U.S. stocks were set to surge at the opening bell Monday, after President Donald Trump announced that he was postponing all military strikes on Iranian power plants for a 5-day period.
Iranian state media responded to Trump’s post by saying the U.S. president has “backed down” after Iran’s firm response.
Iran’s semi-official Mehr news agency also relayed a message from the nation’s foreign ministry that, “there is no dialogue between Tehran and Washington.”
S&P 500 and Nasdaq futures initially soared about 3% on Trump’s post, but those gains faded to about 2% after the statements from Iranian media.
Dow Jones Industrial Average futures also rose as much as 1,300 points immediately after Trump’s statement, before pulling back to about 975 point. Russell 2000 futures rose 3%.
Oil prices dropped nearly 10%, with U.S. crude oil trading down to around $89 per barrel around 9 a.m. ET. International Brent crude oil fell to around $101 per barrel.
Crude oil prices have risen nearly 40% since the war began on Feb. 28, and 60% since the start of the year.
Trump’s Monday announcement on social media came after the president on Saturday said that he had given the Iranian regime 48 hours to “fully open, without threat, the Strait of Hormuz.” That ultimatum was set to expire Monday night.
U.S. natural gas prices dropped 4% Monday, European natural gas futures slid 9% and heating oil prices dropped 3%. Heating oil futures can also be a proxy for the price of jet fuel.
U.S. Treasury bonds also rose in the minutes after Trump’s comments, and the yields which guide borrowing rates for consumers dropped after posting big moves higher on Thursday and Friday on rising inflation fears stemming from soaring energy prices. Yields were largely unchanged after the Iranian media statements though.
Investors were already grappling with how to trade headlines about the war before Monday’s volatility.
“Investors have two related problems in pricing risks around the Gulf war,” UBS economist Paul Donovan said in a note on Monday before Trump’s post. “Statements from top U.S. administration officials give different and at times contradictory assessments of the war; in the absence of measurable objectives, this is all markets have to respond to. The result is volatility.”
