A social media post by U.S. President Donald Trump once again sent global markets into a tailspin, even though his claims about a ceasefire in the Middle East were promptly denied by the involved parties. Despite this, Wall Street chose to rally.
This suggests that, in the eyes of the market, the president's fear of a sharp downturn matters more than the accuracy of his statements, and his perceived unpredictability has itself become a powerful tool to curb bearish sentiment.
On Monday, President Trump posted on social media, announcing a five-day extension to the deadline for bombing Iranian energy facilities and stating that both sides were engaged in "very good, productive talks" aimed at a "complete and total resolution" of the conflict. This statement instantly reversed market pessimism, leading to one of the most volatile trading sessions since the outbreak of the U.S.-Iran conflict.
After the market opened, the S&P 500 surged by as much as 2.2%, marking its largest gain since May, while the Dow Jones Industrial Average skyrocketed over 1,000 points intraday. Simultaneously, crude oil prices plummeted more than 13%, with Brent crude falling below the $100 mark, and the two-year U.S. Treasury yield retreated significantly from its high to 3.79%.
However, less than an hour after the post, Iranian officials denied that any negotiations were taking place. This scenario mirrored events from two weeks prior, when Trump declared that the "war is totally over," which also triggered a brief stock market rally and a drop in oil prices.
This recurrence forces Wall Street to confront a deeper question: What is the market really trading?
The answer is not peace, but Trump's market底线. Investors interpreted the statement as a signal that the president's aversion to market declines would ultimately prevent him from carrying out his most extreme threats. Furthermore, Trump's unpredictability has become a form of market stabilizer: it discourages bulls from chasing rallies aggressively and prevents bears from shorting with full conviction.
At 7:05 AM ET on Monday, Trump posted on social media, announcing the extension of the 48-hour ultimatum to strike Iranian power facilities by five days, citing "very productive dialogue" and the potential for a "complete and total solution."
Upon the news, markets reversed immediately. Brent crude fell below $100 per barrel, dropping over 13% at one point; U.S. stock futures jumped significantly; the two-year Treasury yield plunged 0.22 percentage points from its high to a low of 3.79%; European stocks and bonds also rebounded sharply from earlier losses.
After U.S. markets opened, the S&P 500 rose as much as 2.2%, its largest intraday gain since May, and the Dow surged over 1,000 points. However, as Iran explicitly denied that talks were underway, market gains began to fade. By the close, the S&P 500's advance narrowed to about 1.2%, the Dow finished up around 630 points (1.4%), and the rally in the Treasury market also moderated.
This sequence was familiar to Wall Street. Two weeks earlier, Trump told media that the "war is totally over," sparking an almost identical sharp rally in stocks and a similar pullback in oil prices. That rally, too, failed to sustain itself.
Analysis suggests that part of Trump's motive for this latest statement was to calm investors rattled by the war's impact and to avoid another painful sell-off at the start of the new week. The previous Friday, the S&P 500 had recorded its longest weekly losing streak in a year.
Why did Wall Street rally strongly despite knowing the statements might be dubious?
For Wall Street, the truthfulness of Trump's announcement may be secondary. The sharp rebound was not because investors blindly believed the president's "ceasefire" claims, but because they viewed it as an assurance: the president's intense dislike of poor market performance would ultimately deter him from taking more extreme military actions.
The war, now in its third week, has placed significant strain on the global economy. The blockade of the Strait of Hormuz has severed critical energy supplies, soaring energy prices have introduced new inflationary shocks, and global bond markets have lost over $2.5 trillion in value, facing their largest monthly drop in over three years. Meanwhile, the two-year Treasury yield has risen more than half a percentage point since the conflict began, further constraining the Federal Reserve's ability to cut interest rates.
Tom Garretson of RBC Wealth Management stated, "Trump has clearly been trying to cap oil prices, but perhaps once again it's the bond market that forced his hand."
Marko Papic, Chief Strategist at BCA Research, said, "If this isn't resolved in the next 7 to 10 days, we are looking at a major shutdown of the global economy. Today's statement shows Trump realizes the real economy could go off a cliff."
Other analysis points out that the current trading logic resembles a Keynesian "beauty contest."
Daniel Alpert, Managing Partner at Westwood Capital, noted that the market is not trading on facts, but on expectations of what others will do. Even if investors suspect it's a lie, they will follow suit if they believe others will perceive it as positive and buy.
Furthermore, Fear Of Missing Out (FOMO) is also a significant factor driving stock gains.
Steve Sosnick, Chief Market Strategist at Interactive Brokers, emphasized that no one wants to miss a rebound, and even a hint of good news can trigger a strong market reaction. Simultaneously, equity traders are closely following the lead of oil traders, with the sharp drop in oil prices providing a tangible basis for the stock market's recovery.
What does Trump's unpredictability mean for bears?
Trump's inherent unpredictability has itself become a distorting market stabilizer: it makes bulls hesitant to chase rallies aggressively and prevents bears from shorting with full conviction.
The assessment from Michael Kantrowitz, Chief Investment Strategist at Piper Sandler, is perhaps most accurate: "Truth depends on perception, and Trump's volatility only increases uncertainty, which helps stop otherwise confident bears from pushing the market lower. All this volatility buys time for the market and prevents overconfidence—for better or worse."
During Trump's first year in office, the "TACO trade"—buying the dip—became deeply ingrained as market consensus. However, the Iran war is shaking that belief—hostilities continue to escalate, Iran's leadership remains in control, and the Strait of Hormuz remains blocked.
Brad Conger, Chief Investment Officer at Hirtle Callaghan, expressed concern: "What worries me is that this is no longer entirely something Trump can call off, unlike tariffs which he could stop at any time. The confidence of those who are encouraged by Trump's responsiveness to the market is misplaced."
Jordan Rochester, Strategist at Mizuho Bank, pointed out that the White House's chaotic messaging has left market positioning in a difficult spot.
"The hardest part isn't predicting the war's path, but predicting the White House's communication and how much the market will react to it," he wrote in a client note. "We are dealing with a confused market—unsure if this is a credible signal that the end is near or just another 'almost done' performance."
