Friday's Shift from "Upgrade to Downgrade," Investors Get "Slapped from Both Sides"! Trump Says at Night "Gradually Considering Reducing Military Operations Against Iran," Oil Prices Fall and US Stock Futures Rise

The Middle East conflict enters its 21st day, with the market experiencing a dramatic reversal within the same trading day—from escalation to de-escalation.

According to Wallstreet.cn, after Friday’s close, former President Trump posted on social media platform “Truth Social” that the U.S. is considering gradually de-escalating major military operations against the Iranian regime in the Middle East, and that they are very close to achieving their set goals.

Following the news, the previously down more than 1.4% S&P 500 ETF (SPY) surged over 1% in after-hours trading; oil prices also retreated from near settlement levels, with Brent crude falling from over $110 to around $108.

Just hours earlier, the market was digesting signals of escalation—such as the U.S. possibly deploying ground troops to the Middle East, assessing the occupation of Iran’s Halek Island, and Iran officials refusing to discuss reopening the Strait of Hormuz. This rapid intra-day reversal caught many long positions betting on higher oil prices off guard, and also surprised short sellers in U.S. stocks.

The ongoing Middle East geopolitical conflict, with the Strait of Hormuz nearly closed, has clearly heightened market tensions. U.S. stocks have fallen for four consecutive weeks, marking the longest decline in a year. Concerns over energy supply disruptions have intensified, with Brent crude rising about 9% this week and nearly 50% this month.

Intensive escalation signals during the day accelerated the decline in U.S. stocks

On Friday, during trading, Middle East tensions continued to escalate, with multiple negative signals piling up, increasing market pressure.

Wallstreet.cn reports that, according to CBS News, sources say Pentagon officials are preparing for the possibility of deploying U.S. ground forces into Iran, though no final decision has been made and specific authorization conditions remain unclear.

Meanwhile, U.S. officials have disclosed that the White House is sending hundreds of Marines to the Middle East and evaluating plans to occupy or blockade Iran’s Halek Island to pressure Tehran into opening the Strait of Hormuz. Halek accounts for about 90% of Iran’s oil exports, and any action there could have a significant impact on global energy supplies.

Bloomberg reports that Iranian officials have become unwilling to discuss reopening the Strait of Hormuz, focusing instead on survival amid joint U.S.-Israel efforts. The strait is nearly closed, with about 20% of global oil passing through it.

Driven by these developments, the Nasdaq index fell by as much as 2% intraday, leading the three major indices lower. Since the outbreak of the U.S.-Iran conflict, the Dow Jones and small-cap indices have declined nearly 7% in total.

Notably, rising energy prices fueling inflation fears are rapidly reshaping market expectations for Federal Reserve policy, becoming another major pressure point in this week’s financial markets.

The market is now pricing in a 50% chance of a Fed rate hike within 2026. Previously, bond traders mainly betting on rate cuts are now forced to revise strategies, with market sentiment shifting rapidly in a short period.

Gennadiy Goldberg of TD Securities remains cautious about the rate hike outlook:

“We do not agree with the market’s rate hike expectations. The surge in oil prices should lead the Fed to delay rate cuts amid stagflation pressures, but if oil prices rise enough, it could trigger financial conditions shocks, forcing the Fed to cut rates instead.”

Bloomberg macro strategist Michael Ball warns that the Iran conflict has caused a sudden repricing of monetary policy expectations, tightening financial conditions and risking a shift from a controlled pullback to a full correction in the S&P 500.

Trump’s post-closure statement triggers market reversal

While the market was digesting escalation signals throughout the day, Trump posted on “Truth Social” after hours on Friday, with a markedly different tone.

According to CCTV News, Trump listed U.S. near-achievement of goals including: severely weakening Iran’s missile capabilities, launch platforms, and related facilities; destroying Iran’s defense industrial base; eliminating Iran’s navy, air force, and air defense systems; preventing Iran from acquiring nuclear capability; and providing maximum protection for Middle East allies such as Israel, Saudi Arabia, Qatar, the UAE, Bahrain, and Kuwait.

Regarding the Strait of Hormuz, Trump stated that its guard and patrol should be undertaken by other countries when necessary, and the U.S. will no longer bear this responsibility; if invited, the U.S. is willing to support, but once Iran’s threats are fully eliminated, such assistance will no longer be needed.

Some traders interpret this post-escalation statement as a reversal of earlier signals. SPY surged over 1% after hours, and Brent crude retreated from above settlement levels to around $108.

RBC Capital Markets analyst Helima Croft and others noted in a report that “there is no sign this is a limited engagement,” and Tehran still “effectively controls the Strait of Hormuz.” The U.S. strikes on Halek Island have not altered Iran’s strategic calculus. This means that regardless of Trump’s post-market comments, market uncertainty remains high.

Oil prices fluctuate sharply this week, with long positions reaching six-year highs

This week saw the most volatile weekly swings in energy markets since the conflict erupted.

Brent crude settled above $112 per barrel on Friday, the highest since mid-2022, up about 9% this week and nearly 50% this month. Dubai crude futures surged 16.48% in a single day.

Rebecca Babin, senior energy trader at CIBC Private Wealth, said: “Oil ended a highly volatile, news-driven week with traders reducing short positions ahead of the weekend, pushing prices higher. Today’s rise reflects Iran’s more hawkish rhetoric, limited evidence of flow through the Strait of Hormuz, unconfirmed reports of Halek Island possibly being targeted, and ongoing regional military deployments.”

Market data also confirms extreme bullish sentiment.

According to ICE futures weekly data, as of Tuesday, fund managers increased their net long Brent crude positions by 77,672 contracts to 428,704, the strongest bullish stance in over six years. Analysts warn that Trump’s post-market comments could suddenly reverse this bullish trend.

Energy shocks are spreading to broader markets. European TTF natural gas prices hit their highest since January 2023; U.S. diesel prices again surpassed $5 per gallon this week.

Bloomberg analyst Nathan Risser notes that higher fuel costs—from farm tractors to cross-country trucks—will force industries to raise prices, ultimately passing costs onto consumers for food and other daily essentials.

According to IEA data, the conflict has caused the largest supply disruption in global oil markets history, forcing Gulf oil producers to cut about 10 million barrels per day. It is also reported that Saudi Arabia’s baseline scenario suggests that if supply disruptions persist until the end of April, oil prices could surpass $180 per barrel.

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