Iran conflict latest: Trump pauses Iran energy plant strikes by 10 days
U.S. stocks reversed sharply higher on Monday after President Trump signaled progress in talks with Iran and delayed planned strikes on energy infrastructure, easing immediate escalation fears and triggering a broad risk rebound. The move raises a key question for markets: has the process of bottoming already begun?
The timing is notable. If markets bottom when geopolitical risk peaks, Trump’s decision to delay strikes may represent the first real test of that turning point.
The rebound follows four weeks of orderly declines, with the pullback still relatively shallow compared to last year’s tariff-driven correction. By The Capital Spectator’s reckoning, the recent correction was roughly one‑quarter as deep as the dive in the spring of 2025, based on our standard estimate of overbought-oversold conditions for the SPDR S&P 500 ETF (NYSE:SPY).
No one knows where full capitulation and maximum drawdown ultimately lie, but the conditions that accompany selling exhaustion will likely align with recurring signs of relative improvement.
Markets are already testing whether the outlook is beginning to shift—even marginally—from worsening conditions toward stabilization. Discounting expected future outcomes is a messy business in real time, and the market often misreads the tea leaves. But the constant process of revising the outlook as new information arrives provides a steady recalibration of expected risk and return.
One challenge for investors searching for opportunities to buy stocks on the cheap (to boost expected return) will be distinguishing the absolute state of the war and its long‑term implications from the crucial shift toward relative improvement in the outlook. That change may be obvious or subtle, but at some point the tide will turn and sentiment will move from a sense that the crisis is deepening to one that is becoming slightly less bad.
An additional complication is that this ebb and flow has a short‑term cycle that can be misleading. But as the chart above suggests, the point of maximum pain may become increasingly obvious, in which case there will be several clues indicating that the market has fully priced in the risk at hand.
No one can identify the bottom in real time, of course, but using a set of analytics can help provide useful context for judging when the odds appear to have shifted to a net‑favorable state for the near-term outlook. The task is arguably easier when the decline is sharp and rapid, as was the case during last year’s spring correction. By contrast, longer, slower downturns are more challenging to analyze.
For now, based on the news flow and analytical considerations, current conditions suggest the market has yet to reach maximum pessimism. But keep in mind that behavioral biases are sticky and will keep us focused on the negatives, primarily informed by the rear‑view mirror.
Eventuallly, the backward‑looking influence will become far less useful from an investment perspective. We should remain open to the fact that markets continually look past what just happened and stay focused on the possibilities for tomorrow and beyond.
When the backward‑looking fear finally gives way to forward‑looking recalibration, the market will have already begun its turn. That pivot, subtle at first, is where recoveries are born.
