes open, and if that means Trump proclaiming victory and backing away from threats to destroy Iranian power plants and deploy U.S. ground troops to try to reopen the straits, so be it.
Reality check: As of Monday morning, "it is impossible to tell whether this signals genuine progress toward an off-ramp for the war, or Trump zigzagging to buy time and keep oil from breaking out toward $150," Evercore ISI's Krishna Guha and Gang Lyu wrote in a note.
