It will be a huge fricking mess. The market will react badly because the only thing markets want is stability: this situation could be pure destruction or a new beginning.
After Mike's revelation an hard fork now will bring BTC to the floor simply because the market will not understand it. But there can be a recovery only at a price of even more centralization which is something will bring more panic in the community.
To me, this whole thing is just a big mess.
The price will respond positively because the market wants stability. 1MB blocks is an unstable system because no one knows if they will be able to continue using bitcoin or not, and because the economics are completely changed.
The hard fork maintains the current economics and shows users will continue to scale bitcoin as needed. That lowers risk.