Blink and miss: Trump’s tactic of threats first and U-turn later is proving stale in Iran war
Blink and miss: Trump’s tactic of threats first and U-turn later is proving stale in Iran war
As the world grapples with the fallout from Trump’s aggressive stance in the Iran conflict, the latest episode has left markets rattled. The president’s sudden shift from bombastic threats to a swift reversal has been met with mixed reactions, highlighting a pattern that’s lost its effectiveness. On Monday morning, oil prices spiked, stock futures dropped, and bond yields rose following Trump’s announcement of a planned strike on Iran’s civilian infrastructure. By midday, he swiftly rescinded the threat, citing productive talks that had “greatly improved” the prospects for peace.
This move, dubbed “Taco” by analysts, mirrors a recurring strategy seen in Trump’s earlier tariff crisis. The term, a blend of “Mex-Middle Eastern fusion cuisine,” encapsulates his tendency to make bold declarations before backing down. The market responded almost instantly to the reassurance, with bonds rebounding and Brent crude prices falling back under $100 per barrel from over $112 just hours prior. By 9:30 a.m. in New York, the S&P 500 had surged 1.5%, defying earlier forecasts of a 1% decline.
“He can still inflict tremendous damage to the region and the world economy. Making extreme threats and walking them back will again provide Trump with the illusion of agency.”
Despite the immediate market relief, some argue that Trump’s approach risks undermining his credibility. By stopping American forces from committing a potential war crime, he may have inadvertently prevented a larger escalation but also shown a lack of resolve. Iranian officials, meanwhile, have continued their operations, launching missiles into Israel, Iraq, and other Gulf allies, further complicating the situation.
While the president’s latest peace plan received cautious approval on Tuesday, the market quickly turned skeptical. Investors realized that Trump’s words carry little weight, and the threat of renewed conflict looms large. This is not the first time his strategy has faltered. On March 9, he attempted to halt rising oil prices by claiming the war would end “soon, very soon” because it was “very complete, pretty much.” Though the S&P index recovered that day, it soon resumed its downward trend.
Trump now faces a more precarious political landscape. The November midterms are approaching, and his approval ratings are low. Public support for the war has waned since gas prices hit nearly $4 per gallon, intensifying opposition. Meanwhile, the OECD predicts U.S. inflation will climb to 4.2% this year, adding pressure on his economic policies. His dual goals—ending the war and securing oil flow through the Strait of Hormuz—appear increasingly at odds.
Iran, however, remains strategically positioned. Its leadership has endured significant challenges, yet the regime maintains control. The country has the capacity to disrupt global energy markets by blocking the strait, cutting off 12.5 million barrels of oil and 11.5 billion cubic feet of gas daily. With little incentive to compromise, Tehran calculates that demonstrating its ability to retaliate is the only way to deter further attacks. Unless the U.S. commits troops to the region, Washington may struggle to alter the course of events.
