Trump's tough words have overturned market expectations! Risk assets that had just staged a major recovery were hit hard again, with oil and the US dollar rising once more.

In his latest warning, US President Donald Trump stated that the US will inflict "extremely powerful" blows on Iran in the next two to three weeks, causing a collective downward trend in risk assets including the stock market, cryptocurrencies, and high-yield bonds. Following Trump's speech, global stock markets that had just experienced a super rebound on Wednesday fell on Thursday, while international oil prices and the US dollar index turned upwards. Trump did not perform as the market expected in a "TACO moment," leaving the market tense as traders who had hoped for more clear signs of a short-term end to the war felt disappointed. In his highly anticipated speech on Wednesday, Trump emphasized that the US military had achieved rapid and decisive victories, with US core strategic objectives close to completion. He also stated that in the next two to three weeks, the US will launch extremely powerful military strikes against Iran. "We have the hope that the conflict with Iran can achieve all military objectives in a very short time. In the next two to three weeks, we will launch extremely powerful strikes against them at the same time, negotiations are ongoing," Trump said. "If an agreement is not reached, we will strike their power plants very harshly." Trump once again issued harsh words against Iran. Regarding the focus on the Strait of Hormuz dynamic, Trump claimed that the US does not need oil from the Middle East, stating, "We hardly import oil transported through the Strait of Hormuz." Once the conflict ends, the strait will naturally reopen. Where is the TACO? The stock market did not trade according to the TACO narrative. US stock index futures quickly turned downward after Trump's latest speech stating that the US will inflict "extremely powerful blows on Iran" in the next two to three weeks. The MSCI Asia-Pacific stock index benchmark fell by up to 2% shortly after Trump's speech, casting doubt on whether the "buy on dips during TACO" investment strategy would continue to be effective. In the entire Asia region, the Korean and Japanese stock markets, which led a rebound in Asian stock markets on Wednesday, fell sharply, with the Korean composite index dropping by nearly 5%. TACO (Trump Always Chickens Out): Originated during the period in April 2025 when Trump launched an unprecedented "equal tariff" battle globally. Whenever Trump issues new and more aggressive tariff threats or other major threats that trigger market downturns, investors bet that he will ultimately back down or significantly weaken his policies from his verbal threats, thus choosing to buy in heavily at appropriate times. In high market volatility, even the top traders from hedge funds find it difficult to predict the market accurately, and the market returns to a risk-averse asset allocation. Rich Privorotsky, head of Goldman Sachs Delta-One business, recently released a report indicating that the global stock market is not in a simple stage of "bad news leads to rebound," but in a fragile balance of "extremely pessimistic sentiment and positions, with short-term technical repair conditions, but lacking macro and profit logic to support investor confidence in going long." Privorotsky judged that although there is a political path for the Iran situation to "step down," combined with the fear index falling into an extreme range, CTA short selling crowd, de-leveraging before the holidays, indeed created short-term upward rebound conditions in the market; however, he remains uneasy about a long strategy because deeper pressures have not been relievedoil price shocks are shifting market trading logic from simple hedging to a defensive mode of "downgrading growth + tight policy," and AI and chip supply chains face a continuous valuation compression, while the terminal value of high-valuation assets like software is being reconsidered. Tarck signals that even if bearish marginalizes, the stock market is more likely to experience a fragile, repetitive, and highly selective recovery phase, rather than a round of comprehensive bull market reversal that can be pursued with confidence. In this highly anticipated speech, Trump issued harsh words against Iran again. Trump's national speech "for an important update on the Iran issue" was primarily a speech that indicated a escalation in the geopolitical tension in the Middle East, proclaiming that strategic goals were approaching completion but refusing to provide a clear path to ceasefire, and signaling further aggression against Iran. The White House repeatedly emphasized before and after the speech that the goal of "Operation Epic Fury" remained consistent: to destroy Iran's missile and production capabilities, dismantle its navy, cut off support to its proxies, and prevent it from acquiring nuclear weapons. Trump himself stated in his prime-time speech on April 1 that the US's "core strategic goals" were close to completion, with Iran's navy, air force, ballistic missiles, and nuclear projects severely damaged. However, he also retained the possibility of continuing to forcefully strike, even attack energy and power facilities in the next two to three weeks, and did not provide a clear roadmap on how the Strait of Hormuz would reopen or when the US military would truly withdraw. From a macro investment perspective, this means that the market's net effect from the US-Israel alliance's military dynamics is not a "signal of a final end to the war" but rather a "the possibility of the conflict nearing its end while the risk of a final escalation remains." For the financial markets, the direct impact of such speeches is very clear - first breaking down the expectation of de-escalation, and then raising the risk premium of energy, the safe haven premium of the US dollar, and discounting global economic growth. Before the speech, the market briefly expected a de-escalation due to Trump's previous statements that "could end the war in two to three weeks." European and Asian stock markets rebounded significantly during the week, and oil prices even fell briefly. However, after the speech failed to provide more clear signals of de-escalation, the market's risk preference quickly reversed. During the Asian session on April 2, the Asia-Pacific stock markets fell again, US stock index futures weakened, the Bloomberg dollar index turned upwards, and Brent crude oil soared to around $105. These all indicate that the market interprets the speech as "difficult for the war with Iran to end and for the Strait of Hormuz to reopen in the short term," further confirming "high oil prices may continue for a longer period," reinforcing the constraint of "oil price shock = Fed rate hike" stagflation. Wall Street analysts generally view this speech as reintroducing geopolitical risk premiums, especially in energy supply risks; and recent Fed officials have admitted that the Iran conflict has raised inflation risks again and squeezed the space for rate cuts. In other words, the real impact of this speech on the market is threefold: it raises inflation expectations, lowers global economic growth expectations for the coming quarters, and weakens market confidence in the Fed's quick shift to easing. As long as the risk of continued bombing of the Strait of Hormuz and Middle East energy facilities is not substantially removed, the global financial markets will find it difficult to truly escape high volatility. After Trump's speech, global financial markets recalibrated to a "safe haven and panic mode." Here are the latest comments and views from senior analysts on Trump's speech: Jumpei Tanaka, Director of Market Investment Strategy at Swiss Pictet Asset Management: The content of Trump's speech was not what the market originally expected - that is, releasing signals of a de-escalation and optimism that the conflict is about to end. Instead, he implied that the situation may escalate further, stating that the US may launch extremely powerful strikes against Iran in the next two to three weeks, and warning that if an agreement is not reached, Iran's power plants will be targeted. Therefore, these statements are being interpreted as negative factors for the stock market. Ken Wong, Senior Fund Manager of Asian Equities at Eastspring Investments Hong Kong Ltd.: While everyone hopes to turn the page, there is still much to digest from the events in the Middle East over the past month. The question now is how much these developments will have a cascading impact on the global economy in the coming quarters. With high oil price shocks still fermenting, the likelihood of the US Fed announcing rate cuts this year has further declined. Tomo Kinoshita, Global Market Strategist at Sumitomo Mitsui Asset Management Japan: As the war clearly does not seem to be moving towards a positive resolution, the market has once again shifted to falling stock markets, falling bond prices, and a stronger US dollar. The market is increasingly aware that the Iran conflict may have widespread spillover effects on the economies of many countries and regions. Carol Kong, Economist and Forex Market Strategist at the Commonwealth Bank of Australia: It seems that Trump has failed to convince the market that the conflict will de-escalate from now on, or that the US will help ensure the reopening of the Strait of Hormuz. The reality is that the US military is still gathering in the region, making the possibility of a ground offensive still existent. This means that the US dollar will continue to receive buying support in the short term. Tareck Horchani, Head of Brokerage Sales and Trading at Maybank Securities: Trump's speech is a typical mixed message, and the market's reaction is entirely as expected, initially turning to safe havens. Clearly, the market is re-considering the geopolitical risk premium, especially in terms of energy supply. Interestingly, the market actually began to rise before the speech due to expectations of a conflict resolution. Therefore, this is more like a position reset rather than a full-blown panic. Investors were slightly biased towards a constructive stance, and now they are forced back into a more defensive risk-averse attitude. Wee Khoon Chong, Senior Market Strategist in the Asia-Pacific region at BNY Mellon Bank: The Asia-Pacific forex market, especially the currencies of net oil-importing countries, may continue to be suppressed by high oil prices and a high US dollar index. In addition, outflow pressure from foreign investment is increasing. In March, foreign investors recorded record net sales in the markets of South Korea, Taiwan, and India. The rising inflation pressure could further delay the potential rate cuts by the US Federal Reserve. Coupled with the demand for safe havens, this is likely to support the US dollar in the short term. If there is a significant de-escalation in the geopolitical tension in the Middle East, the most noticeable areas where risk appetite will pick up may be in the stock markets, while the forex market still needs to deal with ongoing pressures from trade conditions, which will depend on the evolution of oil prices. Sean Callow, Senior Forex Analyst at ITC Markets: If the Bloomberg dollar index returns to 1,222, I would not be surprised, as Trump did not propose any plan to reopen the Strait of Hormuz, just pushed this issue to others, and optimistically believed that it would "naturally" reopen. Dilin Wu, Market Research Strategist at Pepperstone Group: His speech was very disappointing. Trump announced victory on one hand, but also threatened to strike Iran's energy and power facilities, and said he might carry out a major strike in the next two to three weeks - so basically, everything remains the same. Previous claims about the withdrawal of US and Israeli military forces from the Middle East now seem more like a way to reassure the market while retaining pressure options. He still seems to favor the strategy of "putting pressure on Iran first" rather than straightforwardly pushing for de-escalation. Nick Twidale, Chief Market Analyst at AT Global Markets: The market was extremely eager for some clear indication of when the conflict would end, but this speech only brought more uncertainty and more intense volatility. Investors are obviously not buying into Trump's statements. I believe that global stock markets may see further declines today. We were hoping he would announce some news about the conflict ending, something the market was really looking forward to. However, although he said the war would end soon, he now says that in the next few weeks, he will strike Iran forcefully, which is extremely negative information for the market. This means that the war may continue.