Donald Trump has regained his influence, and just one word from him has caused a complete turnaround in the markets. European stock markets went from plummeting 2.5% in the early hours to turning around in less than 20 minutes and experiencing increases of over 2%. Wall Street opens with strong gains, exceeding 2% for its main indices like the S&P 500 and the Dow Jones Industrial Average. Oil drops nearly 10%.
The US President has once again used a truce in his negotiations - as he did during the 2025 tariff crisis - to break the deadlock in the US war and primarily to boost investor confidence and public finances, after the US 10-year bond touched 4.4% this morning. This was a cause for concern for the Republican government and was the trigger for their willingness to negotiate last spring when the markets, especially the debt market, raised alarms in the White House.
Donald Trump has again used his social media to communicate the latest on the conflict in Iran after a weekend where tensions escalated significantly between both countries. The Republican leader claims to have had "productive conversations" with the Iranian regime and anticipates a five-day truce to reconsider, depending on the progress of these negotiations, attacking Iranian civilian installations, as he had announced on Sunday when Trump issued an ultimatum to the Iranian regime to reopen the Strait of Hormuz, or else he would attack the country's main power and energy supply facilities. In response, Tehran threatened possible attacks on "all US energy, information technology, and desalination infrastructures in the region."
With this escalating war atmosphere, the markets had started the fourth week of the war with sharp declines, with oil on the rise, reaching around $113 per barrel; with gold plummeting, and volatility up by 25%. In a matter of minutes, the investment landscape has changed again. The US ten-year debt reached 4.4% yield due to investor sales. At this moment, Donald Trump's words have calmed nerves, bringing it back to 4.34%. The 30-year bond touched 5%, a critical level, before falling to 4.9% with significant investor purchases; while the 2-year bond exceeded 4% this morning before starting to decline. US public debt surpassed $39 trillion last week, with a deficit close to 6%, following a significant drop last year.
In the stock market, the Ibex 35 rose over 2%, reaching levels above 17,000 points, then moderating to an increase close to 1%, below 16,900 points. The German DAX rose over 2.7% past noon, similar to the increase seen in the EuroStoxx 50, which includes the largest companies in Europe. Currently, purchases are below one percentage point.
European gas fell over 6%, below ¤60 per megawatt-hour after Trump's statements, although it has moderated its decline to 3%. Meanwhile, oil reversed course and is trading with a 10% drop, close to losing the $100 per barrel mark. The American West Texas crude, which earlier surpassed $100, is now back to $90 per barrel.
Donald Trump's central objective in recent weeks has been to reopen the passage through the Strait of Hormuz. He has repeatedly asked for help from NATO allies with little success. The Republican leader does not want to lose favor with the American public, which is already feeling a significant rise in fuel prices months before the midterm elections in the US, where the governing party traditionally tends to lose.
Following the weekend's escalation, the International Energy Agency (IEA) publicly spoke of a historically serious situation in the oil market. "No country will be immune if the situation continues in this direction," emphasized the agency's president, Fatih Birol, during a visit to Australia on Sunday. According to him, the current supply crisis is "very serious," even worse than those experienced in the 1970s, starting with the Yom Kippur crisis. Iran has closed the Strait of Hormuz to ships from enemy countries, which continues to weigh on the oil and gas prices, sustaining prices 60%-90% higher than before the conflict erupted. Hence, there are fears of more lasting economic effects on inflation and global growth if the situation persists. 20% of global oil and gas supply passes through the Strait of Hormuz.
In three weeks of war, oil has nearly doubled its price, starting from $72 per barrel in Europe. Gas prices have seen a much greater increase. The Dutch TTF gas, used in Europe, has doubled in price to ¤58 per MWh as of this Monday, with contained increases after last week's sessions of extremely high volatility, where it surged almost 30% in just a few hours.
Gold was the other major player of the session, with drops of up to 10% in just a few hours, putting the $4,000 per ounce level at risk. Sales have also been contained since noon, down to 2%. Why such a drop in gold and other precious metals? Experts point to several reasons: firstly, gold is not acting as a safe haven in this crisis - as it usually does - as investors are buying more dollars (which had been heavily penalized against other major currencies) and also more bonds, with now more attractive yields and awaiting potential interest rate hikes by central banks. Another reason is the rally that gold had experienced in recent months. In just the last year, the price of gold rose from $3,100 to $5,300. Since the outbreak of the war, it has corrected by 16%.
Last week, in a series of meetings and public statements by the world's major central bankers, the Federal Reserve, in a wait-and-see approach, decided to keep interest rates stable. Meanwhile, both the Bank of England and the European Central Bank (ECB) in Europe were more explicit in expressing their concerns about the direct and indirect impact of the Middle East conflict on their economies. With interest rates unchanged for now, the ECB significantly raised its inflation forecasts for this year, from 1.9% to 2.6%, with an additional drop in the Eurozone's economic growth estimate.