Wall Street on edge: After Trump's ultimatum is rejected, which way will the market go?

According to reports, on Saturday (April 4), the commander of the Houthi Ansar Allah central headquarters of the Iranian Armed Forces, Abdolrahim, responded to the so-called "48-hour" ultimatum issued by U.S. President Trump - that if Iran does not accept a peace agreement within 48 hours, the U.S. will destroy the country's critical infrastructure. Abdolrahim emphasized that the Iranian military will firmly defend national rights, protect national assets, and make the aggressors pay the price. Abdolrahim stated that Trump's threat is "helpless, confused, unbalanced, and foolish behavior." He also referenced Trump's social media post with religious undertones, saying, "The gates of hell will be open for you (the U.S.)." Earlier on the same day, Trump had posted on social media, "Remember, I gave Iran ten days to reach a deal or reopen the Strait of Hormuz. Time is running out - after 48 hours, hell will come down on them." Abdolrahim stressed that if the U.S. and Israel launch such attacks, "we will strike all the infrastructure used by the U.S. military and Israeli infrastructure continuously and destructively without restrictions." He warned the U.S. and Israel that since the start of this war imposed on Iran, "what we have said has been put into action." Abdolrahim stated, "Remember: if hostilities escalate, the entire region will become your hell. The fantasy of defeating the Islamic Republic of Iran has turned into a quagmire that will ultimately devour you." On March 26, Trump had announced that at the request of the Iranian government, he would extend the deadline for striking Iranian energy facilities by 10 days, until April 6. As both the U.S. and Iran engaged in escalating verbal battles before April 6, many Wall Street analysts were on edge during this Easter long weekend. On Saturday, Iran stated that joint U.S.-Israel airstrikes had targeted Iranian petrochemical factories, forcing personnel to evacuate a large industrial area. Iran's semi-official Tasnim news agency reported that other attacks on areas around Iran's Bushehr nuclear power plant resulted in the death of a security guard. Tasnim also said that the main area of the nuclear plant was unaffected. Over the weekend, Iran continued to launch missiles and drones towards various parts of the Middle East. Authorities in Dubai reported that on Saturday morning, fragments of an air interception missile fell on the outer wall of the Oracle building in Dubai Internet City. They also reported that fragments hit a nearby building in the Dubai Marina area. There were no reports of casualties or fires. Additionally, two U.S. military planes were shot down by Iran on Friday, with one pilot missing. This was the first time a U.S. military plane had been shot down over Iranian territory since the U.S. and Israel launched a large-scale military operation against Iran on February 28. Wall Street Tense: What Will Happen After April 6? In the past two weeks, JPMorgan trading desks have been monitoring the following scenarios that could further impact the capital markets if they escalate: (i) Attacks on energy infrastructure, especially Saudi oil production and refining; (ii) U.S. ground forces intervening or attempting to use force to reopen the Strait of Hormuz; (iii) U.S./Israel attacks on Iranian civilian infrastructure; (iv) Any attacks on water supply systems. JPMorgan trading desks believe that unless the situation escalates, they expect the market to continue trading sideways. However, with Trump's final "ultimatum" approaching, it appears more likely that there will be a decisive move in the short term - either towards a ceasefire or a new round of escalation. JP Morgan pointed out that the market seems to be at a crossroads, facing decisions regarding the contours of the conflict in the Middle East (including remaining duration and intensity). Insights from Trump's earlier statements this week include: (i) More military attacks may be imminent, as Trump stated that the U.S. will "severely hit them (Iran) in the next two to three weeks." This statement neither supports nor refutes the use of ground forces, nor does it clarify if attacks will escalate beyond the level of the past month. (ii) Trump reiterated the threat related to the April 6 deadline - namely, compliance with the demand to reopen the Strait of Hormuz, or else the U.S. will target infrastructure, possibly including desalination plants. (iii) Trump did not commit to reopening the Strait of Hormuz, instead emphasizing that countries importing oil through the strait should be responsible for reopening it, either by seizing oil from Iran or purchasing it from the U.S. (iv) Trump claimed that all of Iran's nuclear capabilities have been destroyed but may be buried under rubble and dust. The core message here is that U.S. military satellites will monitor bombed sites and may conduct airstrikes again if Iran tries to dig up the areas. This eliminates some downside risks regarding a "U.S.-led ground invasion to move enriched uranium," as such actions require more military force and soldiers and would delay the timeline to the second half of 2026 or beyond. JPMorgan's Market Intelligence Division stated that if the next wave of U.S. attacks includes ground forces, it is expected to end by the end of April. There are still no answers regarding ceasefire negotiations. U.S. military deployments point to a significant military strike that could take place this weekend, possibly involving ground forces. The signal of U.S. attacks also means that Iran is expected to retaliate. These retaliatory targets may include: (i) Regional oil infrastructure, such as in Saudi Arabia and the UAE; (ii) Blocking the Red Sea, which could result in another supply interruption of around 5 million barrels per day or a $20 per barrel increase in oil prices; (iii) Regional water supply infrastructure, potentially leading to a humanitarian crisis. Regarding the future of the energy market, Nakul Sarda, founder of ProfitGate Capital Services LLP, is tracking a combination of indicators, including: (i) shipping insurance premiums - assuming insurance companies will lower prices once the "all-clear" is given; (ii) real-time ship transit monitoring; (iii) the price difference between Dubai and Brent crude oil; (iv) tracking what he refers to as the "mid-April cliff point." The "mid-April cliff point" includes: (1) April 1st, when Formosa Plastics declared force majeure (already triggered); (2) April 10th, the expiration of U.S. waivers for Russian offshore oil sanctions; (3) April 15th, the expected date when the release of 400 million barrels of strategic oil reserves will be depleted; (4) April 30th, the final deadline for all emergency measures to expire. The latest warning from the International Energy Agency's director Birol states that if the Strait of Hormuz is not reopened to shipping, the global losses of crude oil and petroleum products in April will be double those in March. Even if the conflict ends, it will take a long time to return to normal. Some countries have been stockpiling energy, weakening the effect of the IEA's move to release 400 million barrels of oil and fuel from emergency reserves to stabilize the market during the current conflict. Of course, there are industry insiders who remain relatively calm. Michael Hartnett, Chief Investment Strategist at Bank of America, pointed out in his latest research report over the weekend, "Based on the trend in Trump's approval ratings, we predict the war will be short-term and the economy will not go into a recession." Hartnett believes that investors can position themselves through a series of "risk-resistant configurations" to boost portfolio performance. He proposed the "4C" trade: Curve: Long steep yield curve strategies, taking advantage of opportunities from rate declines and rate cuts; Commodities: Allocate to commodities, playing the global resource competition under geopolitical background; China: Allocate to Chinese assets, focusing on the May U.S.-China leaders' meeting and the trend of China's economic shift towards consumption; Consumer: Allocate to consumer stocks, taking advantage of post-war policy shifts towards livelihood issues and investment opportunities. This article is a reprint from "Cai Lianshe", author: Xiao Xiang; GMTEight editor: Huang Xiaodong.