A research firm pinpoints exactly how much more market pain would make Trump pivot on Iran

• Trump will hit his "breaking point" with Iran when stocks and bonds are down at least 12%, BCA Research says.
• The firm said Trump is more focused on bonds than on oil prices because of his goal of lowering rates.
• The president also has a long-running focus on how well the stock market is doing.

President Donald Trump will only be able to tolerate so much pain in the market before he pivots on his Iran war strategy, according to one research firm.

In a recent note to clients, BCA Research said it believes that the president will likely hit a "breaking point" when the combined decline in stocks and bonds reaches at least 12%.

That's because Trump — who has long made stocks a focal point and has indicated he is dialed in on lowering borrowing costs for Americans in his second term — is more concerned about the financial market implications of the war than he is about the oil price spike itself, Dhaval Joshi, a chief strategist at the firm, said.

"General Stock Market and General Bond Market have played an important role in the war," Joshi wrote, pointing to how Trump has already pivoted from several ultimatums he gave Iran, which appeared to be in response to market stress.

"To repeat, in both the tariff war and the current war with Iran, Trump's breaking point has been encapsulated by the combined drawdown in stocks plus bonds (S&P 500 plus TLT) reaching 12-15 percent," he added.

BCA pointed in particular to the recent drawdown in the S&P 500 and the iShares 20+ Year Treasury Bond ETF, a reflection of the performance of long-term government bonds.

As of Tuesday, the S&P 500 has nearly all of its losses since the start of the Iran war.

TLT, the treasury bond ETF, is down 4% from its peak earlier this year.

Trump has become known for walking back his aggressive rhetoric when stocks and bonds are under pressure. That tendency is at the heart of the TACO Trade — an acronym that stands for Trump Always Chickens Out — and encapsulates what happened in several instances, most notably in April of last year, when the president talked up his tariffs before introducing framework deals and extending deadlines to appease markets.

Trump is unlikely to walk back his rhetoric on Iran because of higher oil prices, Joshi said, pointing to how the US is a net exporter of oil, meaning the oil shock could actually provide a boost to GDP.

"Instead, Trump's bigger worry is the oil shock's impact on already-too-hot US inflation. This is because the main concerns right now of his MAGA base are surging gasoline prices, surging inflation, and surging mortgage rates — all of which are encapsulated in the performance of the bond market," he added.

Trump, who has made lower interest rates a goal of his second term, suggested his administration is paying close attention to Treasury yields. Treasury Secretary Scott Bessent said last year that the president was particularly focused on the 10-year yield, and Trump himself said he was tuned in to bond volatility during the tariff sell-off last year.

"Meanwhile Trump and his acolytes do care about the stock market, to which they have high exposure, either directly or indirectly," Joshi added, referring to the president's long-running focus on how well the stock market is doing.