Ultimatum and Ceasefire Agreement—Investors Torn Between Bulls and Bears

``` Trump Issues Tough Ultimatum to Iran While Sending Signals of Negotiation and Reconciliation; Contradictory Messages Leave Global Investors in a Dilemma—Both Preparing for a Quick Ceasefire Agreement and Guarding Against a Sudden Escalation That May Further Push Up Oil Prices and Bond Yields. On Sunday, Trump used strong language to warn Iran that if the Strait of Hormuz is not reopened by 8 PM ET on Tuesday, Iran would “live in hell.” He described this deadline as “a combination of Power Plant Day and Bridge Day.” Yet, on the same day in a Fox News interview, Trump also expressed he was “very hopeful” for an agreement before Monday. These contrasting statements are forcing investors to position themselves for two extreme outcomes at once. Iran quickly rejected Trump’s latest threat, insisting the key waterway would only fully reopen after Tehran receives compensation for war losses. Meanwhile, Iran continued its attacks on the Gulf region over the weekend, including a strike on Kuwait’s oil headquarters. Rob Subbaraman, head of global macro research at Nomura, said, “Market nerves are taut, and time is running out. Only two outcomes remain—ceasefire or escalation.” He also noted that Trump’s tone still reveals the White House's urgency to end the war, while investors continue to hedge against escalation risks. Contradictory Signals Dominate Market Trends Since the war began, Trump has repeatedly swung between “negotiations are progressing well and a peace agreement is imminent” and “preparing to ramp up military actions against Iran,” extending Iran’s Strait of Hormuz reopening deadline several times. This confusing communication has directly caused severe market volatility, and oil prices have fluctuated accordingly. Last week, the S&P 500 index rose 3.4%, marking the best week since November, as investors bought the dip driven by hopes for a diplomatic solution. Meanwhile, the Cboe Volatility Index climbed from under 20 pre-conflict to about 24 last week. SGMC Capital equity fund manager Mohit Mirpuri noted, “Trump’s escalatory weekend statements are consistent with his usual tactics: headline-driven, unpredictable, and designed to exert maximum pressure quickly.” He added, “As long as he’s in office, the market will need to adapt to this style of policymaking.” Energy Crisis Persists, Stagflation Risks Emerge The month-long war and practical blockade of the Strait of Hormuz threaten to push the world into one of the most severe energy crises in history. Analysts warn that even if there’s a diplomatic breakthrough, markets are unlikely to quickly return to normal. Brent crude soared to $109.77 per barrel on Monday, up about 50% since the war began on February 28. WTI crude rose even more, up 66% to $111.2 a barrel as of 11 PM ET. Although traffic has recovered slightly, shipping volumes through the Strait of Hormuz are still 95% below pre-war levels—before the war, nearly one quarter of the world’s seaborne oil and one fifth of liquefied natural gas passed through here. OPEC+ decided Sunday to increase the May production quota by 206,000 barrels per day, but analysts say this move does little to supplement oil supply, as war has severely restricted production and shipments from one of the world’s largest oil producers. Mirpuri pointed out, “Even if the Strait of Hormuz reopens, the damage to confidence and supply chains is done—things won’t return to normal overnight.” Rob Subbaraman warned that the war “has lasted long enough to trigger serious global inflation spikes.” If the situation escalates, “the inflation shock could soon turn into a growth shock, causing demand contraction and full-blown stagflation.” Bond Market Repricing Quietly, Yield Risk Underestimated The fixed income market is quietly reassessing inflation prospects. On Monday, the US 10-year Treasury yield climbed to 4.362%, about 40 basis points higher than the 3.962% pre-conflict level, hovering at the highest since mid-2025. Investors have sharply lowered expectations for Fed rate cuts this year. Mirpuri said, “One major risk currently underestimated by the market is government bond yields. If this geopolitical shock continues to drive up inflation expectations, yields could rise further, tightening financial conditions in an already fragile market.” Wall Street strategist Ed Yardeni pointed out that the fixed income market is repricing government bonds to reflect a sharp deterioration in inflation prospects: “Bond vigilantes are taking matters into their own hands, tightening credit conditions.” He warned, “We can’t rule out the possibility of a bear market or even a recession now; it all depends on how long the strait remains blocked.” Headline-Driven Volatility as Market Awaits Key Data As Tuesday’s deadline approaches, markets are expected to remain highly volatile, with investors closely monitoring every signal from Washington and Tehran. CCTV, citing Axios, reported that the US, Iran, and a group of regional mediators are discussing terms for a possible 45-day ceasefire agreement, which could lay the groundwork for a permanent end to the war. However, the report also noted that the chance of any deal before the deadline remains slim. This news boosted markets in Japan and South Korea on Monday, while India’s benchmark equity index fell. Hiroki Shimazu, chief strategist at MCP Asset Management, stated, “We’re now in an event-driven market—headline risk dominates intraday moves, and positions must consider binary outcomes.” He expects both sides to de-escalate under Oman's mediation, “quietly slowing the pace of attacks” rather than reaching a definitive solution, and predicts volatility will persist for weeks. Investors also face a series of key US economic data this week. The Fed’s preferred inflation gauge—February Personal Consumption Expenditures (PCE) Index—will be released Thursday, offering early signs of whether the oil shock has begun to filter into US prices. Spot gold has dropped about 12% since the war began to $4,672.03 per ounce, pressured by safe-haven demand countered by a strong dollar and rising Treasury yields. A stronger dollar makes dollar-denominated gold more expensive for holders of other currencies, while higher yields reduce the appeal of this non-interest-bearing asset. Nomura APAC equity strategist Chetan Seth summed up, “Uncertainty is clearly very high in the near term. For most investors, all they can do now is watch from the sidelines.” Risk Reminder and Disclaimer Markets are risky, and investments require caution. This article does not constitute personal investment advice, nor does it take into account individual users’ specific investment goals, financial situations, or needs. Users should determine whether any opinions, views, or conclusions in this article suit their particular circumstances. Investments made based on this are at one’s own risk. ```