RAPIDAN: “.. Trump will struggle to declare victory with Iran controlling Hormuz, the regime largely intact, and still in control of .. highly enriched uranium. Absent a ceasefire with Iran, Israel would likely continue independent operations, making a clean US disengagement structurally difficult.”

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— Carl Quintanilla (@carlquintanilla.bsky.social) March 31, 2026 at 3:17 PM

In times that are this strange and eventful, I think it’s important to keep some kind of journal—something that lets us go back and see how things looked and felt in real time. One of the things that people will struggle to understand once the dust settles is the market psychology of the second Donald Trump administration.

I realize we’ve been talking about this for a long time and have probably written more about it than most of this blog’s readers would care to hear, but today really does merit a post.

Followed by this.

 
 


At first glance, the logic here seems to be that, faced with gasoline at $4 a gallon—apparently on track to hit five—Trump will “TACO” his way out of the war and all of the painful consequences that have come with it. That narrative is not entirely wrong (the Trump Pressure Index is reaching dangerous levels), but it is incomplete and doesn’t hold up on its own. Even the markets of 2026, led by the dumbest of dumb retail money, have got to realize that getting out of a multiplayer Middle East quagmire is going to be more difficult than simply declaring victory in a trade war and canceling a bunch of tariffs that weren’t legal to begin with.

I reached out to someone who’s been following the story more closely, including some of the chatter and trial balloons, and with that context it starts to make a certain kind of sense—not in a way that could be called rational, but more in the way that the Joker’s plan makes sense after he explains it. You can see the internal logic behind the craziness. You’d have to be deluded to believe this, but at least the delusions are coherent.

Among the various contradictory statements and implications coming out of the White House, you can find some which, once you get past the belligerent language and chest-puffing, amount to essentially an unconditional surrender to Iran. We let them have the Strait of Hormuz, we unfreeze their assets, and we leave them far stronger than they were before we attacked.

It might even convince the Iranians of the importance of becoming a nuclear power as soon as possible. 

David Goldman, Aaron Blake writing for CNN fill in some of the details:

The Dow, S&P 500 and the Nasdaq just had their best day since May 2025, roaring higher Tuesday in large part because of a report (and semi-confirmation) that the White House is considering an end to America’s involvement in the Iran war without reopening the Strait of Hormuz. CNN later confirmed Trump and his administration increasingly believe that they can’t promise to reopen the strait as a prerequisite to declaring an end to hostilities with Iran.

That would be an extraordinary outcome: The war seems nowhere close to being over and, even if it were, the global economic ramifications of Iran continuing to block the critical waterway would be long-lasting – measured in years, not weeks or months.

Oil trades on a global market, and US crude and gas prices will remain high as long as the Strait of Hormuz is closed – no matter how much “drill, baby, drill” President Donald Trump proclaims.

You’d think that’d be bad news for markets.

Nevertheless, the Dow rose by more than 1,000 points, or 2.4% Tuesday. The S&P 500 was up 2.8%; and the Nasdaq, which had entered a correction last week, was 3.8% higher.

The reason: FOMO from a TACO, the Wall Street acronym “Trump Always Chickens Out.” Trump has repeatedly reversed course on some of his most economically significant policies and proposals, giving markets whiplash and leaving traders with significant losses if they had the wrong end of a bet.

“They’re waking up every morning, going to sleep every night, rubbing their hands together, thinking, ‘This is great. All I got to do is be on the right end of the giant roller coaster, and everything’s going to be fine,’” said Dan Alpert, managing partner of Westwood Capital.

...

To demonstrate how fidgety markets were Tuesday, while rumors of the statement surfaced on social media, it wasn’t until late afternoon that Iranian news agencies finally reported the statement — which ultimately only echoed what Pezeshkian has been saying for weeks.

“(Today’s market move) is not justified by the news,” said Art Hogan, chief market strategist for B. Riley Financial. “This is the market telling you it was coiled up for any kind of good news.”

That last sentence captures it nicely. 

It is next to impossible to argue that the markets are rationally pricing in the likelihood of the different scenarios and what the implications of each would be. Of the three main choices—peace, staying the course, or escalation—the best is probably the first and the worst is certainly the last, but all three are ugly, economically and otherwise. That said, if you ignore the possibility of the war staying the same or getting worse, and you overlook the economic consequences of an emboldened Iran holding the world’s economy hostage anytime it chooses, then, if you try really hard, you might understand the mentality of today’s Wall Street investor.

It will also be interesting how MAGA handles the most humiliating surrender in US history, but we've established their grasp of military history is not strong. 

McCormick: "We were horrible in Vietnam until we did Rolling Thunder Two, then we won. As soon as we do half-measures, we lose. The faster we get this over the better. If we seize Kharg island, it could be done almost flawlessly. If we have enough firepower, it would be very easy to defend."

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— Aaron Rupar (@atrupar.com) March 31, 2026 at 2:20 PM