Signum's TACO formula validated as Iran ceasefire cuts oil 10%

A mathematical formula designed to predict President Donald Trump's policy reversals flagged a pivot on Iran last week — and the weekend ceasefire validated the model, sending Brent crude down 10% to below $90 a barrel.

"The index broke through the precedents that triggered previous TACOs on March 22, May 18 and June 11," analysts at Signum Global Advisors wrote in a client note Sunday, referring to the acronym for "Trump always chickens out."

The formula weighted Brent crude prices, the S&P 500, 10-year Treasury yields and Strait of Hormuz transit data. Pressure mounted as Brent topped $100, the S&P 500 slid and the real yield on the 30-year US Treasury bond hit 3% — a level that historically precedes a Trump de-escalation.

The ceasefire, however fragile, removes a key risk for markets heading into the November midterm elections. Gasoline at $4.02 a gallon — up 88 cents from a year ago — had become a political liability, and Republican lawmakers were growing anxious about the electoral toll of sustained conflict.

The TACO trade has become a fixture in markets since Trump's "liberation day" tariff rollout in 2025, when the president imposed and then deferred sweeping levies. Each subsequent episode of brinkmanship — on tariffs, trade and now military action — has followed a similar pattern: escalate until financial market pain crosses a threshold, then reverse.

Andrew Bishop, global head of policy research at Signum, said the firm's base case remains a face-saving compromise. Under the tacit agreement, Iran would stop shooting at ships and cease levying tolls in the Strait of Hormuz — which handles about 21% of global oil trade — while gaining "a consequential precedent of visibility and management of Hormuz shipping flows."

Market Fallout Spreads Beyond Oil

The ceasefire triggered a broad risk-on move. US stock futures rallied ahead of Monday's open, while Treasury yields declined as investors reduced safe-haven positioning. The S&P 500 had fallen in recent weeks as the conflict escalated, with the White House under pressure from rising bond yields and falling equity prices.

The relief may prove temporary. Bob McNally, head of Rapidan Energy Group and a former energy adviser to President George W. Bush, warned that US refineries running at full tilt may have skipped necessary maintenance, raising the risk of outages. Tropical Storm Bertha churning off the Gulf Coast — home to most of the country's refining capacity — adds another supply-side risk.

Political Calculus Weighs on White House

Trump dismissed the idea that midterm elections could influence his Iran strategy, telling reporters Tuesday that "the election — I can't think about that having to do with this." But Republican strategists see a direct link. "Continuing the back and forth that we've been witnessing the last few weeks into November — it is not going to reassure voters that Republicans have a handle on the situation," said Jason Roe, a Michigan-based Republican strategist.

The White House projected confidence. "As the US military degrades the terrorist Iranian regime's ability to attack commercial vessels and disrupt the free flow of energy through the Strait of Hormuz, oil and gas prices will plummet back to pre-conflict levels," said Taylor Rogers, a White House spokesperson.

The last time a similar geopolitical risk premium unwound this quickly was in 2020, when US-Iran tensions de-escalated after the killing of Qasem Soleimani, sending Brent down 15% over two weeks. Whether this ceasefire holds — or follows the pattern of the earlier truce that collapsed this month — will determine if the market relief is sustained.

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