With only hours remaining until the latest deadline set by U.S. President Donald Trump for an agreement with Iran, institutional and retail investors in financial markets find themselves caught between increasingly loud bullish calls for an approaching "TACO moment" and economists' pessimistic narratives of "stagflation" and "recession," forcing them to prepare for a range of potential outcomes. Whether they are increasing allocations to stocks and bonds, adding exposure to commodities, or holding cash for a comprehensive hedging strategy, most share a common view: the weeks of intense market volatility triggered by Trump's shifting stance have left them frustrated and uncertain about future pricing paths.

Since March 23, Trump has repeatedly postponed deadlines related to Iran, most recently claiming the U.S. government extended the ultimatum "at Iran's request," while also stating publicly on April 6 that 8 p.m. local time on Tuesday would be the "final deadline." Simultaneously, the U.S. and Iran continue indirect contacts through channels such as Pakistan, and Trump himself stated on social media that negotiations are "progressing well," calling the reopening of the Strait of Hormuz a "very significant priority." These latest geopolitical developments suggest the White House's true reaction function resembles "threatening while observing negotiation progress and retaining the option to extend," which is why markets are beginning to price in another short-term "TACO moment"—a scenario expected to fuel a sharp rebound in risk assets like stocks. Trump's recent contradictory rhetoric has reinforced market conviction that, at least in the short term, a TACO trading moment is imminent.

The increasingly popular Wall Street trading strategy—TACO (Trump Always Chickens Out)—originated in April 2025 when Trump launched an unprecedented "reciprocal tariffs" campaign globally. At that time, traders bet that either the U.S. administration would withdraw its tariff threats or that any implemented measures would be far less severe than Trump's rhetoric suggested and insufficient to significantly hinder U.S. economic expansion. The term TACO, coined by a Financial Times columnist, describes Trump's vacillation on tariffs following his "Liberation Day" speech on April 2, 2025, ultimately expecting him to back down, leading to a strong stock market rebound. When asked about "TACO" at a press conference, Trump reacted angrily, calling the question "vicious."

The TACO strategy is now widely adopted by traders as one of the hottest strategies. Whenever Trump issues new, more aggressive tariff threats or other major warnings that trigger market sell-offs, global equity and bond investors bet that he will ultimately retreat or that actual policies will be significantly diluted compared to his verbal threats, leading them to buy the dip aggressively during appropriate downturns, wagering on a substantial market rebound shortly thereafter.

"We just hope rationality prevails in the markets over the next 24 hours," said Gary Dugan, CEO of Global CIO Office. Awaiting a de-escalation of Middle East geopolitical tensions, he has temporarily relocated from Dubai to a family residence in Jabalpur, central India. He is reducing equity bets and buying oil-related assets via exchange-traded funds (ETFs). This scenario has repeated multiple times in recent weeks: Trump repeatedly sets deadlines, then extends them, triggering rounds of intense financial market volatility that leave traders struggling to keep up.

As the latest cutoff—8 p.m. New York time on Tuesday—approaches, benchmark volatility indicators for global stocks, bonds, and foreign exchange markets have risen to multi-month highs. During Tuesday's concentrated Asian trading hours, volatility across major asset classes was generally contained, with the dollar struggling to hold earlier gains, while an MSCI benchmark index for Asian equities edged higher. Brent crude futures, the international oil pricing benchmark, traded above $111 per barrel after fluctuating between gains and losses, stabilizing above $110—a sign that more traders believe oil prices may remain elevated near historical highs due to supply shortages, as reopening the Strait of Hormuz is unlikely to弥补 significantly reduced Gulf oil production in the short to medium term.

Transit through the Strait of Hormuz has nearly halted. The strait handles about one-fifth of global oil and liquefied natural gas shipments. Since military conflict erupted between the U.S.-Israel alliance and Iran, only a very small number of tankers have passed through, typically after engaging with Iranian authorities. This near-standstill has substantially increased global energy costs since late February, forcing Persian Gulf Arab states to cut oil production by millions of barrels per day. Iran's military has effectively imposed a "quasi-blockade" on the strait, obstructing about 20% of global energy flows, accompanied by tanker attacks and shipping disruptions. A recent International Energy Agency (IEA) study indicated that U.S.-Israeli military strikes on Iran in late February triggered the largest supply disruption in global oil market history. Brent crude's sustained stability around $110 per barrel suggests high oil prices may be a persistent major threat that investors, central bank policymakers, and corporate leaders must confront.

Despite recent chaotic price action, prominent hedge fund investor Thomas Hayes remains optimistic. "The asymmetry is skewed to the upside," said Hayes, Chairman of New York-based Great Hill Capital. If Trump "mishandles" the situation, U.S. stocks "would retest recent lows, falling about another 4%," he said. "If we get a resolution or ceasefire, this market is a coiled spring, with violent upside potential of at least 10%."

Trump insists that complete freedom of navigation through the Strait of Hormuz must be part of any agreement to end the Middle East war, threatening that if Iran fails to accept a series of conditions by the deadline, the U.S. will "completely and terminally destroy key Iranian infrastructure." However, on Monday he abruptly shifted tone, stating that negotiations with Iran were "progressing very well" and that reopening the strait is "a very significant priority." In recent weeks, he had indicated that a strait agreement was not a core prerequisite for ending the conflict. Still, Trump added that it is "highly unlikely" he will extend the deadline again.

In Singapore, senior FX trader Mingze Wu believes the U.S. dollar will remain the favored sovereign currency amid such uncertainty. "In my view, the real pain is far from over," said Wu of StoneX Financial. "If the actual geopolitical and Strait of Hormuz oil supply situation does not improve substantially, the full shock of oil shortages may not materialize until mid-April to early May, when the real chaos begins."

Some institutional investors, however, indicate they have become somewhat desensitized to Trump's threats. "Markets are starting to see Trump as the boy who cried wolf," said Hideo Shimomura, senior portfolio manager at Tokyo-based Fivestar Asset Management Co. "Market focus is increasingly shifting to how Iran will respond, especially whether it will choose to reopen the Strait of Hormuz under bombing pressure from the U.S.-Israel alliance on its infrastructure."

Thousands of miles away in Sydney's financial markets, Nick Twidale is on high alert, awaiting the next headline. "Traders are exhausted, frustrated, and anxious; they really just want clarity," said Nick Twidale, chief market analyst at AT Global Markets. "People are still long the dollar against everything, just to maintain ample liquidity, because the outcome of Trump's deadline could be so binary—it's almost impossible to position accurately for it."

Notably, mediators including Pakistan have not abandoned efforts to broker a ceasefire between the U.S., Israel, and Iran. U.S. media reported a senior Pentagon official indicated, "If the U.S. President believes a peace deal is imminent, he may further extend the deadline," and U.S.-Iran indirect contacts continue via channels like Pakistan. If traders collectively believed escalation was certain immediately after 8 p.m. Tuesday, oil prices, equities, and forex should have shown more extreme, one-sided repricing. Instead, despite Brent crude around $111, a strong safe-haven dollar, and FX and bond implied volatility at multi-month highs, global equities overall display restraint, with Asian markets even showing relative optimism during April 6 and early April 7 trading, "rising while awaiting news."

Thus, markets have begun partially pricing in a trend wherein "if negotiations show promise, Trump may again extend the deadline," but this is not yet a full, one-sided "TACO trade" replay. More accurately, capital is now pricing a conditional Trump reaction function: as long as U.S.-Iran diplomatic channels remain open, Iran engages via third parties like Pakistan and Turkey, and the White House can claim "negotiations are progressing," the "deadline" acts more as Trump's long-standing maximum pressure tool rather than an immediate action trigger. A "short-term TACO moment" appears a high-probability scenario, though not a risk-free narrative, primarily because financial markets are not betting Trump will "inevitably back down," but rather that he will highly likely keep the negotiation window open if he sees "signs of talks" or a "peace deal framework."

Undoubtedly, markets have begun trading a Trump TACO mode of "extend if there's hope," with a short-term TACO moment visible to most investors. However, it resembles a "cautious, hedged TACO" rather than the pure, indiscriminate buying seen after last year's "Liberation Day." That is, if any signal emerges around 8 p.m. local time Tuesday that the White House can package as "negotiations are still advancing," markets will likely interpret it as a precursor to another extension. But until official news lands, traders will not easily remove their hedges.

Investors should note that overall positioning across equity, bond, and forex markets does not reflect a full "risk-on" stance like during the "Liberation Day" tariff announcement. Some traders maintain exposure to the dollar, cash, energy, and volatility hedges, because a misjudgment here involves not ordinary policy noise but a classic geopolitical binary jump. In other words, while market pricing trends directionally assume Trump will further extend the so-called "ultimatum," some traders remain wary of tail risks in their positioning.