President Donald Trump has a habit of bending the financial markets to his will.
But with the war in Iran, he may have reached the limit of his ability to do so.
On Friday, the S&P 500 closed up 1.7% and saw its fifth straight weekly decline, its worst performance since 2022 and a sign of less rapid confidence in a quick resolution to the Iran war.
Since the US attack on Iran on Feb. 28, the S & P 500 decreased by 7%.
The Dow Jones Industrial Average fell 1.7% Friday and has lost nearly 4,000 points since the war began. It is now down more than 10% from recent highs, which is a correction in technical terms.
The tech-heavy Nasdaq fell back into correction territory on Friday, closing down 2% and 13% from its record close in October.
Oil prices also rose sharply, with the US rising above $100 a barrel and global Brent crude at around $114 at around 4pm ET. The 10-year Treasury yield rose to 4.4%, the highest since last summer. Other energy stocks, such as Exxon, are trading near all-time highs.
Shortly after the stock market closed on Thursday, Trump announced that he was suspending attacks on Iran’s energy facilities for 10 days. But stocks did not decline.
A few days earlier, they had continued on Monday when the president announced that there had been “productive” talks with Iranian representatives, so he would stop striking Iran’s power plants for five days.
“The market is looking beyond the definition of management,” said Adam Turnquist, chief investment strategist at LPL Financial, which manages about $2 trillion in assets. “They want clear facts and solutions, and actions speak louder than words, they are there [current] price action. “
This new reality contrasts with Trump’s ability to manipulate the markets throughout his first term and at the beginning of his second term.
Trump has spent a good part of 2025 whipping traders with frequent changes to tariff levels. Eventually, a pattern emerged: The president would announce new tariffs, the market would crash, and Trump would usually end up reversing himself in some way.
This trend even got a nickname, coined by a Financial Times columnist: “TACO” – for “Trump Always Chickens Out.” (Last month, the Supreme Court struck down most of the fees.)
This time, the chain of events triggered by Trump’s decision to attack Iran is such that a return to pre-war levels – and market conditions – is unlikely in the short or medium term, experts say.
The disruption to the flow of oil and gas has been so great that transportation costs, and ultimately the price paid per barrel, may remain high indefinitely. Even if the Strait of Hormuz, which Iran has used as a barrier to shipping deals from the West, is finally reopened, the cost of passing through it is likely to rise for the foreseeable future.
And the big fall in the economy and consumer prices is already being felt.
That, has made the reduction of the interest rate by the Federal Reserve not easy, because the high cost of oil is intended to contribute to the already stable inflation. The chances of a rate hike before the end of the year have outstripped the chances of a rate cut.
“Let’s say the wars will end tomorrow – the market will rally, but it won’t necessarily go back to where it was before because of the disruptions that have occurred,” said Steve Sosnick, chief strategist of the Interactive Brokers financial group. “You’re not going to see oil go back to where it was right away. You’re not going to see market prices go down the way they were before.”
White House spokesman Kush Desai said Friday that Trump “continues to be a powerful force influencing market confidence in the United States as the world’s strongest trading economy.”
“Once the military objective of Operation Epic Fury is achieved and short-term market disruptions are behind us, everyday investors are poised to reap the benefits of America’s growing economy,” said Desai.
A day earlier, the president said he was not worried about the market’s recent performance.
Oil prices “have not gone up as much as I thought, Scott, to be honest with you,” he said during a Cabinet meeting, speaking to Treasury Secretary Scott Bessent. Everything will go back to where it was, maybe even lower.
Markets haven’t fallen further because expectations for wage growth remain strong, Turnquist said — though that could change as the conflict continues to hurt consumer spending and business investment.
And compared to the early oil shocks, the US economy does not need much oil, as it has become more service-oriented. Global oil markets have also been supported by the growth in US oil production over the past decade – with more supplies online, prices are generally unlikely to rise much.
By some metrics, however, stocks were already considered overpriced before the war. Since they are already in conflict with the vertical values, traders may find it very difficult to boost the stock prices back to the record levels seen before the start of the latest conflict.
“The risk premium is still very high [the] “risk” of further declines in stock prices, said Matt Maley, chief market strategist at Miller Tabak’s financial group.
If the hostility continues, Trump’s ability to influence markets will be further impaired, Sosnick predicted.
“Now he realizes that he would like to get out of it, but it’s not that easy right now because the situation involves a lot of moving parts that are difficult,” Sosnick said. “It doesn’t provide quick explanations that motivate investors.”
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