What Did Trump Say on Tuesday that Soothed the Stock Market?

There was a panicky sell-off in the stock market on Tuesday as investors began to worry that the attacks in Iran would expand to a larger regional conflict.

Just as alarming was the fact that shipping through the Strait of Hormuz had essentially come to a standstill. That was not due to Iran shutting down the narrow strait – through which passes about 20% of global petroleum products – but rather a voluntary halt in shipping as shippers were nervous about what could happen to them.

Image source: Getty Images.

As a result, the S&P 500 index shed 169 points, or about 2.5%, in the first hour of trading Tuesday. Then, at around 2:35 p.m., President Donald Trump took to Truth Social, his social media platform of choice, and calmed markets. Stock indexes had been slowly recovering during the day from the initial drop at the open, but Trump’s post sent them instantly higher.

What did he say?

Trump posted that the U.S. government would provide political risk insurance and guarantees to companies engaging in maritime trade through the Persian Gulf. Perhaps more important, Trump said the U.S. Navy would provide naval escorts to oil tankers and other vessels moving through the Strait of Hormuz to ensure safe passage. Trump emphasized that “No matter what, the United States will ensure the FREE FLOW of ENERGY to the WORLD.”

Trump’s post sent stocks higher and oil prices lower

The S&P 500 ended the day down slightly less than 1%. And the price of Brent crude oil, which had topped $81 during the trading session, fell back to near $80 after Trump’s post. And on Wednesday, stocks recovered much of the ground they had lost the previous session.

Still, that is unlikely to be the end of volatility in this market. The CBOE Volatility Index, or VIX, which measures expectations of near-term volatility – and is widely known as Wall Street’s fear gauge – touched 23.5 on Tuesday and remains elevated at around 21, significantly higher than the average level for the year.

And many market analysts – even those who expect a short and relatively contained war in the Middle East – expect more twists and turns in the short term that could trigger pullbacks. Market watcher Edward Yardeni says a 10% correction from the record high set on Jan. 27 is likely. The S&P 500 index is currently about 1.5% below that peak.

Trump may have to take to Truth Social a lot more in coming weeks.