48-hour final ultimatum and 45-day ceasefire agreement leave investors "confused and overwhelmed"

Author: Pan Lingfei, Wall Street Insights

Trump issues a tough ultimatum to Iran, while also sending negotiation and reconciliation signals—conflicting messaging puts global investors in a bind—they need to set things up for a rapid ceasefire agreement, while also guarding against the situation suddenly escalating and pushing oil prices and bond yields even higher.

On Sunday, Trump warned Iran in harsh language that if the Strait of Hormuz is not reopened by 8:00 p.m. Eastern Time on Tuesday, Iran will be “living in hell,” and he characterized this deadline as “a merger of power plant day and bridge day.”

However, later the same day, in an interview with Fox News, Trump also said that he has “a very big hope” of reaching an agreement before Monday.

These opposite statements force investors to position themselves for two extreme outcomes at the same time.

Iran promptly rejected Trump’s latest threats, insisting that this key waterway would only reopen fully after Tehran receives war-loss compensation. At the same time, Iran continued attacks in the Gulf region over the weekend, including an attack on the Kuwait Oil headquarters.

Rob Subbaraman, head of global macro research at Nomura, said, “The market nerves are stretched tight, and there’s hardly any time left—there are only two outcomes: ceasefire or escalation.” He also noted that Trump’s tone still conveys the urgency felt by the White House to end the war, while investors continue hedging against escalation risks.

Contradictory signals dominate market走势

Since the war broke out, Trump has repeatedly swung back and forth between “negotiations are going smoothly and a peace deal is about to be reached” and “preparing to increase military action against Iran,” and he has extended the deadline for Iran to reopen the Strait of Hormuz multiple times.

This chaotic flow of information has directly led to violent market swings, with oil prices also fluctuating.

Last week, the S&P 500 rose 3.4%, posting its best weekly performance since November, as investors bought the dip driven by hopes for a diplomatic resolution. Meanwhile, the Cboe Volatility Index climbed from below 20 in the pre-war period to about 24 last week.

SGMC Capital’s fund manager of equity funds, Mohit Mirpuri, said, “Trump’s weekend upgrade-style remarks fully match his usual playbook: driven by headlines, hard to predict, aimed at quickly applying maximum pressure.”

He added, “As long as he is still in office, the market needs to adapt to this way of making policy.”

Energy crisis persists, stagflation risk emerges

This month-long war and the Strait of Hormuz’s de facto blockade are threatening to plunge the world into one of the most severe energy crises in history. Analysts warn that even if diplomatic breakthroughs are achieved, the market will not be able to return to normal quickly.

Brent crude jumped to $109.77 per barrel on Monday, up about 50% from when the war broke out on February 28. West Texas Intermediate rose even more, up 66% to $111.2 as of 11:00 p.m. Eastern Time.

Although traffic has recently rebounded slightly, shipping volume through the Strait of Hormuz is still 95% lower than pre-war levels—before the war, nearly one-quarter of global seaborne oil and one-fifth of liquefied natural gas were transported through this route.

On Sunday, OPEC+ decided to raise May production quotas by 206k barrels per day, but analysts believe the impact on replenishing oil supply will be minimal, because the war has severely constrained output and shipments from one of the world’s largest crude oil producers.

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 “this war has lasted long enough to drive a serious inflation surge across the world,” and if the situation escalates further, “inflation shocks could quickly evolve into growth shocks, bringing demand contraction and broad-based stagflation.”

Bond markets quietly reprice, yield-rate risk underestimated

The fixed-income market is quietly reassessing inflation expectations. 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 broke out, hovering near the highest levels since mid-2025, and investors have sharply pared back expectations for the Fed to cut rates this year.

Mirpuri said, “One of the bigger risks that the market has been underestimating is the path of government bond yields. If this geopolitical shock keeps pushing up inflation expectations, yields could move higher 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 the rapid deterioration in the inflation outlook, “bond vigilantes are taking action on their own—tightening credit conditions.” He warned, “We can’t rule out the possibility of a bear market, or even a recession. Everything depends on how long the blockade of the strait lasts.”

Headline-driven volatility, market waits for key data

As Tuesday’s deadline approached, markets expected continued high volatility, with investors closely tracking every signal from Washington and Tehran.

CCTV, citing an Axios report, said the U.S., Iran, and a group of regional intermediaries are discussing the terms of a potential 45-day ceasefire deal, which could lay the groundwork for permanently ending the war. However, the report also noted that the chances of reaching partial agreements before the deadline remain slim. Lifted by the news, Japanese and South Korean stock markets rose on Monday, while India’s benchmark equity index fell.

Hiroki Shimazu, chief strategist at MCP Asset Management, said, “We’re now in an event-driven market. Headline risk dominates intraday trading, and positioning must take into account the binary nature of the outcomes.” He expects the two sides to move toward de-escalation under Oman’s mediation, easing tensions in a way that “quietly reduces the pace of strikes,” rather than reaching a decisive resolution, and he expects markets to remain choppy over the coming weeks.

Investors will also face a series of important U.S. economic data this week. The Fed’s preferred inflation gauge— the February Personal Consumption Expenditures (PCE) index—will be released on Thursday, providing an early signal on whether any oil price shock has begun to filter through to U.S. prices.

Spot gold has fallen about 12% since the war broke out to $4,691 per ounce, weighed down by headwinds from safe-haven demand and a strengthening dollar, as well as rising Treasury yields.

A strong dollar makes gold priced in dollars more expensive for holders of other currencies, while rising yields further weaken the appeal of this non-yielding asset.

Chetan Seth, equity strategist for Nomura APAC, concluded, “Uncertainty is clearly extremely high right now. For most investors, at this stage, the only option is to wait and see.”