Trump TACO trade is outdated, Wall Street is now betting big on NACHO: Oil prices and the stock market have completely decoupled

Wall Street has discovered that Trump’s retreats are no longer effective, shifting instead to betting on a long-term closure of the Strait of Hormuz, leading to a complete decoupling between oil prices and the U.S. stock market. (Context: NACHO trading replaces Trump’s TACO! Wall Street bets on Hormuz remaining closed; Morgan Stanley warns of oil inventory depletion by June.) (Background: Iran denies U.S. airstrikes on fishing boats in the Gulf of Oman as "untrue"; officials have not confirmed any casualties.) On Wall Street, the "TACO trade" has been phased out, and everyone is now focusing on a new trading pattern: "NACHO." Since the U.S.-Israel airstrikes on Iran on February 28, the Strait of Hormuz has not reopened. Currently, oil prices have risen more than 50% since the start of the conflict, and the Fed's 2026 rate cut expectations have been crushed from 2 cuts before the war to 0 at present. Yet, at the same time, the S&P 500 has hit record highs, rising for 6 consecutive weeks—the longest winning streak since 2024. Wall Street defines this seemingly contradictory market state as NACHO, which stands for "Not A Chance Hormuz Opens." It is the antithesis of TACO (Trump Always Chickens Out). TACO bet on Trump backing down at critical moments. NACHO bets that "things will remain deadlocked," and that the Strait of Hormuz cannot be reopened this time by a single Truth Social post. eToro market analyst Zavier Wong explains this shift: "For most of the crisis, every ceasefire headline triggered a sharp drop in oil prices, with traders constantly betting on a solution that never arrived. NACHO means the market acknowledges that high oil prices are not a one-time shock, but the current market environment itself." March 23 was the critical point where the TACO model failed. That morning, Trump announced on Truth Social that he had "very good, constructive talks" with Iran and ordered the Pentagon to pause strikes on Iranian energy facilities for 5 days. S&P 500 futures rebounded nearly 4% from their lows within minutes, and the market instantly added $1.7 trillion in market cap. Brent crude fell from $109 to $92 intraday. Then, Iranian officials denied the existence of any such talks. According to Iranian state media, a "senior security official" called it a market manipulation tactic, stating that no such conversation ever took place. The gains were halved within two hours; the S&P closed up only 1.15%, and Brent rebounded to $99.94. That was the first time in the past 14 months that Trump’s "retreat" was no longer effective for the market. The reason is simple: the retreat under the TACO model was unilateral and could be fulfilled by a single post. The retreat on March 23 required Iranian cooperation. When the opponent does not cooperate, the retreat becomes a lie. From that day on, market behavior changed fundamentally. Brent crude never fell back to the pre-war level of $67 in the following 6 weeks, and the average price in May remained at $109.57. In between, there was the U.S.-Iran ceasefire agreement on April 7 and 8, oil prices briefly returning to "early war levels" on April 17, and reports of a near-agreement on May 7—yet every "ceasefire headline" failed to bring oil prices back to the baseline. But the S&P kept heading north. It rose 10% in April, the strongest month since November 2020, hitting 7 intraday record highs during that period. It broke 7,230 points intraday on May 1 and closed at 7,398 points on May 7. The two lines completely decoupled in early April. In the TACO era, they moved in the same direction: when threats emerged, oil and the S&P fell; when a retreat occurred, both rebounded. In the NACHO era, they speak two different languages: oil prices are saying "Hormuz is closed for good," while the S&P is saying "it has nothing to do with me." NACHO is not just talk; it is a bet made with real money across three independent derivatives markets. The first layer is insurance. According to Strauss Center historical data, war risk premiums for the Strait of Hormuz soared to 3.5% of hull value during the 2003 U.S. invasion of Iraq, and reached 7.5% after the attack on the Yanbu Pride tanker during the peak of the "Tanker War"