Markets bounce back as Trump postpones power plant strikes after ‘very good and productive’ talks with Iran
Stock markets as suddenly surging, after Donald Trump claimed that the US and Iran have held “very good and productive conversations” over an end to the conflict.
The London stock market has recovered almost all its earlier losses, after Trump also declared he had postponed any military strikes against Iranian power plants and energy infrastructure for five days.
Poting on Truth Social, Trump writes:
I AM PLEASE TO REPORT THAT THE UNITED STATES OF AMERICA, AND THE COUNTRY OF IRAN, HAVE HAD, OVER THE LAST TWO DAYS, VERY GOOD AND PRODUCTIVE CONVERSATIONS REGARDING A COMPLETE AND TOTAL RESOLUTION OF OUR HOSTILITIES IN THE MIDDLE EAST. BASED ON THE TENOR AND TONE OF THESE IN DEPTH, DETAILED, AND CONSTRUCTIVE CONVERSATIONS, WITCH WILL CONTINUE THROUGHOUT THE WEEK, I HAVE INSTRUCTED THE DEPARTMENT OF WAR TO POSTPONE ANY AND ALL MILITARY STRIKES AGAINST IRANIAN POWER PLANTS AND ENERGY INFRASTRUCTURE FOR A FIVE DAY PERIOD, SUBJECT TO THE SUCCESS OF THE ONGOING MEETINGS AND DISCUSSIONS. THANK YOU FOR YOUR ATTENTION TO THIS MATTER! PRESIDENT DONALD J. TRUMP
In the City, the FTSE 100 share index is now down just 10 points at 9907 points, having been down almost 250 points at its lowest level today.
Key events
Trump has also told reporters in Washington that his Middle East envoy Steve Witkoff and close aide and son-in-law Jared Kushner talked to the Iranians on Sunday and that discussions would continue on Monday.
Speaking before departing Florida to travel to Memphis, Trump said:
“We have had very, very strong talks. We’ll see where they lead. We have points, major points of agreement, I would say, almost all points of agreement… we’ve had very strong talks, Mr. Witkoff and Mr. Kushner had them.
“All I’m saying is, we are in the throes of a real possibility of making a deal.”
Aberdeen: We need to see than words
Asset manager Aberdeen is cautiously putting its toe into the UK government debt market, after Donald Trump calmed markets (for the moment….) today.
Matthew Amis, investment director at Aberdeen, says Trump’s statement is the circuit breaker that markets needed, adding:
The selling has stopped for the time being after a very weak start to the week. European sovereign markets, as you would expect, are reacting positively to the Trump headlines, despite the Iranian pushback.
However, to materially unwind the moves of the last few weeks, we would need to see more than words and clear action: namely ships moving through the Straits of Hormuz. Markets still have aggressive hikes priced for the UK and Eurozone in 2026. Although we don’t agree with the level, for those to be removed we would need to see energy prices fall a lot further.
Although this is merely a 5 day postponement, we believe today’s headlines at least show that de-escalation is possible. UK gilts have been beaten up over the last few weeks, with yields surpassing 5% on Friday we are therefore very tentatively buying UK Gilts.”
Sky News: Take Trump’s announcement with ‘grain of salt’, says Israeli source
An Israeli source has told Sky News to take Donald Trump’s announcement “cautiously, with a grain of salt”.
They added:
“It’s early Monday morning in the US, the start of the trading week.
“Markets opened higher, largely as expected following the weekend reports on the negotiations and the latest statement by Donald Trump.
“That said, I wouldn’t view this move as a final step. We saw a similar pattern last week.”
More here on Sky News.
US stock market’s ‘fear index’ drops
Wall Streets ‘fear index’ has dropped sharply today, another sign that investors are more optimistic.
The Chicago Board Options Exchange’s CBOE Volatility Index, commonly known as VIX, has dropped by 10% today to 24 points.
It had earlier traded over 30 points just before Donald Trump postponed attacks on Iranian energy infrastructure following “constructive” talks.
Shorter-dated US and UK government bonds are both rallying today, as fears of an inflationary spike from the Middle East conflict ease.
The yield (or interest rate) on two-year US Treasury bills are down 6 basis points (0.06 percentage points) today, at 3.84%.
There’s a bigger fall in UK two-year gilt yields – down 20 basis points at 4.363%. That’s a sharp move – following days in which UK bond yields rose by more than other advanced economies, due to concerns over Britain’s fiscal position in the face of an energy shock.
Donald Trump has been insisting that the US and Iran were in discussions about ending the war, telling reporters there were “major points of agreement” between the two.
The US president said the US is talking to a “top person” within the Iranian regime to try to end the war, but not the new supreme leader, Ayatollah Mojtaba Khamanei.
Speaking after Iranian media denied that talks were happening, Trump declared:
“I didn’t call, they called – and they wanted to make a deal.”
When asked by CNN’s chief White House correspondent Kaitlin Collins who the US is talking to in Iran, Trump was quoted as having said:
A top person. Don’t forget: We’ve wiped out the leadership phase one, phase two and largely phase three.
But we’re dealing with a man who I believe is the most respected and the leader, you know it’s a little tough, they’ve wiped out – we’ve wiped out everybody.
Asked whether the US was talking to Khamenei, Trump said: “No, not the supreme leader.”
Back in London, two round numbers are attracting attention in the City.
The FTSE 100 is bobbing around the 10,000-point mark, which it tumbled through last week.
And Brent crude oil is hovering just above $100 a barrel.
US crude oil down almost 10%
US oil prices have dropped to their lowest level in over a week, on hopes of de-escalation in the Middle East.
The cost of a barrel of West Texas Intermediate (WTI) has fallen by 9.7% today, to $88.72 per barrel, on relief that Donald Trump has delayed any attacks on Iran’s energy infrastructure for at least five days.
US stock market jumps after Trump’s TACO moment
Wall Street has joined the global relief rally after Donald Trump postponed attacks on Iran’s power plants, sending a surge of optimism though trading floors.
In New York, the Dow Jones industrial average has jumped by 2% or 928 points to 46,505 points.
Construction equipment firm Caterpillar (+4.4%), manufacturing conglomerate 3M (+3.7%) and DIY chain Home Depot (+3.65%) are leading the risers.
The broader S&P 500 share index has rallied too, it’s up 1.9%.
Investors are relieved that Donald Trump has extended by five days his deadline to “hit and obliterate” Iran’s power stations and energy infrastructure if Tehran does not allow shipping to move freely through the strait of Hormuz, claiming that the US and Iran have held “very good and productive conversations” on an end to the three-week-old war.
With the markets so volatile today, George Lagarias, chief economist at Forvis Mazars has warned investors to respond only to verified facts.
Lagarias says:
“The volatility of asset prices faithfully mirrors the volatility of events in the Middle East, including competing, and conflicting, statements from Washington and Tehran. Despite the initial jump in risk assets, it’s becoming evident that the situation remains uniquely fluid. De-escalation is as much on the table as re-escalation.
Investors should remain calm and respond only to verified facts and agreed upon deals. At the heart of the market volatility is free movement in and out of the Straits of Hormuz, a very important global trade chokepoint. Until investors get assurance of at least a medium-term resolution that would ensure the resumption of normal trade in the Persian Gulf, they would do well to remain reserved.”
European rally picks up pace
There’s no end to the volatility in the markets today.
The UK’s FTSE 100 share index is now up 63 points, or 0.64% today, at 9,983 points, despite the share prices of oil companies and weapons makers falling (BAE Systems are down 2.8%).
Tom Stevenson, investment director at Fidelity International, sums up the drama:
“A dramatic U-turn by President Trump has once again triggered gyrations in global financial markets. After heavy falls across bonds, shares and precious metals early on Monday, markets quickly regained their composure after threats to attack Iran’s power networks were abruptly withdrawn via a Presidential post on Truth Social.
“With the White House’s change of direction happening after Asian markets closed but before the US opened, the shift in sentiment played out most clearly in European markets. Having been as much as 2.5% lower, the FTSE 100 bounced back into positive territory within minutes of the US suspending its escalation threat.
“As the week’s trading began, investors had been looking in vain for safe havens as global markets eyed President Trump’s deadline for Iran to re-open the Strait of Hormuz. With Iran threatening retaliation if a promised attack on its power networks materialises, investors were concerned that the conflict has entered a newly dangerous phase.
“Despite a shaky start to the week, the impact on global markets remains relatively contained, as investors rightly price in the ever-present possibility that the US President might change tack. Investors are reluctant to give up on a market which continues to be supported by strong earnings growth and where an early resolution of the conflict could lead to a rebound in prices.
“As well as sharp recoveries in stock markets, bond prices rallied hard on the news. Gilts, where yields had risen above 5%, rose as the yield on the 10-year government bond dipped to 4.9%. That reflected a rapid drop in the price of oil, with the Brent contract falling 10% to $101 a barrel.
Today’s drama in the markets shows that the Bank of England should “sit tight” rather than react rapidly to events in the Middle East, says Professor Costas Milas, of the University of Liverpool’s management school.
Prof Milas tells us:
Trump’s predictably unpredictable post is puzzling. Having repeatedly stated that there is nobody to negotiate with, now Trump reveals that negotiations have taken place. All this creates large swings in financial markets and notably so in market expectations of UK interest rates. At the start of the war, money markets predicted no interest rate changes.
Earlier today, financial markets “concluded” that the BoE will raise interest rates from 3.75% to 4.75% before the end of the year. Now financial markets are thinking about more moderate interest rate rises and will have to wait for Trump’s next social post in order to change their mind yet again.
The point is that the sudden and constant change in market expectations of interest rates, almost entirely driven by Trump’s geopolitical actions and social media posts, demonstrates that the Bank of England’s policymakers should sit tight rather than rushing into any action!
Donald Trump just triggered “one of the most extraordinary market turnarounds in recent history,” says David Morrison, senior market analyst at financial services provider Trade Nation.
Morrison says US stock index futures “turned on a sixpence and roared higher” after Trump posted his (disputed claim) of productive talks with Iran.
He explains:
At around 10:45 GMT the S&P 500 had been trading near the low of the day, below 6,440 [points], and at its worst level since early September. Just twenty minutes later it was within sight of 6,700, jumping close to 4%.
The surge came after President Trump declared that: ‘… the US and Iran, have had, over the last two days, very good and productive conversations regarding a complete and total resolution of our hostilities in the Middle East.’ Crude oil prices cratered, while gold and silver, which had both sold off dramatically overnight, roared back to life tacking on 9% and 14% respectively from their session lows.
Iranian media deny that negotiations have taken place… it takes two to TACO
Iran’s Fars news agency has quoted a source as saying there has been “no direct or indirect connection” between Iran and Donald Trump, in contradiction to the US president’s statement.
Citing an unnamed source, Fars said Trump had retreated after hearing that Iran would respond by attacking all power plants in the region.
This has punctured some of the optimism in the markets.
Oil is now trading at $106.75 a barrel, still down 4.8% today, having ended last week around $112 a barrel.
European stock markets have slipped back a little too, but have still clawed back all this morning’s early heavy losses.
Germany’s DAX, for example, is still up 1%.
Neil Wilson, Saxo UK Investor Strategist, says:
Stocks have staged a monster rally off the lows after President Trump signalled the US and Iran have had “very good and productive conversations” over “total resolution” of hostilities, and that the US would postpone all military strikes against Iranian power plans and energy infrastructure for five days.
He posted on Truth Social but I would treat this with caution and it seems to already be refuted by Iran…it takes two to TACO remember.