Trump Vows to Resume US Nuclear Testing, Spooking Markets
Statement marks a significant departure from a three-decade moratorium on nuclear tests, signaling a potential rise in geopolitical risk and market volatility.
Former President Donald Trump declared his intention to resume U.S. nuclear weapons testing in a statement that threatens to upend a 30-year international norm and introduce a significant new layer of risk into global financial markets.
In a post on his Truth Social platform, Trump announced the U.S. would restart testing, arguing he had "no choice" amid escalating global competition. The move would reverse a moratorium on U.S. nuclear testing that has been in place since 1992, a policy cornerstone aimed at preventing a global arms race.
"The U.S. will resume nuclear weapons testing," Trump stated, citing the need to maintain a competitive edge over other nuclear powers. The statement immediately put global investors on alert, raising the prospect of heightened geopolitical instability that could ripple through equity, bond, and commodity markets.
While the U.S. market has not yet had time to fully price in the rhetoric, the established playbook for such geopolitical shocks points toward a classic risk-off reaction. Analysts anticipate that a tangible move toward resuming nuclear tests would likely trigger a flight to safety, boosting demand for traditional safe-haven assets. This could include a rally in the price of gold and increased buying of U.S. Treasuries, which would push bond yields lower.
Conversely, equity markets would likely face headwinds as investors weigh the potential for escalating international conflict. A spike in the CBOE Volatility Index (VIX), often called the market's "fear gauge," would also be a probable outcome.
The United States conducted its last underground nuclear test, codenamed "Divider," on September 23, 1992, at its Nevada test site. Shortly after, the country began adhering to an international moratorium and later signed the Comprehensive Nuclear-Test-Ban Treaty (CTBT) in 1996, a global agreement to halt all nuclear explosions. Although the U.S. has not ratified the treaty, it has abided by its terms for three decades.
A reversal of this long-standing policy would almost certainly provoke strong reactions from other nuclear powers, particularly Russia and China, and could unravel decades of non-proliferation efforts. Such a move could trigger a tit-for-tat escalation, leading other nations to restart or accelerate their own weapons programs, further destabilizing the global security landscape.
For investors, the statement serves as a stark reminder of the unpredictable nature of geopolitical events and their potential to abruptly alter market dynamics. The focus will now shift to whether this campaign rhetoric translates into a concrete policy directive and how international leaders respond to the potential dismantling of a key pillar of global security.