Trump is "capricious," the market is "volatile," and investors can only "grit their teeth and endure"?

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The contradictory signals in the US-Iran situation are plunging global markets into sustained turbulence, leaving investors torn between diplomatic hopes and the risks of escalating conflict.

This week, Trump claimed the US and Iran were "negotiating" and hinted at a peace agreement, causing oil prices to drop and the stock market to surge. However, Tehran subsequently denied direct negotiations, dismissing related reports as "fake news," causing the market rally to quickly reverse.

According to Xinhua News Agency, the Wall Street Journal reported on the 25th that President Trump recently told his advisors he hopes to "quickly" end the war with Iran and strives to "end the fighting in the next few weeks." However, the US and Iran still have significant differences on core demands.

This confusion of signals has already caused oil prices, bond yields, and stock markets to experience extraordinary fluctuations. Analysts warn that if talks break down or energy infrastructure suffers further attacks, recent market gains could evaporate swiftly and volatility would once again heat up.

Two paths priced at the same time, markets in dilemma

This week, the US and Iran made completely opposing public statements about negotiations, making it difficult for markets to form clear macro expectations. Reports say the US has proposed more than a dozen ceasefire conditions to Iran to restart talks, but Iranian officials denied such reports. Meanwhile, the Pentagon is reportedly planning to send thousands more soldiers to the Middle East, which could significantly escalate the conflict.

"The market is struggling because it is trying to price two competing paths at the same time," said Billy Leung, Investment Strategist at Global X ETFs, "A diplomatic solution is being discussed, but the baseline scenario still includes risks of disruption to energy flows in the near term, especially the Strait of Hormuz."

Marko Papic, geopolitical macro strategist at BCA Research, pointed out that the US and Iran stand far apart on the sovereignty issue in the Strait of Hormuz, and negotiations "may happen, or may not." Despite ongoing military action, the market is already acting as though a diplomatic process is underway, and this disconnect itself poses risks.

Markets highly sensitive to headline news, thin liquidity amplifies volatility

Behind this round of market turbulence lies not only geopolitical uncertainty but also reflects the fragility of current market structures. Billy Leung pointed out, thin liquidity and light positions amplify the impact of geopolitical news, with asset prices swinging more in response to headline news rather than converging to clear macro trends.

Ben Emons, founder of Fedwatch Advisors, said the market currently gives "moderate credibility" to prospects for a peace agreement, but the caveat is that any agreement may only last 30 days. Actions by Israel remain the greatest uncertainty—any sudden attack could rapidly trigger turmoil.

In contrast, geopolitical events in Greenland, Venezuela, and Cuba in early 2026 barely moved the market; at that time, investors had become numb to headline risk created by the Trump administration. "Greenland was a sideshow, Venezuela was a sideshow, Cuba was a sideshow," said Ed Yardeni, president of Yardeni Research, "This conflict is at the highest level."

"Grit your teeth and hold on": Historical experience underpins long-term holding logic

Facing ongoing uncertainty, some investors choose to anchor themselves with historical experience and hold their ground. "You can only grit your teeth and hold on," said Ed Yardeni, "Past geopolitical crises have almost always been buying opportunities." He suggests investors holding cash may arrange holdings in sectors benefiting from oil price drops and fading uncertainty, such as airline stocks and homebuilders, while advising those who have profited from energy stocks to take appropriate profits.

UBS strategists issued a clear warning against trading the geopolitical headlines, recommending investors maintain strategic equity positions, use rebounds to rebalance portfolios, cut exposure to regions and sectors sensitive to high energy prices, and increase allocation to defensive assets and short-duration bonds.

Gautam Chadda, Executive Director at RBC Wealth Management, said intense cross-asset volatility also provides investors with an opportunity to reposition. His team is tilting portfolios toward "beneficiaries of regional unrest," including fertilizer producers, defense manufacturers, and helium suppliers.

Economic impact is the market’s true bottom line

Robin Brooks, senior fellow at the Brookings Institution, believes the market ultimately cares not about the political struggle itself, but about the real impact of conflict on the real economy. "Even if the military escalates, as long as the volume of tanker transportation eventually recovers, the market will cheer," Brooks said, "I think we will see oil prices go down, global stocks bounce back, and everything return to normal."

However, he cautioned that if the situation drags on, the impact will shift from mere price shocks to actual shortages, causing an unprecedented drag on economic growth not seen in decades. "The longer the conflict persists, the more we move from the realm of price shocks to the realm of physical shortages," Brooks said.

For investors, until more clarity emerges, the road ahead remains bumpy.

Risk warning and disclaimerThe market contains risk; investment requires caution. This article does not constitute personal investment advice, nor does it take into account individual users’ special investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. You invest accordingly at your own risk. ```