Trump’s Iran ultimatum and signals of a possible deal keep investors on tenterhooks
U.S. President Donald Trump addresses the nation in Cross Hall of the White House in Washington, DC, USA, on Wednesday, April 1, 2026.
Alex Brandon | Bloomberg | Getty Images
Investors are caught between a quick deal to end the war and a significant rally that could send oil prices and bond yields higher as they begin a holiday-weakened trading week.
President Donald Trump issued an expletive-filled ultimatum on Sunday, warning that Iran would be “living in hell” if the Strait of Hormuz was not reopened by 8 p.m. Tuesday and declaring the day “Power Plant Day and Bridge Day all rolled into one.”
Separately, in an interview with Fox News on Sunday, Trump said he was hopeful there would be a breakthrough. “good luck” An agreement is expected to be reached by Monday.
Conflicting signals kicked off a week in which investors were forced to take positions based on completely different outcomes.
Meanwhile, Iran He rejected Trump’s latest threatsHe said the critical waterway would only be fully reopened after Tehran’s war damage is compensated, as Tehran continued its attacks in the Gulf over the weekend, including in the oil hub of Kuwait.
“Markets are on edge as time is running out and the outcomes are binary (ceasefire or escalation),” said Rob Subbaraman, head of global macro research at Nomura. Subbaraman said Trump’s tone still showed there was a degree of urgency in the White House to end the war, with investors maintaining their positions to “hedge escalation risk.”
Trump has wavered between hailing talks with Iran as productive and the imminent arrival of a peace deal and warning that he is ready to intensify military action against the Islamic Republic. He has repeatedly extended the deadline for Iran to reopen the Strait of Hormuz.
Mixed messages, along with choppy oil trading, have led to market volatility. S&P 500 It gained 3.4% last week, its best weekly gain since November, as investors bought the dip in hopes of a diplomatic solution. The Cboe Volatility Index rose from below 20 before the war to around 24 last week.
“Trump’s escalatory tone [over the weekend] “It fits the playbook very well: headline-driven, unpredictable and designed to apply maximum pressure quickly,” said Mohit Mirpuri, equity fund manager at SGMC Capital.
“Markets will need to get used to this style of policymaking for the foreseeable future with him in office,” Mirpuri added.
The risk of stagflation is increasing
A month-long war and effective blockade of the Strait of Hormuz threatens to plunge the world into one of the most severe energy crises in history. Even a diplomatic breakthrough may not bring quick relief to markets, analysts say.
Brent crude rose to $109.77 per barrel on Monday; This is up nearly 50% since the war began on February 28. US West Texas Intermediate crude is up 66% and trading at $111.2 as of 11pm ET.
Despite a moderate increase in recent days, shipping traffic in the Strait of Hormuz Almost a quarter of the world’s oil transported by sea and one-fifth of the liquefied natural gas transported before the war — remained 95% lower higher than pre-war levels.
“Even in a scenario where the Strait of Hormuz remains open, the damage to trust and supply chains has already occurred; things won’t just go back to normal,” Mirpuri said. he said. “Markets will likely remain sensitive to headlines, with sharp swings in both directions as narratives change.”
OPEC+’s decision on Sunday to increase production quotas for May by 206,000 barrels per day will do little to support oil supplies as the war restricts production and shipments by some of the world’s biggest crude producers.
Subbaraman stated that the war “lasted long enough to cause serious inflation increases around the world” and warned that “if the war escalates from here, the inflation shock may soon turn into a growth shock with demand destruction and direct stagflation.”
Bond yields: underestimated risk
Fixed income markets are quietly re-pricing the inflation outlook. The 10-year Treasury yield rose to 4.362% on Monday, from 3.962% before the conflict began, and is hovering near the highest levels since mid-2025, as investors scale back expectations that the Fed will cut interest rates this year.
“One of the biggest undervalued risks is the movement in government bond yields,” Mirpuri said. “If this geopolitical shock fuels expectations of sustainable inflation, yields could rise again and financial conditions could tighten at a time when markets are already fragile.”
Wall Street strategist Ed Yardeni said fixed-income markets were repricing government bonds to reflect the rapidly worsening outlook for inflation, while “bond vigilantes are taking matters into their own hands” and tightening credit conditions.
“We can no longer rule out a bear market or even a recession. It all depends on how long the strait remains closed,” Yardeni said. He deepened the economic difficulties caused by the interruption in the global energy flow.
Headline-induced volatility
Markets are expected to remain highly volatile as investors try to capitalize on every signal from Washington and Tehran as investors hold their breath ahead of Tuesday’s deadline.
Japanese and Korean markets rose on Monday Axis declared The United States, Iran and a group of regional mediators are discussing terms for a potential 45-day ceasefire that could lead to a permanent end to the war, but the chances of reaching a partial agreement before the deadline are slim, the report said. Indian benchmark indices are trading lower.
“We [now in] It is an event-driven market where headline risk dominates intraday movements and positioning must take binary outcomes into account,” said Hiroki Shimazu, chief strategist at MCP Asset Management.
He expects both sides to move towards de-escalation in the form of a “quiet reduction of the strike tempo” brokered by Oman, rather than a definitive solution. Stating that he expects a long-term fluctuation in the coming weeks, Shimazu said, “Instead of approaching a clean solution, we are in a long-lasting stalemate phase.”
Investors are also awaiting important economic data from the United States this week. The February personal consumption expenditures index, the Fed’s preferred inflation gauge, will be released on Thursday, offering an early read on whether the oil shock is reflected in prices in the world’s largest economy.
Spot gold, which has lost nearly 12% since the start of the war to $4,672.03 per ounce, also faces a tug of war between safe-haven demand and geopolitical headwinds from a strengthening dollar and rising Treasury yields. A stronger dollar has made bullion priced in U.S. dollars less affordable to holders of other currencies, while higher yields have weakened the appeal of the non-yielding metal.
“Near-term uncertainty is clearly very high and for most investors it’s just wait and watch at this stage,” said Chetan Seth, APAC equity strategist at Nomura.
