'A way to calm the markets': analysts expect more volatility from Trump's speech

US President Donald Trump, in an address to the nation from the White House on the evening of April 1, made it clear that the United States is ready to step up strikes on Iran in the near future. Analysts surveyed by Bloomberg agreed that the bellicose rhetoric of the American president has destroyed hopes for a quick de-escalation of the conflict, forcing investors to put new geopolitical risks and oil shock into prices.

- "Trump's speech did not meet the market's expectations: investors expected to hear signals about the reduction of tensions, but they were not heard. On the contrary, he allowed the possibility of escalation, saying that the U.S. may strike Iran extremely hard in the next two to three weeks, and also warned that in the absence of agreements Iranian power plants will be at risk. The market took his statements as a negative factor for stocks," says Jumpei Tanaka, head of investment strategy at Pictet Asset Management Japan.

- "His [Trump's] speech is really disappointing. Trump announced victory while threatening strikes on Iran's energy facilities. Talk of withdrawal from the Middle East now looks more like a way to appease markets while keeping options open for pressure. He clearly still favors a 'pressure-first' strategy over pure de-escalation," agrees Pepperstone Group research strategist Dilin Wu.

- "Trump's speech is a classic example of contradictory signals, and markets reacted exactly as one would expect: with an initial risk-off. The market is clearly pricing in a renewed geopolitical risk premium, especially in energy supply. What's interesting is that before the speech, markets started to rally on hopes of a speedy resolution to the conflict. So this looks more like a "reset" of positions than a full-blown panic. Investors were moderately optimistic, but now they are forced to return to a defensive stance," says Tarek Horchani, Head of Trading Sales at Maybank Securities.

- "The market was hungry for clarity on the timeline for the end of the conflict, but this [Trump's] speech just added to the uncertainty. Investors are clearly unimpressed and I think we may see global markets fall further today. The big news is that he [Trump] will hit Iran in the coming weeks - that's a huge negative for markets. It means the war could continue," points out AT Global Markets chief market analyst Nick Tweedale.

- "While everyone wants to put this behind us, the events of the last month in the Middle East have yet to be analyzed in detail. The question now is how much of an impact these events will have on the global economy in the coming quarters. Taking into account the oil shock (the cost of Brent for the first month of the war showed a record growth, adding more than 60%. - Oninvest), the likelihood of the Federal Reserve cutting interest rates has further diminished," emphasizes Asia equity portfolio specialist at Eastspring Investments Hong Kong Ltd. Ken Wong.

- "As it becomes clear that the war is not moving toward an end, markets are switching back into a mode of lower stocks, lower bond prices and a stronger U.S. dollar. There is a growing realization that the conflict with Iran could have broad side effects on the economies of many countries and regions," notes Tomo Kinoshita, global market strategist at Invesco Asset Management Japan.

- "Trump seems to have failed to convince the markets that the war will go down and that the US will help secure access to the Strait of Hormuz. The reality is that US military forces continue to build up in the [Middle East] region while maintaining the possibility of a ground offensive. This means demand for the US dollar will remain strong in the short term," says Commonwealth Bank of Australia economist and currency strategist Carol Wong.

- A rise in the US dollar against a basket of the world's top 10 currencies "would not be a surprise", according to ITC Markets senior currency analyst Sean Callow. This, he estimates, will happen "given that Trump has offered no plan to open the Strait of Hormuz, other than shifting the problem to others and optimistically assuming that it [the Strait] will open 'naturally'".

After Trump's speech, futures on U.S. stock indices showed a sharp decline. Futures on the S&P 500 fell 1.2%, contracts on the Nasdaq 100 fell 1.4%, and the Dow Jones Industrial Average fell 1%. The sharp drop interrupted Wall Street's positive gains on April 1, when hopes of a cease-fire in the Middle East and a rise in cheaper technology assets gave the market a rebound for the second straight day, notes Investing.com. Brent crude oil jumped 6% to $107.7 a barrel.

Meanwhile, the Bloomberg Dollar Spot Index rose 0.3% after Trump's speech. Earlier, traders reported that on Wednesday, April 1, ahead of Trump's speech, hedge funds bought put options on the dollar, counting on the weakening of the U.S. currency on the background of possible de-escalation of the conflict. However, the beginning of trading on Thursday, April 2, was marked by a return to the strategy of "flight from risk", Bloomberg points out.

This article was AI-translated and verified by a human editor