Trump issues final ultimatum; countdown to the peace window sees US military on standby, pushing up the war premium
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- On Tuesday, Trump made it clear that due to uncertainties remaining in the final stage of peace talks, if a deal with Iran cannot be reached in the short term, the United States will resume attacks against Iran.
- Trump, in a highly deterrent tone, stated that bombings are expected to be launched and emphasized that the US military is ready and eager to take action.
- These remarks signal that the boundary between diplomatic maneuvering and military deterrence is narrowing sharply. At this sensitive moment while talks continue in Islamabad, the president personally setting a timetable for force sends the strongest signal to the markets that the ceasefire agreement may collapse at any time.
- On the trading front, caution is necessary as risk assets related to the Strait of Hormuz will be re-priced with a higher war premium. Any delay in negotiations or negative rumors could trigger sharp, sudden surges in oil prices and a new round of inflows into safe-haven assets.
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