$4 gasoline. A cruise missile slamming into an oil tanker off Qatar. The S&P 500 up 0.63 percent.

The gap between financial markets and the physical world has rarely been this wide. As President Donald Trump prepares a primetime address on the Iran war Wednesday evening, Asian-led global equities are staging a dramatic rally on hopes the conflict is winding down — with the region posting its biggest rebound in more than three years — even as missiles continue to strike ships, cities, and oil infrastructure across the Middle East.

Asian markets led the charge. MSCI’s Asia-Pacific index outside Japan surged 4.57 percent, and Japan’s Nikkei jumped 5.24 percent. Europe’s STOXX 600 climbed 2.24 percent. Wall Street followed: the Dow gained 0.55 percent to 46,594.37, the S&P 500 rose 0.63 percent to 6,569.57, and the Nasdaq added 1.01 percent. Oil prices fell, with Brent crude dropping 2.23 percent to $101.65 a barrel.

“Markets are trading this narrative that the war could be over, or at least that the U.S. could withdraw,” Evelyne Gomez-Liechti, a multi-asset strategist at Mizuho, told Channel News Asia. She added that she is more inclined to be sceptical about the rally.

What the optimism is built on

The market euphoria rests largely on a single thread: Trump told Reuters on Wednesday that the U.S. would be “out of Iran pretty quickly” and said a day earlier that the war could end in “two to three weeks” — even without a deal.

He told Reuters the U.S. could return for “spot hits” as needed, and said he had already achieved his primary objectives. “So we have regime change and the big thing we have is they’re not going to have a nuclear weapon,” Trump said.

But the same day, he posted on Truth Social that the war would not end until Iran reopens the Strait of Hormuz — a condition not previously stated as a war aim. “Until then, we are blasting Iran into oblivion or, as they say, back to the Stone Ages!!!” he wrote.

Hours apart, the president offered an off-ramp and an escalation.

The war on the ground

The physical reality offers little support for the market’s optimism. A cruise missile struck an oil tanker off Qatar’s coast on Wednesday, according to Qatar’s Defense Ministry. A Kuwaiti tanker was attacked off Dubai the day before — two of more than 20 ships targeted since the conflict began on February 28. A drone hit a fuel tank at Kuwait International Airport. Debris from an intercepted drone killed a person in the UAE.

Iranian missiles and drones were intercepted over Jordan and Saudi Arabia. Air raid sirens sounded in Tel Aviv as missile defences engaged incoming threats. Israeli airstrikes on Tehran appeared to hit the former U.S. Embassy compound. In Lebanon, at least five people were killed in an Israeli strike on a Beirut neighborhood.

The human toll is mounting. Iranian authorities report more than 1,900 people killed in Iran, according to the Associated Press. Lebanon’s government says over 1,200 have died there, with more than a million displaced. Thirteen US service members have been killed. Nineteen deaths have been reported in Israel, and more than two dozen across Gulf states and the occupied West Bank.

A diplomatic vacuum

Behind the scenes, Vice President JD Vance has been speaking with Pakistani intermediaries as recently as Tuesday, according to a source briefed on the matter who spoke to Reuters. Trump privately signaled openness to a ceasefire if certain US demands are met. The US presented Iran with a 15-point peace proposal through Pakistani mediators.

Iran rejected it. Foreign Minister Abbas Araghchi told Al Jazeera that while Tehran has received direct messages from US Mideast envoy Steve Witkoff, there are no direct negotiations. “The trust level is at zero,” he said.

Iranian state media called Trump’s claim that Iran’s president had requested a ceasefire “false and baseless.” Iran still has the same president, Masoud Pezeshkian, that it did before the war — a detail that contradicts Trump’s references to a “New Regime President.”

The Strait and the midterms

The Strait of Hormuz, which carries roughly 20 percent of the world’s oil, remains blocked. International Energy Agency head Fatih Birol warned Wednesday that supply disruptions will worsen in April and begin hitting Europe’s economy as the closure severely curbs supplies.

Brent crude is up more than 40 percent since the war began. US gasoline prices crossed $4 a gallon this week — a politically dangerous threshold for a president who once pointed to cheap fuel as evidence of success. A Reuters/Ipsos poll found two-thirds of Americans want the US to end its involvement quickly, even if the administration’s stated military objectives are not fully accomplished.

Imran Bayoumi, a geostrategy expert at the Atlantic Council and former Pentagon policy adviser, told the BBC that the war’s “deep domestic unpopularity” and its economic fallout “both pose a problem ahead of midterm elections” if the conflict drags on.

What to watch tonight

Trump’s address at 9 p.m. ET will be parsed for a simple answer: off-ramp or escalation? His public statements this week have pointed in both directions simultaneously. He told Reuters he was “absolutely” considering withdrawing the US from NATO, complaining that allies “haven’t been friends when we needed them.” The UAE, according to the Wall Street Journal, is considering entering the conflict and lobbying for a UN Security Council resolution to authorize military action to force open the strait. Thousands of additional US troops are heading to the region.

The markets have made their bet. The missiles haven’t stopped.

Sources