Trump cancels Iran strike, crude plunges 3.5% as deal nears

President Donald Trump canceled a planned military strike on Iran scheduled for Thursday night, triggering an immediate cross-asset market shock as WTI crude plunged more than 3.5% and U.S. equities surged on expectations a formal agreement is near.

"I said, 'Bibi, you better be careful, or you will be on your own very soon,'" Trump told Axios, recounting a phone call with Israeli Prime Minister Benjamin Netanyahu in which he urged restraint. The president said the U.S. was "close to doing something good in terms of a deal" with Iran and that Netanyahu had "pseudo agreed" to stand down if Tehran did not launch further attacks.

WTI crude futures crashed through the $90 psychological level and extended losses to trade below $87 a barrel, down more than 3.5% on the session, as the de-escalation removed the most immediate supply-risk premium. The S&P 500 jumped 1.3% to 7,360.16, the Dow surged 1.5% to 50,707.59, and the Nasdaq climbed 1.7% to 25,598.30. Spot gold broke above $4,150 an ounce, gaining 1.97%, while the Bloomberg Dollar Index slid to a session low and U.S. Treasury prices rallied, pushing yields lower.

The maritime blockade remains in place, introducing lingering uncertainty. But Trump said final agreement details had received all necessary approvals and that the time and location for signing would be announced soon. The development marks a sharp reversal from the trajectory of recent weeks, during which the U.S. and Israel launched joint operations — including Operation Epic Fury beginning Feb. 28 — that drained American munitions stockpiles. The Pentagon has used an estimated 1,000 or more Tomahawk missiles from a pre-war inventory of roughly 3,100, according to the Center for Strategic and International Studies, and replenishing production could take more than three years even if new contracts were signed today.

The missile supply crunch that shaped the decision

The cancellation comes as the Pentagon faces mounting pressure over thinning weapons stockpiles. Defense industry leaders are preparing to meet with Trump at the White House this week in what sources described to NBC News as a potentially contentious discussion over missile production capacity. Capitol Hill officials estimate the Pentagon needs an additional $20 billion to begin replenishing inventories to pre-Ukraine-aid levels, and the House Appropriations Committee this week unveiled a defense spending bill exceeding $1 trillion with a focus on munitions production.

The last time the U.S. faced a comparable munitions drawdown was during the 2003 Iraq invasion, when precision-guided munition inventories fell to critically low levels and took more than two years to rebuild. The current situation is more acute because simultaneous operations in Ukraine and the Middle East have strained production lines that were already running below replacement rates.

What comes next

If a formal Iran deal is signed, the immediate risk premium in crude could continue to unwind, potentially pushing WTI back toward the $80 level that prevailed before the latest escalation. For equities, the removal of a tail risk supports further upside, though the maritime blockade — which restricts Iranian oil exports — means some supply uncertainty persists. Gold's rally above $4,150 suggests safe-haven demand is being reshuffled rather than extinguished, with investors rotating from crude-linked hedges into traditional store-of-value assets.

The key date to watch is the expected signing ceremony, which Trump indicated would occur soon. If talks stall or the blockade is tightened, the fragile truce could unravel quickly — Iran's military command has warned that any further Israeli strikes in southern Lebanon would trigger retaliation "with more force" than the initial ballistic missile barrages.

This article is for informational purposes only and does not constitute investment advice.