Markets Reverse Course After Trump Threatens to Bomb Iran ‘Back to the Stone Ages’

The S&P 500 slid 1.2% in early trading Wednesday, erasing roughly half of Tuesday’s 2.4% war-end euphoria, after traders parsed President Trump’s Tuesday-night address and heard threats rather than diplomacy. Futures on the Nasdaq fell 1.5% and the Dow shed 210 points as markets absorbed headlines quoting Trump saying he would bomb Iran "back to the stone ages" if the standoff drags on. The VIX jumped back above 20, a sign the risk-off mood has returned.

Brent crude rebounded $3 to $99 a barrel in Asian trade, clawing back half of Tuesday’s $6 tumble, after Trump’s bellicose wording sank in. Hedge funds that had raced to dump long positions on Tuesday began layering modest new bets, according to CME open-interest data. The quick reversal shows the market is now pricing a renewed war premium rather than celebrating a diplomatic exit.

AAA’s Wednesday morning survey showed the national average for regular gasoline inching back up to $3.91, reversing part of Tuesday’s dip below $4. Airline and cruise-line stocks that had soared on fuel relief gave back gains; United Airlines fell 3% pre-market and Carnival slid 2.7%. Big-box retailers trimmed early gains as energy-cost guidance was quietly walked forward again.

Ten-year Treasury yields slid 8 basis points to 3.84%, unwinding Tuesday’s climb, as traders shifted the probability of a May Fed hike back down to 48%. Oxford Economics trimmed its U.S. growth outlook to 1.5% from the prior 1.8%, noting that "geopolitical tail risk has re-emerged faster than energy tailwinds faded."

Japan’s Nikkei fell 1.8% and Hong Kong’s Hang Seng dropped 2.2%, leading global equity declines as regional investors absorbed Trump’s demand that "countries of the world that do receive oil through the Hormuz Strait must take care of that passage." The dollar firmed against the euro and yen, while gold added $18 to $2,045 an ounce, classic safe-haven moves.