U.S. stocks surged Monday, after President Donald Trump announced that he was postponing all military strikes on Iranian power plants for a 5-day period.
Iranian state media responded to Trump’s post by saying the U.S. president has “backed down” after Iran’s firm response.
Iran’s semi-official Mehr news agency also relayed a message from the nation’s foreign ministry that, “there is no dialogue between Tehran and Washington.”
Trump, however, said that Iran had “called” to discuss trying to resolve the war diplomatically.
“They want to make a deal, and we are very willing to make it,” Trump told reporters before boarding Air Force One in Florida.
The Strait of Hormuz, a crucial transit point for global oil supplies, could be “open very soon,” Trump added, but he provided few details.
The S&P 500 and Nasdaq 100 futures initially soared about 3% on Trump’s post shortly after 7 a.m. ET. Hours later, both indexes were still recording significant gains of about 1.3%, but less than futures had indicated early in the morning.
The Dow Jones Industrial Average also shot higher immediately after Trump’s statement, before sliding and then rising again. By late morning, the Dow was higher by about 700 points, and the Russell 2000 index rose 2.8%.
Shortly after 11 a.m. ET, oil prices had plunged around 13%, with U.S. crude oil trading at around $85 per barrel. International Brent crude oil fell to around $97 per barrel.
Still, crude oil prices have risen 30% since the war began on Feb. 28, and 50% since the start of the year.
Trump’s Monday announcement on social media came after the president on Saturday said that he had given the Iranian regime 48 hours to “fully open, without threat, the Strait of Hormuz.” That ultimatum was set to expire Monday night.
U.S. natural gas prices dropped 6% Monday, European natural gas futures slid 9% and heating oil prices dropped 12%. Heating oil futures can also be a proxy for the price of jet fuel.
U.S. Treasury bonds also rose in the minutes after Trump’s comments, and the yields which guide borrowing rates for consumers dropped after posting big moves higher on Thursday and Friday on rising inflation fears stemming from soaring energy prices. Yields were down only slightly in mid-morning trading after the statements from Iranian media and Trump.
Investors were already grappling with how to trade headlines about the war before Monday’s volatility.
“Investors have two related problems in pricing risks around the Gulf war,” UBS economist Paul Donovan said in a note on Monday before Trump’s post. “Statements from top U.S. administration officials give different and at times contradictory assessments of the war; in the absence of measurable objectives, this is all markets have to respond to. The result is volatility.”
