Wall Street is the biggest winner of the Iran war—and the S&P 500 just turned positive for the year
Markets opened down nearly 1% across the indexes on Monday, but news-aggregating accounts online and on social media picked up a report by New York Post Pentagon reporter Caitlin Doornbos. At 7:46 a.m. Monday, Doornbos had posted on X that Iranian officials were still considering a U.S. proposal to end the war, “centering around uranium enrichment.”
“One thing affecting why Iran couldn’t make a deal while U.S. was in Islamabad … Iranians could not call their final decision-maker back in Tehran due to security risks,” she wrote, citing a “Pakistani analyst.”
Soon, the headline traveled. Brent crude began dropping steeply, down roughly 4% to about $4.50 a barrel, roundtripping hundreds of millions of dollars notionally across the front-month contract. Doornbos received hundreds of replies to her post, calling her a liar, a market-manipulator and a pawn of the Trump regime.
By 11 a.m., she issued another post—”she had a responsibility to clarify”—that her original post contained no news, at all. She was just reiterating what was known; that discussions were centered on the nuclear deal, which Vice President JD Vance had already said, and that theoretically Iranians could accept.
“This took off unnecessarily,” Doornbos wrote.
Brent crude began climbing again, hitting $103 briefly before again descending on some more typical jawboning news; Trump saying that he’d been called by the “right people” in Iran, that they truly want a deal, etc. Ultimately, the day ended on a high: The S&P 500 had risen 1.02% to 6,886.24, wiping out every single day of losses since the beginning of the Iran war on Feb. 28. The Nasdaq added 1.23%; the Dow tacked on 301 points after being down more than 400 earlier in the session.
Now, most readers know very well that the war has not ended. In fact, talks in Islamabad collapsed over the weekend after 21 hours of seemingly genuine effort from both U.S. and Iranian counterparts. President Trump took the risk of enacting a U.S. naval blockade of Iranian ports at 10 a.m, potentially even stoking another hot war that could drag troops back into conflict. He had spent the afternoon threatening on Truth Social to “ELIMINATE” any Iranian ships that approached the blockade. So why, why did markets rally on a short X post from a New York Post reporter? Why would they rally to another high on information from Trump, an obviously biased party? Surely they must imagine that the probability the conflict escalates is higher than the probability it ends tomorrow?
The answer is that Wall Street has been Pavlov-dogged, over 14 months and during at least nine separate de-escalations, to buy the dip on every Trump-era escalation. According to a MarketWatch tally, nine of the 10 best days for the S&P 500 since the beginning of Trump’s second term have been driven by signs of de-escalation—on tariffs or on Iran. A trader who caught only those 10 sessions would be sitting on a 35% compound return, against roughly 13% for the index over the same period.
Wall Street calls it the TACO trade—“Trump always chickens out,” coined by Financial Times columnist Robert Armstrong after Trump abruptly paused his “liberation day” tariffs in April 2025. But what started as a joke has become some hard serious liquidity. Morgan Stanley’s Mike Wilson told clients in a Sunday note that the Iran selloff was a correction inside an ongoing bull market, with earnings accelerating into the oil shock rather than rolling over. The median S&P 500 company is now growing earnings per share at a double-digit pace—the fastest since 2021. “The market trades in advance of the headlines,” Wilson wrote. “Investors should do the same.”
This story was originally featured on Fortune.com