Markets Reject 'Trump Put' as Iran Tensions Escalate, Spiking Volatility and Commodity Prices

The prospect of a 'Trump Put'—a long-held market belief that a Trump administration would intervene to support equities during crises—has lost credibility amid worsening tensions between the U.S. and Iran. With regional hostilities intensifying over the past week, Wall Street has responded with renewed caution, leading to a sharp repricing of risk. The S&P 500 dropped 1.8% on Friday, marking its worst daily decline since January, while the VIX, the CBOE Volatility Index, climbed to 32.1—the highest level since early 2024. This spike reflects growing investor anxiety over the potential for a broader Middle East conflict, which could disrupt global energy flows. The benchmark energy index lost 5.3%, driven by a surge in crude oil prices. Crude futures (CL=F) rose 6.4% to $89.60 per barrel, nearing levels not seen since late 2023, as fears of supply interruptions increased. Defense stocks were also under pressure, with Lockheed Martin (LMT) and Raytheon Technologies (RTX) shedding 4.7% and 5.1%, respectively, despite initial expectations of gains from heightened geopolitical risk. Apple (AAPL) declined 2.3% as tech investors reassessed global supply chain exposure. Market participants now view the current geopolitical landscape as too volatile for predictable federal intervention. Unlike in previous crises, there is no visible indication of coordinated policy support, prompting a flight to safer assets including U.S. Treasury bonds and gold. The 10-year Treasury yield fell to 4.12%, underscoring the shift in investor sentiment.