The "TACO moment" is coming? Amid rumors of "ground troops taking the island," Trump suddenly says "downgrade military operations."

President Donald Trump of the United States told reporters on Friday that he is not interested in a ceasefire with Iran, however, less than 24 hours later, Trump posted on the social media platform "Truth Social" stating that the US is considering gradually de-escalating all major military operations against the Iranian regime in the Middle East and is very close to achieving strategic goals. At the same time, just one second before Trump officially released the "de-escalation" signal, rumors about the US government sending ground troops to seize Iran's Harlgz Island for oil exports caused a major crash in US stocks, with the international oil price benchmark Brent crude oil nearly reaching the $115 mark. However, there was a reversal in news later on Friday evening, with sources stating that the US is developing a strategic plan to seize Iran's "nuclear reserves." As a new round of Middle Eastern political conflicts entered its 21st day, global financial markets experienced a dramatic turnaround from extreme pessimism to seeing a glimmer of hope in just one trading day on Friday. However, Trump's contradictory statements have led the market to believe that a moment of "TACO" trading is imminent at least in the short term. The popular trading strategy on Wall Street - TACO (Trump Always Chickens Out) - was born in April 2025 during Trump's unprecedented "tariff war" campaign. Traders were betting that either the US government would retract its tariff threats or that even if implemented, they would not be as harsh as Trump's threats and would not substantially hinder the US economic expansion. The term TACO was coined by a column writer for the Financial Times to describe Trump's wavering on tariffs after his April 2nd "Liberation Day" speech, but ultimately, he would choose to back down, leading to a major rebound in the stock market. When asked about "TACO" at a press conference, Trump became furious and called the question "malicious." The TACO strategy is now widely adopted by traders as the hottest trading strategy, whenever Trump issues new, more aggressive tariff threats or other major threats causing market decline, investors bet that he will eventually back down or the actual policy will significantly weaken, and choose to buy in heavily at the appropriate low points, anticipating a major rebound in the stock market shortly. Trump's "flip-flopping" and the volatile market Before heading to Florida, Trump stated on the South Lawn of the White House, "We can talk for sure, but I don't want a ceasefire. You know, you don't ceasefire when you're actually destroying the other side." "They have no navy. They have no air force. They have nothing," Trump continued. However, in a post released later in the afternoon on Truth Social, Trump claimed that the US "is very close to achieving our goals, while we are also considering gradually scaling back our great military operations in the Middle East." He also asserted that the Strait of Hormuz, a key passage for a large portion of global oil and liquefied natural gas (LNG) trade, "will have to be patrolled and protected by other countries using it when necessary - but the US does not need to!" Trump wrote in the post, "If asked, we will provide some help to these countries in their actions in the Strait of Hormuz, but once the Iranian threat is completely eliminated, this should not be necessary. Importantly, this will be an easy military action for them." At the time of Trump's statement, the US-Iran war had been going on for nearly three weeks and had evolved into a wider political conflict across the entire Middle East region. Earlier on Friday, Trump stated that the US "could end the war now," but he planned to continue the offensive. "I think we've won," he later said on the South Lawn, "What they are doing now is just blockading the strait. But militarily, they're finished." In fact, Iran had effectively blocked the strait since the war began. Trump had been criticizing NATO allies, trying to garner more support to help open the strait; and he reiterated on Friday that this was not important for the United States. Most energy goods transported through the strait are destined for Asian and European markets. However, a report from the Dallas Fed released on Friday stated that the ongoing closure of the strait by the Iranian military would have global economic repercussions, including in the US. During his remarks to reporters on Friday, Trump stated that reopening the strait would be easy as long as other countries came to support the US. "This is a simple military action, relatively safe," he emphasized. "But you need a lot of help, meaning you need ships, you need a significant naval escort. NATO could help us, but they haven't had the courage thus far." Just one second before Trump stated that the US is considering gradually scaling back major military operations against the Iranian regime in the Middle East, rumors about the US sending ground troops to seize an island in the Strait of Hormuz region of Iran were rampant. There were reports in the media on Friday that the White House was sending hundreds of Marines to the Middle East, while considering a plan to dispatch ground troops to seize Iran's Harligz Island for oil exports. Brent crude oil had been hovering and stabilizing around $110 per barrel, showing that high oil prices might be a sustained significant threat, forcing investors, central bank policymakers, and business leaders to confront this reality. Iran had effectively blocked the Strait of Hormuz, which meant that approximately 20% of global energy flows were completely disrupted, leading to attacks on oil tankers and disruptions in shipping. The International Energy Agency (IEA) reported recently that a US-Israeli military action against Iran at the end of February had triggered the largest supply disruption in the history of the global oil market; meanwhile, the US government was considering using military means (including potential ground or quasi-ground control) to restore shipping lanes and take full control of the Strait of Hormuz. However, maintaining the blockade or vying for control required a strong military presence, and reopening the channel would be even more difficult (involving mine clearing, escorting, air control, port control). Once the US and Iran became engaged in a "channel control power game," this round of Middle Eastern war might shift from airstrikes and naval blockades to a showdown over strategic points (such as Harligz Island), potentially leading to a protracted standoff where both sides' forces could easily escalate into a long-term conflict similar to the 1980s Iran-Iraq War. During the US stock trading hours on Friday, the rumor of "ground troops seizing an island" catalyzed a widening of the Nasdaq's decline to 2%, leading the three major indices lower. Since the outbreak of the US-Iran conflict, the Dow Jones Index and small-cap indices had cumulatively declined nearly 7%. Just as the market was digesting the escalation signals throughout the day, Trump's post on Truth Social after trading hours marked a significant shift in tone. Traders generally interpreted this post as a reversal of the previous escalation signals. The S&P 500 ETF, tracking the S&P 500 index and coded "SPY," surged over 1% in after-hours trading - closing down 1.5% - while Brent crude oil retreated from near $115 to around $108 in trading. Short-term "TACO" moment? The market may trade on Trump's statement of "gradually scaling back operations" in the short term, but it may not truly believe that the conflict is entering a sustainable de-escalation phase. While Trump publicly says he "doesn't want a ceasefire" and claims to be considering scaling back military operations, the US is actually deploying around 2,500 Marines and vessels to the Middle East; more importantly, multiple media outlets have revealed discussions within Washington about more escalatory options, including sending ground troops to Harligz Island in Iran and using the US military to control Iran's highly enriched uranium stockpile. For the macro market, this is not a consistent "policy shift" but a coexistence of verbal de-escalation and action readiness; therefore, the market may not view it as definitive evidence of conflict resolution, but may engage in short-term trading driven by the TACO strategy. It is probable that a short-term version of the "TACO moment" will arrive next week, but it is definitely not the actual long-term version of a "TACO trade". After-hours US stock futures and the S&P 500 ETF continued to rebound, indicating that some funds were willing to bet on a temporary softening of Trump's political position; however, the broader asset pricing actually shows that global investors do not truly believe in a ceasefire or the narrative of the Strait of Hormuz reopening, such as Bitcoin, a risk asset indicator, which continued to fluctuate on Saturday, showing a slight decrease of 0.1% from the latest trading price. From the linkage between oil, the US dollar, and the stock market, the core judgment of the market now is that Trump's words may change sentiment overnight, but will not change the supply shock of a quarter. Brent oil prices have risen by about 50% since the outbreak of the war and have reached their highest levels since July 2022; major airline giant American Airlines Group Inc. has been preparing to cut flights as oil prices are expected to rise to over $175 per barrel and be maintained above $100 until the end of 2027. Furthermore, short-term conflicting news will also impact the TACO strategy, with the latest news revealing that sources claim the US is developing a strategic plan to seize Iran's "nuclear reserves." The financial giant Goldman Sachs Group, Inc. recently released a research report stating that oil prices are likely to continue to rise in the short term, as traffic remains extremely low in the Strait of Hormuz. If this persistently low traffic focuses the market on the risk of prolonged interruptions, there is a chance that Brent crude oil futures prices could surpass the historical high of 2008. The firm believes that given recent attacks on energy infrastructure, the Iran war is highly likely to push oil prices to remain above $100 per barrel in the long term. Goldman Sachs Group, Inc.'s in-depth analysis of the five largest supply shocks in history shows that on average, four years later, production suffered a 42% impact, often reflecting damaged infrastructure and low investment. The statistics from Goldman Sachs Group, Inc. show that by 2025, Iran and seven other Gulf countries had daily crude oil production volumes of 3.5 million barrels and 21.8 million barrels respectively, equivalent to 30% of global crude oil supply. If there is prolonged production decline, it will exert long-term upward pressure on oil prices. Goldman Sachs Group, Inc.'s scenario analysis shows that in both the short term and by 2027, there is a bias for oil prices to rise. The persistence of large-scale supply shocks in history and the tendency for geopolitical conflicts to evolve into long-term stalemates highlight the risks of extended interruptions and sustained substantial supply losses. This suggests that oil prices may stay above $100 per barrel for an extended period of time.