Trump Threatens Military Action as U.S.-Iran Talks Stall
0h ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
irantrump
Fazen Markets Editorial Desk
Collective editorial team · methodology
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President Donald Trump stated on 31 May 2026 that he is not in a "hurry" to reach a deal with Iran to end the ongoing military conflict. According to reporting, he threatened further military action if negotiations break down and the United States does not receive desired concessions. This follows months of escalating tensions in the Persian Gulf region that have already contributed to a 15% rise in Brent crude prices year-to-date.
The current impasse echoes the breakdown of the 2015 Joint Comprehensive Plan of Action (JCPOA), which Trump withdrew from in May 2018. That decision triggered a series of sanctions and a steady escalation, culminating in the assassination of a senior Iranian commander in January 2020, which briefly sent oil prices up 4% intraday. The present military conflict began with a significant exchange of strikes in early 2025.
The current macroeconomic backdrop features subdued global growth and a Federal Reserve that has paused its rate-hiking cycle. The 10-year Treasury yield recently traded at 4.2%, a level that historically shows sensitivity to Middle East supply shocks. Real yields remain positive, limiting a flight-to-quality surge unless the conflict broadens.
The immediate catalyst for the stalled talks appears to be a widening gap in core demands. The U.S. seeks a complete halt to Iran's enrichment activities and support for regional militias. Iran's primary demand is a full lifting of all U.S. and allied sanctions, including those on its central bank, before it will discuss military de-escalation. Neither side has shown public flexibility on these points.
Brent crude oil, the global benchmark, traded at $94.50 per barrel following Trump's remarks. This represents a 15.2% increase from its 2026 opening price of $82.10. West Texas Intermediate (WTI) crude traded at $91.75, maintaining a typical discount of roughly $2.75 to Brent due to regional supply dynamics.
| Asset | Price on 31 May 2026 | Change Since Conflict Start (Jan 2025) |
|---|---|---|
| Brent Crude | $94.50/bbl | +28.5% |
| WTI Crude | $91.75/bbl | +26.1% |
Defense sector equities have significantly outperformed the broader market. The iShares U.S. Aerospace & Defense ETF (ITA) is up 22% year-to-date, compared to the S&P 500's gain of 8%. Major prime contractors like Lockheed Martin (LMT) and Northrop Grumman (NOC) have seen their order backlogs swell by an estimated 12% and 15%, respectively, over the past fiscal year. The geopolitical risk premium embedded in oil prices, estimated by analysts at Fazen Markets, is currently $8-$12 per barrel.
The direct second-order market effects are concentrated in energy and defense. Sustained oil prices above $90 per barrel disproportionately benefit U.S. shale producers with strong balance sheets, such as Diamondback Energy (FANG) and Pioneer Natural Resources (PXD). Their operating cash flow margins expand by approximately 4 percentage points for every $10 increase in WTI. Defense contractors (LMT, NRT, GD) are direct beneficiaries of increased military appropriations and urgent operational needs.
The primary counter-argument is that global demand remains fragile, and a coordinated SPR release from consumer nations could cap price gains. prolonged high prices could accelerate the energy transition, hurting long-term oil demand forecasts. The current positioning data from CFTC shows money managers have built a net-long position in WTI futures equivalent to 320 million barrels, near a two-year high. Flow data indicates institutional investors are rotating into the energy sector ETF (XLE) and out of consumer discretionary names.
The next observable catalyst is the 11 June 2026 OPEC+ meeting, where member states will review production quotas. Saudi Arabia's commitment to voluntary cuts will be a key signal of its assessment of geopolitical risk. The U.S. Department of Defense is scheduled to release its quarterly contract obligation report on 24 June, providing transparency on defense spending flows.
Key price levels to monitor include the $100 per barrel psychological threshold for Brent crude. A sustained break above this level would likely trigger inflation reassessments. For defense stocks, the ITA ETF faces technical resistance at its all-time high of $125. On the downside, a rapid de-escalation could see Brent retreat to its 200-day moving average, currently near $86.50.
Retail gasoline prices in the U.S. have a high correlation with Brent crude, with a typical lag of 2-3 weeks. Current refinery margins are stable. A sustained $10 increase in oil translates to an approximate $0.25-$0.30 per gallon increase at the pump. Regional disparities exist, with the West Coast typically experiencing greater price volatility due to specific refining constraints and environmental regulations.
The market disruption potential is currently assessed as lower. In August 1990, Iraq's invasion of Kuwait removed 4.3 million barrels per day (bpd) from the market instantly. Today, Iran exports approximately 1.5 million bpd, and alternative supply from the U.S., Guyana, and Brazil provides a larger buffer. However, the risk of the Straits of Hormuz closing, which transits 21 million bpd, remains a tail risk scenario with no modern precedent.
Defense equities typically see positive performance in the initial 6-12 months following a major conflict escalation, as budgets are passed and orders are placed. During the first year of the post-9/11 wars, major defense stocks outperformed the S&P 500 by an average of 18 percentage points. Performance then normalizes as contracts move from authorization to execution, shifting focus to execution risk and margin delivery rather than top-line growth.
Trump's threat reinforces a high geopolitical risk premium in energy markets and solidifies strong near-term fundamentals for defense contractors.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
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