Trump's "Ultimatum" Has 24 Hours Left, Global Stock Markets and Oil Prices "Struggling" at Monday's Open

Questioning AI · Trump’s Final Ultimatum Countdown: What Are the Deep-Rooted Considerations Behind Market Hesitation?

Middle East geopolitical tensions suddenly escalated over the weekend, triggering brief volatility in global risk assets and commodities markets at Monday’s open, followed by a stalemate.

Due to intense exchanges between conflicting parties over the weekend, and with President Trump’s 48-hour ultimatum set to expire Monday evening Eastern Time, crude oil prices surged initially, and US stock futures declined sharply.

However, after the initial shock, both oil prices and stock index futures partially recovered, now hovering near flat, highlighting the market’s deep hesitation and dilemma as it assesses the duration of the conflict and potential economic impacts.

Following the decline in US stocks on Friday, Asian markets plunged on Monday. The Nikkei 225 index fell up to 4% intraday. The KOSPI 200 futures dropped 5%, triggering a 5-minute circuit breaker on the KOSPI index, with algorithmic trading paused.

Goldman Sachs trader Shreeti Kapa said, “The market has begun to price in inflation risks from this short-term energy shock, but has not yet fully priced in the growth slowdown risks from a longer-term impact.” This contrasts sharply with the 2022 energy shock, as current markets still tend to believe that the war and energy disruptions will be relatively short-lived.

Market Stabilizes After Opening Volatility

This weekend, Middle East conflict rhetoric shifted rapidly from “de-escalation” to threats of “total destruction.”

According to CCTV News, on March 21, U.S. President Trump posted on social platform “Real Social” demanding Iran fully open the Strait of Hormuz within 48 hours, or the U.S. will strike and destroy Iran’s power plants, “the largest of which will be hit first.”

Early on April 22, Iran’s Hatem Anbia Central Command warned that, based on previous warnings, if Iran’s fuel and energy infrastructure are attacked, the U.S. and its allies’ energy infrastructure, IT systems, and seawater desalination facilities in the region will become targets.

Markets reacted sharply at the start of Asian trading on Monday. WTI crude briefly rose above $100, then retreated from the high at open; Brent crude also declined slightly from Friday’s highs.

In equities, US stock futures initially fell about 1% to 1.5% from Friday’s after-hours highs but later narrowed losses, now mostly flat. The 10-year US Treasury futures declined, implying yields rose about 4-5 basis points. Gold remains around $4,500, while Bitcoin continued its decline over the weekend, dropping below $68,000.

Goldman Sachs: How Long the War Lasts Will Determine Everything

According to Kapa’s analysis, the core contradiction in current market pricing is: “Markets have largely priced in the interest rate shocks but remain limited in pricing the growth risks.” This contrasts with the 2022 energy shock, when real yields surged significantly from negative levels, causing a larger rate-negative impact.

The implicit assumption now is that the war and resulting energy supply disruptions will be relatively short-lived. If this assumption proves false, and energy prices continue to rise beyond expectations, markets will have to reprice for a larger downward revision of global growth and corporate profits, leading to more significant declines in global equities.

Bloomberg macro strategist Michael Ball previously pointed out that rising energy costs have inflationary effects, effectively taxing consumers, corporate profit margins, and market confidence simultaneously. This explains why major central banks this week issued more hawkish signals—markets quickly priced in tightening expectations for the European Central Bank and Bank of England, and wiped out all expectations of Fed rate cuts this year, even betting on Fed rate hikes.

Central banks are wary of repeating the mistakes of 2021 and 2022, when slow responses and misjudging inflation’s persistence led to rate hikes. But as economic growth slows and labor markets soften, the difficulty of raising rates increases—especially since, before actually implementing the first hike, financial conditions often tighten already.

Kapa notes that the current interest rate markets are beginning to show this tension: the narrative of front-end re-pricing outweighs the clean duration sell-off, and fears of policy errors are emerging. Hawkish signals can quickly push up 2-year yields, but convincing the long end that the economy can withstand another full tightening cycle amid ongoing energy shocks is much harder.

Hormuz Strait: The Only Variable in Market Pricing

The core question now is: How long will the Strait of Hormuz be closed?

The answer to this determines whether oil tankers can pass safely, whether oil flows can return to pre-conflict levels, and the credibility and duration of any ceasefire agreements. Kapa points out that the core difficulty of binary risk is that traditional diversification cannot hedge against it—an exogenous event can reprice all assets simultaneously, and diversification offers little protection.

In this context, Kapa recommends shifting portfolio management focus from optimization to structural positioning around possible outcomes: overweight energy, defense, and high-quality assets in a “prolonged conflict” scenario; overweight high-beta, cyclical, and rate-sensitive assets in a “quick resolution” scenario; and reduce overall exposure rather than just net exposure, because in a binary risk environment, correct directional calls are less important than position management.

Kapa concludes that binary risk environments reward liquidity and flexibility, not directional bets. The best performers in such scenarios are often not those who accurately call the bottom, but those who hold cash and can act quickly once uncertainty dissipates. Given that global equity risk premiums are near zero and valuations across regions and sectors are at historic highs, holding cash is a reasonable asymmetric position—offering little sacrifice in expected return but significant flexibility.