Trump's Speech "Lacks Clear De-escalation Signal," Market "Deeply Disappointed"
- Core View: U.S. President Trump's speech on the Iran conflict failed to deliver the de-escalation signal the market was hoping for. Instead, it conveyed threats of continued pressure and military strikes, leading to a rise in market risk aversion, a surge in oil prices, and pressure on global stock markets.
- Key Elements:
- Trump declared that the U.S. would deliver "extremely severe" strikes against Iran and threatened to target its power plants, but did not provide a timeline for reopening the Strait of Hormuz, intensifying market concerns about prolonged conflict and energy supply disruptions.
- The market reacted sharply, with Brent crude prices briefly surpassing $105 per barrel, widespread declines in Asia-Pacific stock markets and U.S. stock futures, and a strengthening U.S. Dollar Index.
- Multiple institutional analyses suggest the speech's essence was a pressure tactic rather than a de-escalation signal, aimed at forcing Iran into an agreement, but this increases the risk of escalation and sustained high oil prices.
- The speech lacked substantive details on resolving the shipping crisis in the Strait of Hormuz. The U.S. aircraft carrier strike group continues to assemble in the Middle East, indicating ongoing military pressure.
- In the long term, the risk premium for energy supply disruptions may be priced into asset valuations and have differentiated impacts on the currencies and government bond yields of various countries.
Original Author: Long Yue
Original Source: Wall Street News
At 9 AM Beijing time on April 2nd, U.S. President Trump delivered a nationwide televised address regarding the Iran conflict. The market had bet on him signaling a de-escalation, but instead received new threats.
In his speech, Trump declared a "swift, decisive, and overwhelming victory" in the Iran conflict, while clearly stating, "In the next two to three weeks, we will hit them with an extremely powerful strike," and issued an ultimatum: "If there is no deal, we will strike every single power plant in Iran with great force." He did not provide an answer on when the Strait of Hormuz would reopen.
The market's initial reaction came from oil prices: Brent crude oil briefly broke through $105 per barrel during the session, with an intraday gain of up to 4%. Asia-Pacific stock markets were under pressure across the board, with the Nikkei 225 index extending its decline to 1.1%, the Seoul Composite Index in South Korea widening its loss to 2.1%, and S&P 500 futures falling 0.6%.
Nick Twidale, Chief Market Analyst at AT Global Markets, said, "Investors clearly aren't buying it, and global markets may have more downside today." "Even though he said the war is about to end, that key message—that Iran will still be struck in the coming weeks—is extremely negative for the markets."
Institutional Analysis: A Pressure Strategy, Not De-escalation
Multiple institutions quickly made assessments after the speech, with their core conclusions highly consistent: this is not the signal the market wanted. Following Trump's remarks, the market seemed to focus more on the view that the Iran war is not over.
Robert Subbaraman, Head of Global Markets Research at Nomura Securities, stated that Trump's speech "did not send the clear signal of de-escalation that the market had hoped for." He noted that in the foreign exchange market, Asian currencies may weaken against the US dollar, and if volatility becomes too rapid, central banks may increase intervention; simultaneously, this could also put upward pressure on government bond yields. The Bloomberg Dollar Spot Index rose 0.2% after the speech.
Rodrigo Catril, a strategist at National Australia Bank (NAB) in Sydney, believes, "The market seems to be focusing on the view that the war is not over." He said, "The U.S. is seeking escalation, hoping to force Iran into an agreement, but this strategy is not without risk—oil prices need to be watched closely."
Dilin Wu, Research Strategist at Pepperstone Group, bluntly stated that Trump's speech was "indeed disappointing." She pointed out that Trump's earlier talk about disengaging from the Middle East "now seems more like an attempt to calm the markets while keeping pressure options open." "He clearly still favors a strategy of applying pressure first before easing tensions, rather than straightforward de-escalation."
OCBC Bank expressed a similar view, stating that Trump's speech dashed hopes for a swift end to the war, prompting the market to prepare for further escalation in the short term, rising oil prices, and a stronger US dollar.
"Persistently high oil prices are shifting inflation concerns to growth concerns, which may not only start to weigh on risk-sensitive energy-importing currencies like the New Zealand dollar, British pound, and Swedish krona, but could also spill over to risk-sensitive energy-exporting currencies like the Australian dollar and Norwegian krone," said Moh Siong Sim, the bank's FX strategist.
"If U.S. Treasury yields fall due to heightened growth concerns, the Japanese yen could shift from underperformer to outperformer," he added.
Lack of Ceasefire Details, Not Much New Content
As the speech lacked substantive details to resolve the core supply chain crisis, market concerns are intensifying.
Derek Wallbank, a senior editor at Bloomberg, commented: "If you've been listening to the president over the past week, there wasn't much new tonight."
He pointed out that Trump made no mention of the fact that Iran now effectively controls traffic in the Strait of Hormuz. This situation, which gives Iran a "de facto veto," is difficult for many Gulf states to accept. Furthermore, according to U.S. officials, a third U.S. aircraft carrier strike group left Virginia for the Middle East on Tuesday, indicating that the military buildup is continuing.
Columnist Clara Ferreira Marques stated that Trump did not provide new details or a lasting solution for the Strait of Hormuz. Instead, by urging other countries to find "belated courage" to solve the problem, such rhetoric "will unsettle the crude oil market."
From a longer-term investment perspective, the market is factoring "energy disruption" into long-term pricing. Analyst Abhishek Vishnoi noted that Trump's remarks asking other countries to look after the Strait of Hormuz themselves increase the probability of a sustained risk premium in the crude oil market.
