Trump's Iran Deal Claims Keep Disappointing Markets

President Donald Trump has claimed dozens of times over the past six months that the U.S. is close to striking a deal with Iran. Each announcement sends investors into a frenzy of optimism, only for the hoped-for agreement to fail to materialize. The cycle has become so predictable that it raises a troubling question: How much longer will markets keep believing?

This week provided the most recent example. Treasury Secretary Scott Bessent told CNBC on Tuesday morning that a deal ensuring “freedom of movement” through the Strait of Hormuz could come within hours. Oil prices tumbled immediately. Stocks soared. By Wednesday, the Dow Jones Industrial Average hit another record close.

By Thursday? Nothing. Iranian state media reported a draft plan involving restrictions the Trump administration instantly dismissed as a nonstarter. When asked directly if a deal had been reached, Trump gave a characteristically vague response: “I don’t want to say it has been. It’s sort of open right now.”

The Optimism Bias Problem

Headline-driven market reactions have become an almost mechanical response at this point. Helima Croft, global head of commodity strategy at RBC Capital Markets, frames it perfectly: “There’s tremendous optimism bias in the market.” Investors seem to view a potential deal as a “time machine” that could reset the Middle East to its pre-war status quo, even though that outcome remains highly unlikely.

The fundamental problem is structural. Both sides have irreconcilable positions on the Strait of Hormuz itself. Iran wants to impose a service fee on shipping passing through this vital waterway that handles roughly 20 percent of global oil trade. The U.S. wants the pre-war situation restored, where the strait functioned as an open, untolled international waterway. These aren’t minor negotiating points that split the difference on.

Why the Str ait Matters So Much

The Strait of Hormuz has become the pivot point of this entire conflict. Before the war began, vessel traffic flowed normally. Today it sits far below pre-war averages. Iran has effectively weaponized its ability to disrupt global energy supplies, creating tremendous leverage in any negotiation.

This leverage explains market behavior entirely. The energy sector remains eager for any hint of progress. Oil prices remain elevated compared to pre-war levels. Traders perpetually bounce between hope for a durable solution and anxiety about military escalation. As Bob McNally, president of Rapidan Energy Group, describes it: “The market remains trapped in a spiky muddle-through dynamic.”

Meanwhile, Iran continues insisting it isn’t actively negotiating with the U.S. directly at all, claiming instead to discuss matters only with Oman. Trump angrily counters these assertions while maintaining the U.S. maintains full control of the strait. The disconnect between rhetoric and reality grows wider by the day.

The Breaking Point

Analysts are increasingly questioning whether the market’s optimism has an expiration date. Shrinking U.S. Strategic Petroleum Reserve levels signal waning global buffers. Both military and economic resources on both sides are reportedly dwindling as the war extends into its sixth month. The cycle of expectation and disappointment cannot sustain itself indefinitely.

Claudio Galimberti at Rystad Energy believes both sides need to shift toward compromise if they want to avoid total stalemate. “If they want to avoid a costly stalemate, with oil prices quickly escalating back to April levels or above and little to no Iranian flows, they will need to start bridging the differences,” he told CNBC.

The alternative is grimmer. Oil prices could spike dramatically if military escalation resumes or as inventory depletion finally exhausts market confidence in a peaceful resolution. For now, traders cling to the hope that this week’s failed negotiations won’t be the pattern forever.

But how many more disappointments can markets absorb before the cycle finally breaks?

Source: CNBC