Trump teased an Iran deal that didn't come, but markets soared. Here's why it keeps happening

• Treasury Secretary Bessent said Tuesday a deal could come 'today or tomorrow,' sparking immediate stock gains and oil price pullbacks, but Iran subsequently released a draft proposal imposing tolls and blocking U.S. and Israeli ships.
• The Strait of Hormuz conflict has caused a global energy supply shock, with vessel traffic remaining far below prewar levels when 20% of the world's oil transited the waterway.
• Analysts warn markets show 'deeply entrenched optimism bias' despite shrinking U.S. Strategic Petroleum Reserve and no actual progress on core issues, with oil prices risking a spike back to April peak levels if the stalemate continues.

Market Summary: Trump's Iran Deal Promises Drive Volatility

Key Developments:

The Trump administration sparked significant market rallies this week by projecting an imminent deal with Iran to reopen the Strait of Hormuz, though no agreement materialized by promised deadlines. Treasury Secretary Scott Bessent told CNBC Tuesday that a deal could come "today or tomorrow," while Trump suggested Wednesday-Thursday timeframes. These announcements drove stocks to record highs and temporarily reduced oil prices.

Market Response:

• Dow Jones Industrial Average hit record closes Monday and Wednesday
• Oil prices declined on optimism but remain elevated from pre-war levels
• Bond yields pulled back as investor sentiment improved
• Rally coincided with broader AI-fueled tech gains

Core Issue:

The Strait of Hormuz—normally carrying 20% of global oil—has been effectively closed by Iran since war began five months ago, triggering an energy supply shock and elevated gas prices. A fundamental disagreement persists: Iran wants to impose service fees on the waterway, while the U.S. demands restoration of free international passage.

Conflicting Signals:

Iran repeatedly denies direct negotiations with the U.S., stating it's only in talks with Oman. Iranian state media Thursday reported a draft proposal blocking U.S. and Israeli ships, which the Trump administration dismissed as a nonstarter. Iranian officials mocked Trump's "theater diplomacy."

Analyst Warnings:

RBC's Helima Croft cited "tremendous optimism bias," noting markets assume deals will restore pre-war status quo despite slim evidence. Rapidan Energy's Bob McNally warned of continued "spiky muddle-through dynamic" with depleting U.S. Strategic Petroleum Reserve signaling "waning global buffers." Analysts caution oil prices could spike if military escalation occurs or market optimism fades.

Timeline: War entering sixth month with no clear diplomatic breakthrough despite repeated presidential claims.