Iran war’s aftermath: Are US stock markets shaking off their ‘Trump Always Chickens Out’ phase?

Investors have grown accustomed to the idea that US President Donald Trump-induced shocks rarely last long, because, as the popular TACO acronym tells us, ‘Trump Always Chickens Out.’ But the American president’s decision to join Israel in starting a war with Iran has opened a geopolitical and macroeconomic Pandora’s box that may make a tidy walk-back impossible. Under the surface, financial markets are starting to take note.The ‘TACO regime’ in American stocks—under which every selloff was a buying opportunity—may be over. That thesis will now get a test after Trump postponed threatened strikes against Iranian energy infrastructure and power plants for five days, pending the outcome of what he said were talks with Iran to end the war.

Consider the extraordinary difference between 2025 and 2026. In the first year of the second Trump administration’s term, the president became a one-man market narrative. He hinted at firing US Federal Reserve Chair Jerome Powell, but the market effects of it were soon nullified by a moderation of his rhetoric.

On 2 April, he triggered a market crash by unveiling sweeping and indiscriminate tariffs on the entire world, but he also ushered in a V-shaped recovery less than a week later by opening the door for delays and negotiation. Because the market was driven by words rather than actions, it was easy to repair what was broken.By starting a real kinetic conflict in Iran, Trump has lost any semblance of control. Now, the market moves on attacks against energy infrastructure and the inability to get tankers through the Strait of Hormuz.