Trump Calls Iran “Islamic Republic of Japan” as Oil Surges 5% and Stocks Crash

President Donald Trump has told the reporters that the US-Iran ceasefire is now over. “I don’t want to have anything to do with them anymore; they’re scum,” he added. The comments jolted the financial markets around the world. Stocks fell, oil surged, and around $500 billion was wiped out of U.S. stock markets in just a few hours.

The remarks also included some unusual verbal errors by Trump, such as referring to Iran as the “Islamic Republic of Japan” while discussing an attack on a U.S. aircraft carrier involving 11 missiles. President Trump said during the NATO Summit that they will probably hit Iran again tonight.

Last week, positive news came in from the US-Iran talks. The indirect talks concluded between Iranian and U.S. negotiators and Qatari and Pakistani mediators in Doha, Qatar, with positive progress. But today, all of that progress seems to go in vain.

How Markets Responded to US-Iran Escalation News

This was met with a quick and widespread reaction. Crude oil rose by 5%, testing the $75 resistance. The price action shows that if it manages to close above the $72 price point, we might see it testing $78 in the short term.

The S&P 500 fell 1%, the Nasdaq 100 dropped 1.5%, and the Dow Jones lost 1.3%. The S&P 500’s 1-hour chart indicates a strong sell-off mid-session, dropping to 7,437 currently, with a low of 7,429.

Gold also declined by 2.5% from $4100 to $4030. Crypto assets also followed stocks. Data from CoinGlass shows that over the last 24 hours, 137,023 traders were liquidated, totaling over $385 million in liquidations.

Bitcoin has been retracing from $64,000 resistance after Oil Tanker was attacked in Hormuz Strait on Tuesday. The next point of interest for Bitcoin price is $61,500 support. If tensions escalate we might see a new low around $59,500.  

What Trump Actually Said About Iran’s Infrastructure

The most important component of the comments for markets was not the ceasefire part; it was the “what the U.S. could do after.”

“The U.S. military could destroy all of Iran’s bridges, disable its electrical grid, and destroy its desalinization plants in one day,” Trump warned. “I could say we could take down every bridge in Iran in a day,” he said.

He also talked about Kharg Island, Iran’s main port for exporting oil. The U.S. struck it the night before and said they destroyed part of it, and they might end up controlling the whole thing.

The vast majority of crude oil exports from Iran go through Kharg Island. The disruption would take a huge amount of oil out of the world’s supply chain quickly.

How the Escalation Will Impact Oil, Crypto, and Stocks

The Kharg Island threat is the key that will be in focus moving forward. As soon as the U.S. decides to seize or disable Iran’s main oil export terminal, global oil supply becomes tight and prices are driven up. If the US-Iran escalation continues, we might see markets dropping further.