48-Hour Ultimatum and 45-Day Ceasefire Agreement — Investors Are "Confused and Frustrated"

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Source: Wall Street Insights

Trump issues a tough ultimatum to Iran while also releasing signals of negotiation and reconciliation. The conflicting messages put global investors in a dilemma—on the one hand, they need to position for a swift ceasefire agreement, and on the other, they must guard against the situation suddenly escalating and pushing oil prices and bond yields even higher.

On Sunday, Trump warned Iran in sharply worded language that if the Strait of Hormuz is not reopened by 8:00 p.m. ET on Tuesday, Iran will “live in hell,” and he labeled this deadline as a “fusion of power-plant day and bridge day.”

However, on that same day, when Trump accepted an interview with Fox News, he also said he has “a great deal of hope” that an agreement will be reached before Monday.

These starkly opposite statements force investors to build positions for both extreme outcomes at the same time.

Iran immediately rejected Trump’s latest threats, insisting that the key waterway would only fully reopen after Tehran receives compensation for war losses. Meanwhile, Iran continued attacks on the Gulf region over the weekend, including an assault on the Kuwait oil headquarters.

Rob Subbaraman, head of global macro research at Nomura, said, “The market’s nerves are tight, and there’s very little time left. The outcome is only two options—ceasefire or escalation.” He also noted that Trump’s tone still conveys the White House’s urgency to end the war, while investors continue to hedge against escalation risk.

Contradictory signals dominate market moves

Since the outbreak of the war, Trump has repeatedly wavered between “negotiations are progressing smoothly, and a peace agreement 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 information transmission directly led to violent swings in the market, and oil prices have also moved up and down unpredictably.

Last week, the S&P 500 rose 3.4%, recording its best weekly performance since November, as investors bought the dip driven by hopes for diplomatic resolution. At the same time, the Cboe Volatility Index climbed from below 20 before the war to about 24 last week.

Mohit Mirpuri, stock fund manager at SGMC Capital, said, “Trump’s weekend remarks about escalation fully match his usual playbook: using headline news to drive the market—unpredictable—aimed at quickly exerting the maximum pressure.”

He added, “As long as he’s still in office, the market needs to adapt to this policymaking approach.”

Energy crisis persists, and the risk of stagflation emerges

The month-long war and the effective blockade of the Strait of Hormuz are threatening to push the world into one of the most severe energy crises in history. Analysts warn that even if a diplomatic breakthrough is achieved, the market will be unlikely to return to normal quickly.

Brent crude surged to $109.77 per barrel on Monday, up about 50% from the time of the war’s outbreak on February 28. West Texas Intermediate (WTI) rose even more, up 66% to $111.2 as of 11:00 p.m. ET.

Although shipping volume has ticked up slightly in recent days, the shipping traffic volume through the Strait of Hormuz is still 95% lower than pre-war levels—before the war, nearly a quarter of the world’s seaborne oil and one-fifth of its liquefied natural gas were transported through this route.

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

Mirpuri said, “Even if the Strait of Hormuz reopens, the damage to confidence and the supply chain has already been done—things won’t return to normal overnight.”

Rob Subbaraman warned that the war has lasted long enough “to trigger a serious surge in inflation globally.” If the situation escalates further, “the inflation shock could quickly evolve into a growth shock, bringing demand contraction and widespread stagflation.”

Bond market quietly reprices, and yield risk is underestimated

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

Mirpuri said, “One of the bigger risks that the market is underestimating is the direction of government bond yields. If this geopolitical shock continues to push inflation expectations higher, yields could move up again, tightening financial conditions further at a time when the market is already fragile.”

Wall Street strategist Ed Yardeni said the fixed-income market is repricing government bonds to reflect the sharp deterioration in the inflation outlook. “The bond vigilantes are taking action on their own, tightening credit conditions.” He warned that “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 as the market waits for key data

As Tuesday’s deadline approaches, the market expects continued high volatility, with investors closely tracking every signal coming from Washington and Tehran.

CCTV cited an Axios report saying that the U.S., Iran, and a number of regional mediators are discussing provisions for a potential 45-day ceasefire deal. The agreement could lay the groundwork for permanently ending the war, but the report also notes that the chances of reaching partial agreements before the deadline remain slim. Boosted by this news, Japan and South Korea’s stock markets rose on Monday, while India’s benchmark equity index recorded a decline.

Hiroki Shimazu, chief strategist at MCP Asset Management, said, “We’re now in an event-driven market. Headline risk dominates intraday moves, and position building must account for 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 solution. He also expects the market to remain volatile over the coming weeks.

Investors will also face a series of important U.S. economic data this week. The Federal Reserve’s most favored inflation gauge—the Personal Consumption Expenditures (PCE) price index for February—will be released on Thursday, offering an initial signal as to whether the oil price shock has already been transmitted to U.S. prices.

Spot gold has fallen about 12% since the war broke out to $4,691 per ounce, pressured by the headwinds between safe-haven demand and a stronger dollar, alongside rising Treasury yields.

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

Chetan Seth, Nomura’s APAC equities strategist, concluded: “Uncertainty is clearly extremely high in the near term. For most investors, at this stage, all they can do is wait and see.”

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