President Donald Trump is used to bending the financial markets to his will.
But with the Iran war, he may have reached the limit of his ability to do so.
On Friday, the S&P 500 closed down 1.7% and saw its fifth straight weekly decline, its worst expansion since 2022 and a sign of rapidly declining confidence in a quick resolution to the Iran war.
Since the US attacked Iran on Feb. 28, the S&P 500 fell nearly 7%.
The Dow Jones Industrial Average fell 1.7% on Friday and has lost nearly 4,000 points since the war began. It is now down more than 10% from its recent high, a correction in technical terms.
The tech-heavy Nasdaq fell sharply into correction territory on Friday, down 2% and down 13% since its record close in October.
Oil prices rose again, with US crude reaching $100 a barrel and global Brent crude around $114 around 4 pm ET. The yield on the 10-year Treasury note rose to 4.4%, the highest since last summer. Some energy stocks, like Exxon, are trading near all-time highs.
Shortly after stock markets closed on Thursday, Trump announced that he was suspending attacks on Iran’s energy facilities for 10 days. But the shares did not decline.
A few days earlier, they had risen on Monday when the president announced that there had been “productive” talks with Iranian representatives, so he would suspend strikes at Iran’s power plants for five days.
“The market is looking beyond management’s comments,” said Adam Turnquist, chief strategist at LPL Investment Group, which manages about $2 trillion in assets. “They actually want concrete information and a decision. And actions speak louder than words, they really do [current] price action.”
This new reality is different from Trump’s ability to move the markets during his first term and the beginning of his second.
Trump has spent the better part of 2025 whipping tradesmen for general changes in tax rates. Eventually, a pattern emerged: The president would announce new import duties, markets would fall, and Trump would usually end up backtracking in some way.
This trend even got a nickname, coined by a Financial Times writer: “TACO” – which means “Trump Always Chickens Out.” (Last month, the Supreme Court overturned many of the tax rates.)
In this case, the chain of events created by Trump’s decision to attack Iran is such that a return to pre-war conditions – and market levels – is unlikely in the short or medium term, experts say.
The disruption to the flow of oil and gas has been so great that transportation costs, and ultimately the price paid per barrel, are likely to remain high indefinitely. Even when the Strait of Hormuz, which Iran has used as a hub to drive concessions from the West, eventually reopens, the cost of passing through it is likely to rise for the foreseeable future.
And the broader slowdown in the economy and consumer spending is already being felt.
That, in turn, has made an interest rate cut by the Federal Reserve less likely, as higher oil costs are set to contribute to already sticky inflation. The odds of a rate hike before the end of the year now outweigh the odds of a rate cut.
“Let’s say the fighting ends tomorrow — the market will have rumors, but it doesn’t mean it’s going back to where it was because of the disruption that has happened,” said Steve Sosnick, chief strategy officer of Interactive Brokers financial group. “You’re not going to see oil go back to where it was right away. You’re not going to see the market price go down the way it was before.”
A White House representative did not respond to a request for comment Friday.
The previous day, the president said he was not interested in the market’s recent performance.
Oil prices “have not gone up as much as I thought, Scott, to be honest with you,” he said at a Cabinet meeting, addressing Treasury Secretary Scott Bessent. “Everything will go back down to where it was and probably down.”
Markets haven’t fallen much because the outlook for wage growth remains stagnant, Turnquist said — though that could change the longer the conflict drags on and further dampens consumer spending and business investment.
And compared to previous oil shocks, the US economy is less oil-intensive, having shifted to a more service-oriented one. Global oil markets have also been supported by the growth in American oil production over the past decade – with more supply online, prices are unlikely to rise significantly.
But by some metrics, the shares are already considered overvalued before the disputes. Already opposed to extended valuations, traders may find it more difficult to force stock prices back to the record levels seen just before the start of the latest dispute.
“The risk reward still weighs heavily on it [the] the risk” of falling stock prices,” said Matt Maley, market strategist at Miller Tabak.
If the war drags on, Trump’s ability to influence markets will erode further, Sosnick predicted.
“Now you realize that he would like to get out of it, but it’s not that easy right now because this situation involves a lot of moving parts and difficult variables,” Sosnick said. “It doesn’t boil down to a quick set of comments that hurt investors.”
