Trump Wants TACO? The Script for an Iran War May No Longer Be His to Write

TradingKey - The US-Israel-Iran conflict enters its second week as new developments emerge in the situation.

On March 9 local time, U.S. President Trump sent a clear signal during a press conference, stating that military operations against Iran would end "soon" but would not be completed within the week. This statement was interpreted by outside observers as a direct signal that the U.S. is seeking a "graceful exit."

In the face of these signals of de-escalation from the U.S., Iran's stance remains defiant.

Iran proposed a "three-step" ceasefire plan, but its core prerequisite explicitly requires "confirmation that it will no longer be under attack." Iran's top military commander, Abdolrahi, stated bluntly, "Today, the United States and Israel can no longer start wars at will, nor can they end them at will."

Notably, Iran's newly appointed Supreme Leader, Mojtaba Khamenei, is widely considered even more hardline than his father. The appointment itself is seen as a confrontational gesture by Iran, clearly signaling that the regime has not backed down under external pressure but is instead determined to stand its ground.

A "Graceful Exit" Becomes a Dilemma?

Analysts pointed out that Trump is attempting to end the conflict through a "graceful exit," but this "TACO playbook" may be failing.

The war has already generated its own internal momentum and new geopolitical strategic factors. Before the first shots were fired, Trump could have withdrawn from his massive military deployment; however, once the fighting began, the situation was out of his hands.

Soon, Trump will sound the final bell for this war in Iran, but the arrival of this moment has nothing to do with his so-called "Mission Accomplished." It depends solely on the threshold of political and economic pain he can endure—and Iran's limit of endurance is clearly far higher than his.

If Trump had possessed even a modicum of foresight, this predicament could have been avoided. There were at least three key response strategies he could have implemented in advance, yet he ignored them all.

First, replenishing the U.S. Strategic Petroleum Reserve—which saw a significant decline after the Russia-Ukraine conflict and was never refilled. Today's shock from skyrocketing oil prices validates the old saying that "an ounce of prevention is worth a pound of cure." Second, securing the support of Gulf monarchies for the war plan in advance; however, his vague strategic objectives deterred allies, leaving him to face an increasingly irritable Gulf region today. Third, preparing the American public psychologically for a long-term conflict; again, he did nothing in this regard.

More ironically, Trump even botched the script for "regime change" in Iran. The U.S. spent 20 years in Afghanistan "replacing the Taliban with the Taliban," whereas in just over a week, he "replaced one Khamenei with another Khamenei"—the more hardline stance of the new Supreme Leader, Mojtaba, has nearly shattered Trump's hopes for a ceasefire, let alone the fantasy of "unconditional surrender."

Just over a week into the war, American public support has already dropped to levels seen at the end of 1967 during the Vietnam War, when fatalities exceeded 11,000—modern-day America cannot tolerate even dozens of casualties. Consequently, Trump's "graceful exit" may be only a matter of time, but the price has already been set.

Even so, Trump will likely package the exit as a great victory, while Iran will inevitably use action to puncture this self-deceiving lie. This is the core of the dilemma he created himself.

Deep-seated Concerns for U.S. Stocks

At the same time, recent trading desk warnings from Goldman Sachs ( GS) and JPMorgan ( JPM) show that deep structural contradictions in the market remain unresolved. The core issues of systemic selling pressure and insufficient position clearing are pushing U.S. stocks into a new period of high volatility.

The latest model from the Goldman Sachs trading desk issued a clear warning that the market is currently facing a triple threat: systemic selling pressure, the failure of hedging mechanisms, and a liquidity crunch.

First, CTA (Commodity Trading Advisor) strategy funds have fully pivoted to short positions. Influenced by recent severe market volatility, CTA funds triggered risk control mechanisms and will continue to be net sellers of stocks over the next week to month, regardless of market direction. Goldman Sachs specifically noted that the scale of selling is expected to reach all-time highs, with algorithmic trading desks becoming the primary source of continuous market outflows. If the S&P 500 breaks below key medium-term support levels, it will trigger a more violent wave of systemic selling.

Second, a negative Gamma environment is exacerbating market volatility. Market makers' Gamma exposure has dropped to its lowest level of the year, meaning their hedging activities will amplify price movements rather than suppress volatility. Whether the market goes up or down, the negative Gamma effect will continue to magnify the magnitude of swings, significantly increasing the probability of the market entering a high-volatility zone.

Third, there is a liquidity crunch and a lack of confidence. The order book depth of E-mini futures contracts has fallen to low levels seen around the "Liberation Day" crash, leaving market liquidity on the brink of exhaustion. Meanwhile, the Goldman Sachs volatility/fear index is near historical extremes, and risk appetite indicators have retreated to "Liberation Day" levels, indicating a general lack of direction among market participants.

Concurrently, JPMorgan data shows that despite the recent sharp market fluctuations, there has not been a complete "washout" deleveraging. Current overall investor positioning has only retreated to neutral levels, far from historical clearing points, which means the market lacks sufficient "ammunition" to absorb selling pressure.

JPMorgan believes that the recent rebound is driven more by short covering and sentiment recovery than the start of a new allocation cycle. Tactical positioning monitoring models suggest a potential technical rally over the next two to four weeks, but this short-term signal cannot mask deep-seated structural risks.

Based on the above analysis, the JPMorgan market intelligence team has shifted to a tactically bearish stance, forecasting that the S&P 500 could drop as much as 10% from its recent highs, with a target low of approximately 6,270 points. Key risk factors include ongoing uncertainty in the Middle East, insufficient position clearing, and systemic selling pressure that has yet to be fully released.

Analysts believe that as passive systematic traders (such as CTAs) become purely selling forces and active managers have yet to complete their position adjustments, the market still faces pressure for a second bottom after a short-term stabilization.