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For years, critics described Donald Trump’s foreign policy rhythm as a kind of geopolitical “TACO” trade: escalate hard, shock the system, then pull back and let markets recover. In the war with Iran, that playbook has broken down. TACO (Trump Always Chickens Out) was once a repeatable cycle of brinkmanship and retreat. But now it has turned into a trap. Iran has absorbed the initial shock, escalated on its own terms and made it far harder for the US president to simply declare victory and walk away.The result is a conflict that Trump can no longer unilaterally end, a market that reacts less to his rhetoric and more to Iran’s actions and a negotiation process that now appears unavoidable yet deeply constrained.The turning point came a when Trump’s threats stopped working. He warned Iran to reopen the Strait of Hormuz within 48 hours or face attacks on its power plants. Tehran did not comply. Instead, it raised the stakes. Regional officials told Reuters that Gulf states warned Washington such strikes would trigger Iranian retaliation against their own critical infrastructure. Iran reinforced that message through intermediaries, signalling “unlimited retaliation” if its power plants were hit. Trump backed off.That moment exposed a miscalculation. Former US diplomat Alan Eyre told Reuters, “Trump totally miscalculated when he said ‘you’ve got 48 hours to open the strait’… once it became clear Iran was serious… he had to back down.” Trump's pause was an acknowledgment that escalation dominance had shifted to Iran.Iran had been merely resisting devastating attacks so far but now it seems to be dictating the war. Since the start of the war, it has targeted US bases and allies across the region while effectively shutting down the Strait of Hormuz, through which roughly a fifth of global energy flows. In practice only Iranian oil and a limited number of friendly shipments are passing through, even though Tehran claims non-hostile vessels can transit with coordination. The economic consequences have been immediate. Oil prices surged and global markets rattled, only stabilising when talk of negotiations emerged.At the same time, Iran has widened the battlefield. It has launched attacks on Israel as well as US-linked targets in Kuwait, Jordan and Bahrain. A strike even hit a fuel tank at Kuwait International Airport, proving the vulnerability of regional infrastructure.This is not defensive posturing by Iran. As analyst Alex Vatanka told Reuters, Tehran has shown “no inhibitions, no restrictions, no holdbacks.” In doing so, it has turned escalation into leverage. The markets sentiment now seems to wholly depends on how Iran reacts to Trump's overtures.Trump’s shift in tone this week briefly calmed financial markets. His softer stance, including postponing strikes on Iran’s civilian energy sector, helped stocks recover and oil prices ease. But this is not the old TACO cycle. The calming effect now depends on whether Iran engages, not just on what Trump says.Tehran has openly mocked the US narrative. Iranian military spokesperson Ebrahim Zolfaqari suggested Washington was “negotiating with itself”, taking a dig at reports of talks between Iran and the US. The foreign ministry has gone further, saying no one can trust US diplomacy after what it described as a betrayal of ongoing nuclear talks when the war began.This public defiance by Iran matters a lot. It shows that Iran sees Trump’s rhetorical pivot not as a concession to be accepted but as a vulnerability to exploit.Despite the rhetoric, diplomatic channels are quietly opening. Reuters reports that Pakistan has conveyed a US proposal to Tehran and that Pakistan or Turkey could host talks. CNN reports that messages have been exchanged through intermediaries and that a meeting could be arranged soon, potentially involving senior US officials.The proposed framework is ambitious. According to various reports, the US' 15-point plan includes removing Iran’s highly enriched uranium, halting enrichment, curbing missile programmes, limiting support for proxies and reopening Hormuz. In return, it could involve sanctions relief and broader security arrangements.But most of these are precisely the issues Iran has historically refused to negotiate. the issues of Missile capabilities and regional alliances were non-starters even before the war.Iran’s position has hardened further. Reuters reports that Tehran now seeks guarantees against future attacks, compensation for wartime damage and even a form of control over Hormuz. Analysts say this reflects a broader ambition: not a return to the old status quo but a renegotiation of the regional order.A CNN report says that while Iran is “willing to listen” to “sustainable” proposals, it has not agreed to direct talks and insists any deal must preserve its national interests and include sanctions relief.Even as diplomatic feelers intensify, as various reports suggest, the war continues unabated. The situation is as usual with ongoing Israeli airstrikes and Iranian missile and drone attacks. Meanwhile, the US is expanding its military footprint. It has plans to deploy thousands of airborne troops. CNN has reported the movement of elements of the 82nd Airborne Division along with additional Marine Expeditionary Units . AP confirms that these deployments are happening even as ceasefire proposals circulate.This dual-track approach reflects a deeper contradiction. Trump is simultaneously preparing for escalation and signaling de-escalation. In earlier crises, that ambiguity created leverage. Here, it shows the absence of control.The core problem for Trump is structural. The war has created new facts on the ground that cannot be reversed by mere declarations. Iran has demonstrated it can disrupt global energy flows, threaten US allies in the Gulf and sustain military pressure. Gulf states, according to Reuters, feel they have been “put at enormous risk without their consent.” Any deal now must account for their security concerns as well. At the same time, Israel remains deeply skeptical of any agreement that might constrain its freedom of action. Reuters reports concerns in Tel Aviv that US negotiators could make concessions during talks. This means Trump cannot simply choose to exit. Any settlement requires alignment between Washington, Tehran, regional allies and global stakeholders. That is a far more complex negotiation than the unilateral pivots that defined earlier episodes.What made the TACO pattern work in the past was asymmetry. Trump could escalate quickly and then de-escalate on his own terms, with markets rewarding the retreat. In the Iran conflict, that asymmetry has disappeared. Iran has matched escalation with escalation and has now turned de-escalation into a bargaining chip it controls.The result is a strategic inversion. Trump now needs negotiations not as an option but as a necessity. Yet those negotiations will be shaped by Iranian demands, regional anxieties and the realities of a war still being fought in real time such as continuing strikes and impact on oil and supply chains. It is not just that the TACO strategy has failed. It is that the conditions that made it possible no longer exist. It's too late for Trump now to go TACO because Iran has come to seize the escalation ladder.