US stock markets face a pivotal shift as Trump's Iran conflict reshapes investor sentiment. The 'TACO' regime—where every selloff was a buying opportunity—appears to be breaking down. Unlike tariff threats that can be reversed with rhetoric, kinetic warfare creates real economic consequences that markets cannot easily dismiss. Higher oil prices, Strait of Hormuz disruptions, and weakening consumer sentiment signal a fundamental change in market dynamics. The S&P 500's sluggish recovery contrasts sharply with the V-shaped bounce from April 2025 tariff shocks, while breadth deteriorates with eighty percent of stocks below their fifty-day moving averages. Trump has lost control of the narrative as markets now react to actual geopolitical events rather than presidential statements.
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