Trump "TACO" Again: Can You Bet on Iran Situation De-escalation?

The ongoing tug-of-war between the US and Iran suggests that short-term market geopolitical premiums still have room to expand, but medium-term downgrade expectations are brewing.

On Monday, according to CCTV News, Trump announced a five-day delay in the deadline to bomb Iran’s energy facilities and stated that both sides are engaging in “very good, productive dialogue” toward a “comprehensive and thorough resolution” of the conflict. Crude oil prices plummeted in response, and European and American stock markets rebounded sharply. Despite Iran’s denial, US stocks still closed significantly higher overnight.

The replay of the TACO trade indicates that Wall Street’s betting on Trump’s fear of market collapse will ultimately serve as the last line of defense against extreme actions. Industrial Securities’ latest strategy report also points out that, as the intensity of the conflict peaks and the stick effect gradually diminishes, the market’s sensitivity to “carrot” signals may significantly increase, and the window for medium-term de-escalation is quietly opening.

Maximum Pressure: Trump’s Usual Script

To understand US-Iran developments, first understand Trump’s diplomatic logic.

Industrial Securities notes that maximum pressure is Trump’s usual diplomatic approach—stacking chips through threats and tough stances, ultimately serving to maximize benefits at the negotiation table.

It is noteworthy that the US’s current political goals have quietly narrowed. From early ambitions of regime change in Iran to now ensuring the Strait of Hormuz remains open. The goal downgrade itself signals an expanded room for negotiation—“it’s easier to negotiate than to win.”

Within this framework, Trump’s operational path is clear: using troop escalation as a “stick” threat, while promising de-escalation as a “carrot.” As the threat of troop buildup is fully digested, the impact of the carrot on the market may be amplified.

Iran’s Resistance Will Is Strong, US Military Motivation to Escalate Is Weak

Industrial Securities believes that Iran’s resistance will and its willingness to negotiate are not mutually exclusive.

Iran’s new leader, Mughtab, reaffirmed three conditions for a ceasefire: US troop withdrawal, lifting sanctions, and economic compensation. This statement clearly conveys two messages—Iran will not easily compromise, but also leaves substantive outlets for future negotiations.

Geographical factors further constrain US escalation impulses. The northern coast of the Strait of Hormuz is mountainous and rugged. Industrial Securities suggests that if US forces forcibly occupy and escort the strait, they would face significant strategic risks and tactical setbacks.

Iran possesses strong blockade capabilities over the strait, which imposes clear cost boundaries on US military escalation.

In contrast, Iran’s resilient resistance weakens the US’s willingness to continue escalating, and both sides are under practical pressure to keep the conflict within manageable limits.

Peak of Conflict as an Opportunity for De-escalation

Historical experience and logical deduction point to the same conclusion: the peak of conflict intensity often marks the beginning of de-escalation.

For Trump, after troop buildup, the decision to fight or not remains undecided. Industrial Securities notes that in 2018, Trump’s re-imposition of sanctions on Iran was not fundamentally opposed to negotiations but was driven by lobbying from Israel to overturn the Iran nuclear deal negotiated under Obama. In other words, Trump does not have an inherent ideological rejection of negotiations.

Lifting sanctions is a step both US and Iran can accept. For Iran, sanctions have been a long-standing pain point, so lifting them provides strong internal motivation; for Trump, it is also a diplomatic achievement that can be promoted domestically and internationally. Israel, as an external variable, has limited lobbying power to influence US moves significantly.

The ultimate catalyst will come from the market itself: High oil prices and the negative feedback from escalating conflict, once exceeding Trump’s tolerance threshold, will open a window for de-escalation.

Risk Warning and Disclaimer

Market risks exist; investments should be cautious. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Invest at your own risk.