Ultimatum and Ceasefire Agreement—Investors Torn Between "Long" and "Short"

Trump issues a tough ultimatum to Iran, while also sending signals of willingness to negotiate and seek reconciliation. Conflicting messages put global investors in a bind—positioning for a rapid ceasefire deal, yet also trying to guard against a sudden escalation that could push oil prices and bond yields higher.

On Sunday, Trump warned Iran in sharply worded language that if the Strait of Hormuz is not reopened by 8:00 p.m. Eastern Time on Tuesday, Iran would be “living in hell,” and he characterized the deadline as a “combination of power-plant day and bridge day.” Yet later that same day, in an interview with Fox News, he said he has “very high hopes” of reaching an agreement before Monday. The starkly contradictory statements force investors to build positions for both extremes.

Iran promptly rejected Trump’s latest threats, insisting that the key waterway would only fully reopen after Tehran receives war-loss compensation. At the same time, Iran continued strikes across the Gulf region over the weekend, including an attack on Kuwait’s oil headquarters. Rob Subbaraman, head of global macro research at Nomura, said, “The market’s nerves are frayed, and there’s very little time left—there are only two outcomes: a ceasefire or escalation.” He added that Trump’s tone still conveys the sense that the White House is eager to end the war, while investors continue to hedge against escalation risk.

Contradictory signals dominate the market’s direction

Since the outbreak of the war, Trump has repeatedly swung between “negotiations are going smoothly, and a peace agreement is about to be reached” and “preparing to increase military action against Iran,” and he has repeatedly extended the deadline for Iran to reopen the Strait of Hormuz. This chaotic messaging directly led to violent market swings, and oil prices have followed suit with unpredictable fluctuations.

Last week, the S&P 500 rose 3.4%, recording its best weekly performance since November, as investors bought the dip on the back of hopes for a diplomatic resolution. Meanwhile, the Cboe Volatility Index climbed from below 20 before the war to around 24 last week.

Mohit Mirpuri, portfolio manager of the SGMC Capital stock fund, said, “Trump’s weekend upgrade/ escalation comments are completely in line with his usual playbook: driving the day’s headlines, hard to predict, and aimed at quickly applying maximum pressure.” He added, “As long as he’s in office, the market needs to adapt to this style of policy-making.”

Energy crisis persists; stagflation risk emerges

This monthslong war and the effective blockade of the Strait of Hormuz are putting the world at risk of one of the most severe energy crises in history. Analysts warn that even if diplomatic breakthroughs are achieved, markets are unlikely to return to normal quickly.

Brent crude jumped to $109.77 per barrel on Monday, up about 50% from the start of the war on February 28. West Texas Intermediate rose even more sharply—up 66%—to $111.2 as of 11:00 p.m. Eastern Time. Although shipping volumes have recently ticked up slightly, the Strait of Hormuz’s shipping flow remains 95% below pre-war levels—before the war, nearly one-quarter of seaborne oil and one-fifth of LNG globally were transported through this corridor.

OPEC+ decided on Sunday to raise May production quotas by 206k barrels per day, but analysts say the move will have little impact on replenishing oil supply because the war has severely constrained the output and shipments of one of the world’s largest crude-producing countries.

Mirpuri noted that, “Even if the Strait of Hormuz reopens, the damage to confidence and supply chains has already been done—things won’t return to normal overnight.” Rob Subbaraman warned that the war has already lasted long enough to trigger “a serious surge in inflation worldwide,” and if the situation escalates further, “inflation shocks could quickly evolve into growth shocks, bringing demand destruction and full-blown stagflation.”

Bond market quietly reprices; yield risk is underestimated

The fixed-income market is quietly reassessing the inflation outlook. The yield on the U.S. 10-year Treasury rose to 4.362% on Monday, up about 40 basis points from 3.962% before the conflict erupted. It has been hovering near its highest level since mid-2025, and investors have sharply pared back expectations for rate cuts this year by the Federal Reserve.

Mirpuri said, “One of the bigger risks that the market is underestimating is the trajectory of government bond yields. If this geopolitical shock keeps pushing up inflation expectations, yields could rise again, tightening financial conditions further at a time when markets are already fragile.”

Wall Street strategist Ed Yardeni said, “The fixed-income market is repricing government bonds to reflect a sharp worsening in the inflation outlook.” He said, “Bond vigilantes are already taking action on their own, tightening credit conditions.” He warned that, “We can’t rule out a bear market and even a recession now—everything depends on how long the strait blockade lasts.”

Headline-driven volatility; the market awaits key data

As the Tuesday deadline approaches, markets expect continued high volatility, with investors closely tracking every signal coming out of Washington and Tehran.

China Central Television, citing Axios, reported that the United States, Iran, and a number of regional intermediaries are discussing the terms of a potential 45-day ceasefire deal, which could lay the groundwork for a permanent end to the war. The report also noted, however, that the likelihood of reaching partial agreements before the deadline remains low. Lifted by the news, Japan and South Korea’s stock markets rose on Monday, while India’s benchmark equity index fell.

Hiroki Shimazu, chief strategist at MCP Asset Management, said, “We are currently in an event-driven market, with headline risk dominating intraday price action, so position sizing must take into account the binary nature of outcomes.” He expects both sides to move toward de-escalation under Oman’s mediation, easing tensions by “quietly lowering the pace of strikes” rather than reaching a decisive resolution. He also expects that over the coming weeks, the market will remain volatile.

Investors this week will also face a slate of important U.S. economic data. The Federal Reserve’s preferred inflation gauge—the Personal Consumption Expenditures (PCE) price index for February—will be released on Thursday, providing an initial signal to gauge whether any oil-price shock has already passed through to U.S. prices.

Spot gold has fallen about 12% since the war broke out to $4,672.03 per ounce, pressured by headwinds from reduced safe-haven demand alongside a stronger dollar and rising Treasury yields. A strong dollar makes gold priced in dollars more expensive for holders of other currencies, while rising yields erode the appeal of this non-yielding asset. Summarizing the situation, Chetan Seth, equity strategist at Nomura for APAC, said, “Uncertainty is clearly extremely high right now, and for most investors at this stage, there’s only so much they can do but wait and watch.”

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