Wall Street, along with the rest of the world, is nervous. President Trump's deadline to reach a deal with Iran to reopen the Strait of Hormuz is quickly approaching, with the odds dwindling of an agreement being struck. Trump said in a new Truth Social post early Tuesday that, "A whole civilization will die tonight, never to be brought back again. I don't want that to happen, but it probably will." Beforehand, multiple reports said the U.S. conducted military strikes on Kharg Island in Iran. As a result, stocks were under pressure in early trading Tuesday and U.S. crude prices rallied more than 2%. International Brent crude oil gained about 1%. Yet, many Wall Street investment banks are positioning for some sort of de-escalation — perhaps leading to more muted moves ahead of the 8 p.m. ET Tuesday deadline set by the White House. "Notwithstanding his increasingly bellicose rhetoric, none of the escalatory options available to Trump … are good ones and given the huge costs involved in each (along with the fact that the U.S. strategic objectives have been achieved), he will be forced to pursue an offramp of some sort," wrote Adam Crisafulli of Vital Knowledge. .SPX mountain 2026-03-02 S & P 500 since Iran war began Jacob Funk Kirkegaard, head of European Research at 22V Research, echoed that sentiment. "Due to these very large and very negative consequences from an imminent escalation in the air campaign against Iran, it continues to have to be the outcome of any attempted rational analysis – such as this one – that such a course of action cannot be the base case going forward. A negotiated and diplomatic path of some kind towards de-escalation and an eventual end to the conflict must still be the base case," he wrote to clients. Stocks have languished since the U.S.-Iran war began. The S & P 500 is down nearly 4% and has fallen below its 200-day moving average, a key technical level watched by investors. Yet the benchmark is also coming off its strongest weekly performance of the year, rising more than 3% last week, and is also riding a four-day winning streak. "The price action over the last week appears to be the market reflecting the view that a deal is more likely than not, or at least military action does not rise to the level that would result in the destruction of regional energy/water infrastructure," JPMorgan's trading desk wrote. That said, JPMorgan traders remain skeptical a deal will be reached soon. "While there are parts of Trump's rhetoric that suggest a deal, the troop movement suggests an escalation which could include a short-term ground incursion but not a full scale land war," they said. The Cboe Volatility Index (VIX) , known as Wall Street's "fear gauge," remains elevated, at around 25. That's well below the highs set last month. But, "Despite elevated headline risk, equity volatility markets continue to price a relatively contained outcome," Barclays derivatives strategist Stefano Pascale wrote. "The SPX implied forward volatility for (April 8) stands at 21.9%, only slightly above the past two-week realized volatility of 20.5%. This alignment suggests implied volatility is broadly fair, with investors not pricing a material premium for event risk."
