TACO without flavour

• Enguerrand Artaz
  Strategist
  La Financière de l’Échiquier (LFDE)

It subsequently gained widespread popularity among investors the following year, used to describe the US president’s numerous U-turns, notably on the issue of rising tariffs. The ‘TACO trade’ thus gradually became a gimmick. In short, any market stress caused by an action or statement by Donald Trump would sooner or later lead to a backtracking on his part, thereby paving the way for a rebound in risky assets. This logic worked perfectly throughout 2025, fuelling the ‘buy the dip’ reflex – buying on the dip – which was particularly popular among retail investors.

In the context of the Iran conflict, this logic is still partially at work, but the mechanism seems to have broken down. After threatening, over the weekend of 21–22 March, to destroy Iran’s energy infrastructure if the Strait of Hormuz was not reopened within 48 hours, the US president announced on Monday 23 March a five-day extension of the deadline for reopening, citing “very productive discussions”. Following this announcement, futures contracts on US markets rose by as much as 4% in a matter of minutes… only to lose all that ground over the next three days. On Thursday 26 March, Donald Trump once again pushed back the deadline for his threat, this time by 10 days, “at the request of the Iranian government”, in his own words. This time, S&P 500 futures rose by just over 1%, only to erase that gain within a few hours.

This loss of momentum in the “TACO trade” is hardly surprising. Investors are simply coming to terms with a reality that still seems to elude the occupant of the White House: in this situation, unlike the tariff episode, he is no longer the sole decision-maker. Alongside Donald Trump’s assertions that ‘talks are going very well’, Iran and Israel continue to exchange missile fire, tensions are mounting among the other Gulf states and, above all, the Strait of Hormuz remains largely impassable. Yet this is precisely the crux of the matter. Regardless of the US president’s backtracking on his threat against Iranian infrastructure and his assurance that negotiations are going well: only an official reopening of the Strait of Hormuz will ease market concerns.

And time is running out. Every additional day the strait remains closed increases the risk of oil storage capacity in the Gulf reaching saturation point and, consequently, of a cascade of production stoppages. Iraq is already facing this situation. Production from the oil fields in the south of the country has fallen to around 800,000 barrels per day, compared with over 4 million before the conflict began, whilst storage levels are reaching critical limits. The situation is also beginning to become strained in Kuwait, as evidenced by the recent announcement of a production cut by the state-owned Kuwait Petroleum Corporation. Whilst the United Arab Emirates and Saudi Arabia have slightly more bypass capacity in the short term via their oil pipelines, this will not be sufficient in the long term, particularly as the Red Sea bypass is also at risk, with increasing threats of attacks by Iran’s Houthi allies.

The ‘TACO trade’ is now coming up against physical reality, with Donald Trump’s U-turns proving powerless in the face of stockpiles and production disruptions. For investors, the strategy must change radically: it is no longer a question of betting on the US president’s moods, but rather of looking at the reality of hydrocarbon flows from the Middle East. Bearing in mind that the clock is ticking.

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