By Martin Baccardax

Can you "TACO" a war?

Investors are betting you can and they're distilling down a series of signals from President Donald Trump, not all of them pointing in the same direction, to extend the massive rally Monday.

The president's crisis playbook, which typically includes an eye-catching policy aim, a major market reaction, and an abrupt and surprising U-turn, was in full display on Monday as he conducted a series of interviews, press conferences, and statements from his golf resort in Doral, Florida, as oil prices blasted through $100 a barrel and stock markets sank to the lowest levels since November.

Investors, however, chose to focus on what could be the key element of the president's messaging, and the latest example of the TACO ( an acronym for Trump Always Chickens Out) trade that has proved immensely valuable over the past year.

Trump suggested the U.S. may end its war with Iran "very soon" during a press conference Monday, adding that oil prices will decline quickly and shipping traffic through the Strait of Hormuz would return to normal.

His rosy assessment was buffeted by talks among G-7 finance ministers to release millions of barrels of oil from their respective reserves to support market prices, as well as suggestions that the White House could further ease sanctions on the sale of Russia crude to keep global supplies flowing.

It seems to have worked. The S&P 500, which fell more than 100 points in the opening hour of trading Monday, soared 159 points into the close to end 0.8% higher on the session. Oil, which raced to as high as $120 a barrel during the peak of Monday's frenetic trading, tumbled nearly $40 to end the day closer to $90 a barrel.

"Investors have gone from thinking the 'Trump TACO' trade is a bit of a joke to taking it very seriously," Amy Wu Silverman, head of derivatives strategy at RBC Capital Markets, told CNBC on Tuesday. "It's almost considered in the same way you would a share buyback or a [Federal Reserve] put structure in the market."

Early indications suggest that will echo into Tuesday trading, as well, with stocks priced for modest gains across the board, oil extending its retreat below the $80 mark, and the dollar giving back some of last week's 'flight-to-safety' advance.

Digging deeper, however, unearths a defensive tenor to Monday's rally, which was paced by megacap tech, healthcare, and industrial stocks that was paired with a big bid for U.S. Treasury bonds. That's hardly the kind of action that suggests sustainable gains in a market that remains fraught with both headline risk and crippling uncertainty.

"One can make a case for anything from 'this war ends right now' to 'this war drags on for years,' and almost anything in between, with that whole spectrum being entirely plausible right now," said Michael Brown, senior research strategist at London-based Pepperstone.

"It's logical, then, that participants have sought to adopt something of a more cautious stance, taking down risk exposures, cutting position sizes, and reducing the duration for which trades are held," he added.

Markets are still priced for volatility, as well, with the Cboe Group's VIX index trading at around 23.50. That's well south of Monday's 35.30 peak, but still high enough to suggest daily swings of around 100 points for the S&P 500 over the coming month.

In other words, while investors are content to return to risk markets on the back of Trump's search from an off-ramp to the war in Iran, they're also mindful of his penchant for changing his mind.

Meanwhile, the unanswered questions over the fate of shipping traffic through Hormuz, the speed at which energy prices normalize, and the likelihood of a major response from Iran over the coming days continue to linger.

"Until greater clarity emerges, volatility is likely to remain elevated, " said Ole Hansen, head of commodity strategy at Saxo Bank. "The market will continue to monitor tanker movements through Hormuz and the willingness of Gulf producers to maintain output under increasingly challenging logistical conditions."

Write to Martin Baccardax at martin.baccardax@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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March 10, 2026 06:53 ET (10:53 GMT)

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