Markets Bet Trump will End Iran War Soon Despite Threats from Both Sides

Despite the defiance rhetoric from both sides, investors placed strong bets that Trump would call off his war soon, before the unprecedented disruption it ‌has caused to energy supplies causes a global economic meltdown.

After Trump described the war on Monday as ahead of schedule, the bulk of an historic surge in crude oil prices the previous day was reversed. Asian and European share prices staged a recovery on Tuesday from earlier precipitous falls.

On the ground, there was no sign of any letup. Tehran residents reached by Reuters described intense U.S.-Israeli bombardment of the capital overnight as the fiercest of the entire war so far.

"It was like hell. They were bombing everywhere, every part of Tehran," a ​resident said by phone, speaking on condition of anonymity for security reasons. "My children are afraid to sleep now. We have nowhere to go."

A source familiar with Israel's war plans told Reuters the Israeli military was ​operating under the assumption that Trump could order an end to the war at any time, and was taking advantage of the opportunity to inflict as much damage ⁠as possible before the window for further strikes closes.

TRUMP PRESS CONFERENCE APPEARS TO REASSURE MARKETS

Iran has refused to bow to Trump's demand that it allow the United States to choose its new leadership, naming hardliner Mojtaba Khamenei as its ​new supreme leader to replace his father who was killed on the war's first day.

But Trump held a press conference on Monday that appeared to reassure markets he would stop his war before provoking an economic crisis like the ones ​that followed the Middle East oil shocks of the 1970s.

He said the U.S. had already inflicted serious damage and predicted the conflict would end before the four weeks he had initially set out.

He has not defined what victory would look like, but on Monday stopped short of repeating declarations from previous days that Iran must accept an "unconditional surrender" and let him choose its leader.

UNPRECEDENTED DISRUPTION

The war has effectively halted shipments through the Strait of Hormuz, where a fifth of global oil and liquefied natural gas normally passes along ​Iran's coast. As the blockage has persisted, producers have run out of storage and stopped pumping.

After Iran chose its hardline new leader, oil prices briefly rose to nearly $120 a barrel on Monday in what would have been the biggest ​single-day gain in history. But by 1030 GMT on Tuesday, Brent crude had settled back down to around $92, suggesting traders now expected the disruption to end soon.

Trump said on Monday evening that U.S. military might was sufficient to keep oil flowing. If ‌Iran blocks oil ⁠through the strait, "We will hit them so hard that it will not be possible for them or anybody else helping them to ever recover that section of the world," he said.

A spokesperson for Iran's Islamic Revolutionary Guard Corps dismissed Trump's remarks, saying Tehran would not allow "one litre" of Middle Eastern oil to reach the U.S. or its allies while U.S. and Israeli attacks continue.

"We are the ones who will determine the end of the war," the spokesperson said.

In a later Truth Social post, Trump said: "If Iran does anything that stops the flow of Oil within the Strait of Hormuz, they will be hit by the United States of America TWENTY TIMES HARDER than they have been hit thus ​far."

QUICK END TO WAR COULD LEAVE IRAN'S LEADERS IN PLACE

Ending ​the war quickly to let oil flows resume ⁠would appear to preclude toppling Iran's leadership, which held large-scale rallies on Monday in support of the new supreme leader.

Some Iranians openly celebrated the death of the elder Khamenei, weeks after his security forces killed thousands of people to put down anti-government protests in Iran's worst domestic unrest since the era of its 1979 revolution.

There has been little ​sign of anti-government activity since then amid concerns that it would be unsafe to protest while Iran is under attack.

Despite Trump's repeated maximalist demands for a say in ​who runs Iran, U.S. administration ⁠officials have mostly said the war's aim is to destroy Iran's missile capabilities and nuclear programme. Israel has openly proclaimed its wish to see Iran's clerical rulers toppled.

"Our aspiration is to bring the Iranian people to cast off the yoke of tyranny," Israeli Prime Minister Benjamin Netanyahu said in a statement on Tuesday.

At least 1,332 Iranian civilians have been killed and thousands wounded, according to Iran's U.N. ambassador, since the U.S. and Israeli airstrikes began on February 28.

Scores of people have also been ⁠killed in Israeli ​attacks on Lebanon to root out the Iran-backed group Hezbollah, which fired into Israel in solidarity with Iran.

Iranian retaliatory strikes on Israel have ​killed 11 people. Iran has fired missiles and drones at Arab Gulf states that have struck U.S. military bases and diplomatic missions but also hit hotels, closed airports and damaged oil infrastructure.

Iranian Foreign Minister Abbas Araqchi told PBS that Tehran was unlikely to resume negotiations with the U.S. "because ​we have very bitter experience of talking with Americans" after Washington twice broke off talks to launch attacks.