He offered no clear timeline for when the conflict might end
In the early hours of Thursday, financial markets absorbed the weight of a presidential ultimatum — President Trump's vow to strike Iran 'extremely hard' sent oil surging more than 8% and erased the quiet optimism that had briefly settled over equities. The Strait of Hormuz, that narrow passage carrying a third of the world's seaborne oil, became once again a symbol of how geopolitical will can override economic momentum. From Tokyo to Frankfurt, markets registered the same ancient anxiety: that the cost of conflict is always paid first at the pump, and then everywhere else.
- Trump's primetime threat to reduce Iran to 'the stone ages' within weeks shattered fragile hopes for Middle East de-escalation and triggered an immediate global repricing of risk.
- WTI crude surged over 8% in hours, dragging S&P 500 futures down 1.27% and Nasdaq futures down 1.65%, wiping out the previous session's gains in a single overnight move.
- Bond markets responded swiftly — 10-year Treasury yields climbed to 4.37% as traders halved their expectations for a Fed rate cut in 2026, from 20% odds to just 10%.
- The sell-off spread globally: European indexes fell nearly 2%, Japan's Nikkei dropped 2.38% with its volatility index spiking over 60%, and China's central bank quietly drained $129 billion in liquidity as a precaution.
- Investors now brace for Friday's Nonfarm Payrolls report — released while U.S. markets are closed for Good Friday — as the defining test of whether oil-driven inflation will force the Fed's hand.
Thursday morning opened with a sharp reversal. S&P 500 and Nasdaq 100 futures fell sharply after President Trump delivered a primetime address promising to strike Iran with overwhelming force within weeks, offering no clear endpoint to the conflict. The ambiguity was precisely what markets had feared.
Oil responded immediately, with West Texas Intermediate crude jumping more than 8%. The Strait of Hormuz — through which roughly a third of the world's seaborne oil flows — had been the focus of fragile hopes for reopening. Those hopes evaporated. Bond yields climbed, and futures markets cut the probability of a Federal Reserve rate cut in 2026 nearly in half, from just over 20% to around 10%. Sustained oil prices feed inflation, and inflation is what the Fed has spent years trying to contain.
The previous session had told a different story. All three major U.S. indexes had closed in the green, led by strong gains in Western Digital, Micron, and Boeing. Economic data reinforced the sense of resilience — private payrolls beat expectations, retail sales came in above forecast, and the ISM manufacturing index ticked higher. Yet Nike's 15% plunge after a downbeat revenue outlook served as a reminder that not every corner of the economy shared the same momentum.
Globally, the damage was broad. European indexes fell nearly 2% as investors locked in profits ahead of the Easter weekend. In Asia, Japan's Nikkei dropped 2.38% and its volatility index surged more than 60%. China's central bank drained over $129 billion in liquidity — its first such move in a year — signaling caution as oil prices rippled outward. Foreign investors had already pulled nearly $28 billion from Japanese equities in a single week, the largest outflow in two decades.
Ahead lay a cluster of economic releases and Fed speeches, but the market's real attention had already shifted to Friday's Nonfarm Payrolls report — due while U.S. markets sit closed for Good Friday. The question was no longer whether the economy was holding up. It was whether oil, and the inflation it carries, would force the Fed to hold rates higher for longer than anyone had hoped.
The morning opened with a sharp reversal. June contracts for the S&P 500 were down 1.27%, and the Nasdaq 100 futures had fallen 1.65%, erasing the modest gains that had accumulated the day before. The culprit was simple and stark: President Trump had delivered a primetime address on Wednesday night in which he promised to strike Iran "extremely hard" over the next two to three weeks, vowing to reduce the country to conditions he described as belonging to "the stone ages." He offered no clear timeline for when the conflict might end, only that U.S. military objectives would be achieved "very shortly." The ambiguity was precisely what markets had feared.
Oil responded immediately. West Texas Intermediate crude jumped more than 8% in the hours after the speech, a move that rippled through every asset class. The Strait of Hormuz, through which roughly a third of the world's seaborne oil passes, had been the focus of fragile hopes for reopening. Trump's rhetoric crushed those hopes. Bond traders moved swiftly. The yield on the 10-year Treasury note climbed five basis points to 4.37%, a signal that inflation concerns had resurged. Futures markets recalibrated their expectations for Federal Reserve rate cuts this year, dropping the probability of a cut in 2026 from just over 20% to roughly 10%. Higher oil prices, sustained over time, feed into inflation. And inflation is what the Fed has been fighting to contain.
The previous day's trading had offered a different picture. The three major U.S. equity indexes had closed in the green. Western Digital had surged more than 10%, leading gainers across the S&P 500 and Nasdaq 100, while Micron Technology rose more than 8%. Mining stocks had climbed on strength in gold and silver, with Newmont gaining over 5% and Freeport McMoRan rising more than 4%. Boeing had advanced over 4% after Wells Fargo initiated coverage with an Overweight rating and a $250 price target. But Nike had tumbled more than 15%, the worst performer on both the S&P 500 and the Dow, after the company projected revenue would fall between 2% and 4% in the current quarter and decline in the low single digits for the rest of the year.
Economic data released Wednesday had painted a picture of resilience. Private nonfarm payrolls rose by 62,000 in March, beating expectations of 41,000. Retail sales climbed 0.6% month-over-month in February, above the forecast of 0.5%, while core retail sales—excluding vehicles and parts—rose 0.5%, beating expectations of 0.3%. The ISM manufacturing index for March unexpectedly ticked up to 52.7, slightly above the expected 52.3. These numbers suggested an economy with some momentum, not one in distress. Yet they also complicated the inflation picture. St. Louis Federal Reserve President Alberto Musalem had acknowledged on Wednesday that risks to both inflation and employment were rising, and that officials should be prepared to adjust rates in either direction depending on how conditions evolved.
Global markets moved in lockstep with the American sell-off. The Euro Stoxx 50 Index fell 1.82% as European investors locked in profits ahead of the long Easter weekend. Technology, mining, and bank stocks sank, while energy stocks climbed on the oil surge. Switzerland's annual inflation rate had risen to 0.3% in March, its highest level since the previous year, driven by the Middle East conflict and oil prices. Italy's monthly retail sales had been unchanged. Eurozone government bond yields climbed as traders raised bets on European Central Bank rate hikes; money markets were now pricing in at least three 25-basis-point ECB increases by year's end.
In Asia, the picture was similarly grim. China's Shanghai Composite Index closed down 0.74%, while Japan's Nikkei 225 fell 2.38%. China's central bank had drained liquidity from its financial system for the first time in a year, withdrawing 890 billion yuan ($129 billion) through short-term operations and absorbing an additional 250 billion yuan through longer-term instruments—a cautious move designed to preserve flexibility as oil prices rippled through the economy. In Japan, foreign investors had sold a net 4.45 trillion yen ($27.92 billion) worth of stocks in the week through March 28th, the largest weekly outflow since at least January 2005. The Nikkei Volatility Index surged 60.23% to 42.35, a measure of fear.
Ahead lay a day of economic releases: Initial Jobless Claims data, expected at 212,000 compared to 210,000 the previous week; U.S. Trade Balance figures, forecast to widen to a deficit of $60.5 billion in February from $54.5 billion in January. Speeches from Federal Reserve Vice Chair Michelle Bowman and Dallas Fed President Lorie Logan were scheduled. But the market's attention had already shifted. The real test would come Friday with the March Nonfarm Payrolls report—the key monthly jobs snapshot—though U.S. stock markets would be closed for Good Friday. Economists expected 65,000 jobs added, following a 92,000 decline in February, with unemployment holding at 4.4%. By then, the question would no longer be whether the economy was strong. It would be whether oil prices, and the inflation they carried, would force the Fed to hold rates higher for longer than anyone had hoped.
Citações Notáveis
Going to hit Iran extremely hard over the next two to three weeks. We're going to bring them back to the stone ages, where they belong.— President Trump, primetime address Wednesday
Risks to both inflation and employment are rising, and officials should be ready to adjust interest rates in either direction depending on how the economy evolves.— St. Louis Fed President Alberto Musalem
A Conversa do Hearth Outra perspectiva sobre a história
Why did Trump's speech move markets so dramatically? He's been hawkish on Iran before.
The difference was the specificity and the timeline. He said "extremely hard" strikes over the next two to three weeks. That eliminated any hope the Strait of Hormuz would reopen soon. Oil jumped 8% because traders suddenly priced in prolonged supply disruption.
And that matters for stocks because?
Oil prices feed inflation. Higher inflation means the Fed can't cut rates as aggressively as markets had been pricing in. Rate-cut odds dropped from 20% to 10% in hours. That's a massive repricing of future returns.
But the economic data that day was actually strong—jobs, retail sales, manufacturing.
Exactly. That's the trap. The economy looks resilient, which is good. But resilience in the face of rising oil prices means the Fed has to keep rates higher to fight inflation. Strength becomes a problem.
So what happens if oil stays elevated?
Corporate earnings get pressured, especially for airlines and manufacturers. Consumers feel it at the pump. The Fed stays restrictive. Stocks can't rally on growth because the cost of capital stays high.
Is there a way out?
De-escalation in the Middle East. That's it. If Trump's strikes don't happen, or if they're limited, oil falls, inflation fears ease, and the Fed can cut. But his speech suggested that's not coming soon.
What are investors watching now?
The jobs report on Friday will matter, but honestly, it's secondary. The real variable is oil. Everything else flows from that.