On Monday, President Trump announced a five-day postponement of planned strikes on Iranian energy infrastructure, citing 'very good talks' between the two sides, which led to a sharp reversal in risk sentiment across global financial markets [1]. This announcement removed a major geopolitical risk premium that had been weighing on markets since the weekend, resulting in extraordinary intraday volatility [1]. WTI crude oil, which had been trading near $97-98 per barrel due to anxiety over Trump's 48-hour ultimatum to Iran regarding the reopening of the Strait of Hormuz, briefly surged above $101 before plunging to a session low of around $84.30 following the postponement announcement. The contract settled near $88.36, down approximately 9.23% on the day [1]. Iranian state media denied any negotiations had taken place and characterized the postponement as a retreat driven by their own warnings [1].
Equities also experienced significant volatility, with the S&P 500 paring deep early losses to close modestly higher, while the U.S. dollar reversed its early safe-haven bid to finish with a net bearish lean against most major currencies [1]. The session was described as one of the most volatile of the year, with nearly every major asset class reversing sharply in response to the geopolitical headline [1].
Former National Economic Council director Gary Cohn commented that markets are 'hanging on every word' as the U.S.-Iran conflict stretches into its fourth week, emphasizing that volatility has been 'enormous' due to the crisis in the Iran-controlled Strait of Hormuz [2]. With U.S. ships banned from passing through the waterway, domestic gas prices have risen by more than $1, with the national average at $3.95 per gallon for regular gasoline compared to $2.94 before the U.S. struck Iran, according to AAA [2]. Cohn stated that the outcome of the Middle East conflict and the price of oil are the biggest determinants for both the short-term and long-term U.S. economy, noting that 'movement in oil… it's weighing down heavily on stock markets and other assets' [2].
Federal Reserve Governor Stephen Miran said the Fed should not set policy based on considerations related to the war in Iran, while Federal Reserve Bank of Chicago President Austan Goolsbee indicated that either a rate hike or cut scenario is possible, dependent on the conflict in the Middle East [1]. Cohn advised investors to have a game plan amid volatility, warning against acting out of 'fear or greed' and highlighting the importance of strategic buying and selling during turbulent times [2].
CONCLUSION
President Trump's postponement of strikes on Iran triggered a sharp reversal in oil prices and heightened market volatility, with equities and currencies also reacting strongly. The ongoing conflict and closure of the Strait of Hormuz continue to drive up domestic gas prices and weigh heavily on market sentiment. Analysts and officials emphasize the central role of oil prices in determining economic outcomes, urging investors to remain strategic amid persistent volatility.