Editor's note: The Iran conflict has now lasted nearly a month, and, unsurprisingly, U.S. President Trump's stance toward Iran has repeatedly reversed—from a "48-hour ultimatum" to delaying military strikes by five days. Sources previously reported that Trump wants the war with Iran to end "quickly," striving to finish the conflict "within the coming weeks." Capital markets have swung violently as a result. Is this a replay of the "TACO trade" scenario?
【Anchor】The Iran conflict has now lasted nearly a month, and, unsurprisingly, U.S. President Donald Trump's stance toward Iran has repeatedly reversed—from a "48-hour ultimatum" to delaying military strikes by five days. Sources previously reported that Trump wants the war with Iran to end "quickly," striving to finish the conflict "within the coming weeks." Capital markets have swung violently as a result. Is this a replay of the "TACO trade" scenario? Welcome to DDN Business Insider. Today, we've invited Yu Fenghui, a new finance expert from Top 100 HK-Listed Companies Research Center (HKLCRC), together with Steve Wong, chief macro analyst of the International Research Department at SDIC Securities, to provide analysis and interpretation. Hello to both of you!
The acronym TACO —T, A, C, O—stands for "Trump Always Chickens Out." Since Trump's second term began, this TACO pattern of issuing major statements and then retracting or delaying them has occurred repeatedly. Previously, most of these incidents were in the area of tariff policy. Mr. Yu, what signal does it send that the TACO pattern has now spread into the military domain?
On the surface, this signal is about military decision-making, but it is also influenced by short-term political considerations, which increases the variables and risks in international relations.
In fact, Trump has always been changing, but he knows what he wants —it's just hard for outsiders to predict.
Mr. Wong, what signal do you think this change conveys?
【Wong】It really started with tariff wars. From beginning to end, Trump's main objective has remained unchanged: to make America strong again. That has been his policy all along. With his tariff measures, he used economic tools to try to push certain industries and supply chains away from abroad and encourage manufacturing to return to the United States, reducing external dependence.
What this shows is that he wants America to be strong again —essentially to greatly increase the security coefficient for the U.S. homeland. That makes his intentions easy to understand. Geopolitically, the war with Iran is prioritized according to American interests. Previously, he proposed concepts like a "new Monroe Doctrine" or "Trump's Monroe Doctrine": for matters that affect U.S. interests, within the scope of U.S. power, he seeks to assert absolute dominance.
We can see that whether it's a tariff war or the dispute with Iran, the ultimate reason for him to back down often shows up as unfavorable movements in the capital markets. If we observe certain macroeconomic indicators—such as rising unemployment or a decline in business sentiment—we can actually predict that Trump will introduce tougher measures to prioritize rescuing the economy. So this can be understood as a "Trump put": when the economy becomes too weak, he will implement strong measures to revive it.
【Anchor】Okay. Some commentators point out that Trump's major announcements are often cleverly timed around financial market openings and closings. Mr. Yu, what is your view on this?
【Yu】The association between Trump's statements and market open/close times reflects his use of the news cycle to influence market sentiment. This helps him immediately gauge the impact of policy statements on the markets and adjust policy direction accordingly.
We know that Trump, as a businessman-president, places the greatest emphasis on economic and financial market developments. Whether it's war decisions, political decisions, or other choices, he treats economic and financial considerations as a major factor, which is not surprising.
【Anchor】Understood. It is known that the TACO phenomenon first appeared in connection with Trump's initial announcement of reciprocal tariffs on April 2 last year and his subsequent last-minute modification. Now, about a year has passed, and over the past year, the TACO phenomenon has occurred more and more frequently. Mr. Yu, compared with the impact on the capital markets when the reciprocal tariff policy was announced a year ago, has the market already become immune to this kind of policy flip-flopping? How do you assess the future trajectory of the current Middle East situation? Might it, like the tariff policy, wind down amid Trump's changing stance?
【Yu】Markets have been gradually adapting, and the volatility caused by sudden statements has reduced. However, major policy shifts can still trigger market tremors, which shows the market has not fully developed immunity to Trump's policy reversals. Another issue is that the Middle East situation is complex and volatile. Although Trump's stance is inconsistent and his opinions change frequently, geopolitical tensions are not easy to resolve. Iran's military capability has now been exposed and remains relatively strong. It would be difficult to quickly resolve the situation—like what happened in Venezuela—by installing a proxy to control Iran.
Regional conflicts are affected by multiple factors, including great-power rivalry and internal regional contradictions, all of which indicate that geopolitical control in the Middle East is more difficult than in other regions.
【Anchor】Mr. Wong, has the market already become immune to Trump's flip-flopping policy stance?
【Wong】Personally, I think, in broad terms, yes. But of course, each major event has to be considered on a case-by-case basis, because TACO mainly concerns whether Trump will back down.
However, beyond Trump, we believe the central banks' stance is a very important factor. Aside from Trump's intentions, the market is more focused on whether central bank positions will change. Put differently, if there is a deterioration in the labor market, an economic downturn, or rising inflation, how central banks choose between those trade-offs will be a major factor affecting equity market performance in the second half of the year.
【Anchor】Indeed. In reality, the capital markets have been significantly affected—especially early last week when gold fell sharply. Mr. Yu, what do you see as the core reason for this sharp drop in gold prices? Given the current gold price level, do you think there is still bubble risk or selling pressure going forward?
【Yu】The sharp drop in gold was mainly driven by a stronger U.S. dollar and a cooling of global risk-off sentiment. As I've said before, if Trump could decisively neutralize Iran and bring the Middle East situation under control, geopolitical risk would decline. We are now moving in that direction, so the current gold price already reflects most of the negative factors. Reports of changes in gold reserves in some Middle Eastern countries are secondary. But if the dollar continues to climb and risk appetite recovers, the gold market will still face pressure.
【Anchor】Mr. Wong, what are the reasons behind the big drop in gold prices? How do you view gold's future trajectory?
【Wong】I can interpret this on a few levels. First, the gold rally had already persisted for a long time and accumulated significant gains.
Second, because this rally lasted so long, many retail investors participated through gold ETFs. During a bull market, gold ETFs act as a lever, pushing prices higher. Conversely, when the trend reverses, ETF outflows can amplify the decline and accelerate a bear-market drop.
However, from a medium- to long-term perspective, we remain bullish on gold. The big-picture logic hasn't changed: de-dollarization continues, and central banks are still increasing gold holdings as part of their reserve strategy. In an inflationary environment, falling real interest rates are favorable for gold. Therefore, for the second half of the year and over the medium to long term, we are still optimistic about gold's prospects.
【Anchor】Understood. Trump's flip-flopping has become a major variable in the Middle East conflict, and the region's uncertainty continues to affect global capital markets. Mr. Yu, how will Trump's inconsistent stance specifically impact global capital markets?
【Yu】Capital markets are particularly sensitive to developments in the Middle East, especially energy prices. If the conflict escalates and oil prices rise, it will drive inflation expectations—especially U.S. domestic inflation expectations, which Trump cares about most.
On the other hand, conflict resolution could bring temporary market stability. I previously wrote that oil cannot stay at extremely high levels forever and will eventually come down. Geopolitical conflict now attracts speculative capital: investors use Middle East tensions—large-scale conflicts involving Iran, the U.S., and Israel—as a pretext for speculation. Our dependence on fossil fuels has already fallen significantly, thanks to the development of new energy vehicles and diversified energy sources such as wind, solar, and hydropower.
China's share of new-energy power generation has already exceeded 50%. So in my view, crude oil prices cannot sustain extreme highs — much of the current move is pure speculation.
【Anchor】OK, thank you to both. That's all for this episode. Remember to follow us on YouTube or download our APP. I'm Yunfei Zhang, thanks for watching, and see you next time.
Anchor: Laura Cheung | Edited: Kelly Yang, Laura Cheung, Rachel Liu | Translate: Kato Ip | Proofread: Chris Liu
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