Barclays communicated to clients on Friday that recent market resilience linked to signals of de-escalation from U.S. President Donald Trump may be waning as policy uncertainty mounts.
Analyst Emmanuel Cau flagged that the refrain of repeated reversals and media overload is beginning to erode what he described as the put's effectiveness, writing that "constant flip-flopping and headline fatigue is starting to undermine the put efficacy."
Cau observed that equities had been buoyed by what he termed Trump’s "apparent willingness to de-escalate the conflict," and he pointed to market sensitivity around the shifting timetables the president issued for Iran to reopen the Strait of Hormuz.
He recounted how "panic in oil, rates and equities was palpable when markets opened on Monday, before Trump extended to Friday the 48h ultimatum," adding that the deadline was subsequently moved again after further market stress the next day.
Barclays described the broader situation as "fluid and rather confusing" as Israel escalates strikes and the United States reportedly deploys additional troops to the Middle East. The bank noted that while hedge fund and CTA de-grossing may aid short-term positioning, the persistence of upward price action suggests the "market wants to go up."
Cau further commented that long-only investors largely remain in the "glass half-full camp," which leaves the possibility of an extended conflict and its consequences insufficiently priced by markets.
Highlighting macroeconomic risks, Barclays warned that if the conflict endures and the associated shock to oil supplies continues, the probability of stagflation would grow stronger.
Quantifying the bank's updated view, Cau said, "Our economists now expect global growth in % Q4/Q4 2026 terms to be 2.9%, while global inflation will get pushed higher to 2.7% by end-2026. Advanced economies in aggregate are expected to grow only 1.7% 2026 (all Q4/Q4), driven by weaker growth in the euro area (0.7%), the UK (1.0%) and Japan (1.4%)."
This assessment underscores how shifting policy signals and geopolitical escalation can reverberate across oil, rates and equity markets, and how those moves feed into growth and inflation forecasts even in the absence of a definitive military outcome.