Market Report.
📈 The rally then resumes. After Oman cleared ships from one of the last ports still able to export Middle Eastern oil, oil prices jumped back above $100 per barrel.
🌾 The ongoing conflict in the Middle East is not just affecting oil markets, but also critical agricultural supply chains through the disruption of fertilizer shipments
🛢️ Crude oil prices closed more than 4% higher on Wednesday, as several commercial vessels were attacked off Iran’s coast near the Strait of Hormuz.
🚢 At least three cargo ships were struck by suspected projectiles, causing one to catch fire and forcing the crew to evacuate.
🔮 According to Polymarket predictions: The war between the U.S./Israel and Iran is expected to last about another month and a half. The U.S. Navy will not be able to unblock the Strait of Hormuz during this time period.
🏦 Release of Emergency Oil Reserves: The U.S. plans to release 172 million barrels from its strategic petroleum reserve to help ease energy price pressures resulting from the conflict.
🌽 The closure of the Strait of Hormuz has also disrupted fertilizer shipments since late last month, raising the risk of higher agricultural costs and potential food inflation. More than one-third of globally traded fertilizer passes through the Strait, making it a critical passageway for agricultural supply chains.
⏳ The timing is critical as fertilizers are applied early in the crop cycle and help determine yields later in the year. The impact extends beyond just oil, with other commodities like aluminum also taking a hit from the Middle East conflict.
📰 The Guardian: Iran has spurned two messages from Donald Trump’s special envoy, Steve Witkoff, seeking a ceasefire as its leaders sense it is not losing the war
🛑 Iran has spurned ceasefire offers from the U.S., insisting on guarantees that it will not be attacked again. Iran believes it is not losing the war and that the U.S. is feeling political pressure.
📜 Iran is demanding a permanent deal that includes a U.S. commitment not to attack Iran again, rather than just a temporary ceasefire. It believes the economic, political and military cost to the U.S. must be shown to be too high to repeat.
🇮🇷 Even Iran’s more moderate president is taking a defiant stance, arguing “the destroyers have come and gone, Iran remains.” While the regime remains standing, it faces significant resource issues due to the closure of the Strait of Hormuz and the region’s reluctance to trade with Iran.
🗳️ Iran’s public opinion may have shifted from being against the regime to being against the war on Iran, due to the impact of attacks on energy infrastructure.
📱 A senior Iranian political official says on X former U.S. President Donald Trump is attempting, through intermediaries, to open channels with Tehran and Washington to end the war, while publicly making contradictory statements.
⚖️ “Trump tells American media there is no ‘specific timeline’ for ending the war, which contradicts the messages he is sending to us,” the official said, adding that the discrepancy reflects “chaos and deep crisis” surrounding Trump and a lack of a clear way out.
🤖 How the Iran war could pull down the AI business of the Middle East.
💻 Iran war threatens to disrupt the Middle East’s emergence as a key hub for AI infrastructure, at least in the near-term, as companies navigate the heightened geopolitical risks.
💰 Billions of dollars have been invested in AI infrastructure projects in the Middle East in recent years, drawn by factors like cheap energy, available land, and government support.
🎯 Data centers have already been targeted in the conflict, with Iran’s attacks hitting AWS facilities in the UAE and Bahrain, causing service outages.
🛰️ This signals that data centers may now be seen as “legitimate targets for attack” in modern conflicts, changing how companies think about data center security.
✈️ Do you recall when, at the beginning of the conflict, in this very report we pointed to kerosene, its disruptions and the impact it would have on airlines? Well, now the financial newspapers are beginning to talk about it. We were ahead of the news.
🌍 Global Travel Disruptions: The war with Iran has significantly disrupted global travel, particularly Asia-Europe routes, with airlines and passengers facing unprecedented price hikes and capacity constraints.
❌ Over 46,000 flights have been canceled across the region since the start of the conflict. Up to 10% of global airline capacity has been wiped out, marking the biggest aviation shock since the COVID-19 pandemic.
📊 Yesterday’s US IPC data show stability, for the moment.
📈 U.S. consumer prices rose moderately in February, up 0.3%, before the escalation of the war in the Middle East.
⛽ The data covered the period before the U.S. and Israel launched strikes against Iran, which have since boosted oil prices significantly. Gasoline prices have already soared 20% to $3.58 per gallon.
📉 Consumer prices could increase by up to 1.0% in March due to the surge in energy costs from the conflict.
🏛️ The moderate February inflation reading may not carry as much weight with the Federal Reserve, which is expected to keep interest rates unchanged next week given the geopolitical uncertainty and oil price volatility.
🇪🇺 What about Europe?
🇫🇷 According to the Bank of France governor Francois Villeroy de Galhau: Inflation in France is expected to remain low, even though the war in Iran may lead to slightly higher prices and lower global growth.
📌 The governor said this is not a situation of “stagflation” (stagnant growth and high inflation), as France will maintain economic growth.
📉 France’s inflation forecast, which stood at 1.3% for the full year back in December, could edge up slightly due to the Iran conflict, but will remain significantly lower than in other European neighbors.
🗣️ The governor stressed the increase in inflation will be “slight” and that the Bank of France does not believe interest rates need to be raised right now. However, they will not allow inflation to take hold.
🌐 The Trade War continues, it is not over.
⚖️ Trump administration’s intent to maintain its protectionist trade policies despite the Supreme Court ruling, by leveraging alternative legal mechanisms like Section 301 investigations.
📑 The Trump administration has announced new trade investigations into China, Mexico, the European Union, and over a dozen other economies under Section 301 of the Trade Act of 1974.
🎯 The goal is to replace President Trump’s reciprocal tariffs, which were recently ruled illegal by the Supreme Court.
🏭 The Section 301 probes will examine “acts, policies and practices of certain economies relating to structural excess capacity and production in manufacturing sectors.”
🌏 Besides China, Mexico and the EU, the other economies being investigated include Japan, India, Taiwan, Vietnam, South Korea, and several Southeast Asian nations.
💼 The investigations could lead to new tariffs or other trade actions against these countries if unfair practices are found.
📅 Treasury Secretary Scott Bessent predicts that by August, U.S. tariff rates will return to pre-Supreme Court ruling levels through these new Section 301 authorities.
Market View.
📉 S&P 500 futures continued to decline overnight, approaching the 6,700 level. In recent hours, however, they have rebounded towards 6,750, though the 6,800 level, which had acted as support in recent days, has now been lost.
📉 Nasdaq 100 futures also fell towards the 24,700 area, but are currently recovering to around 24,875.
💵 The US dollar index (DXY) extended its advance, reaching 99.50 in recent hours before easing slightly to 99.35. This move pushed EUR/USD back below 1.1550, although the pair is now attempting to regain momentum towards 1.1555.
🛢️ Spot Brent crude briefly moved back above $100 per barrel overnight, but has since retreated to around $96.50.
🥇 Gold futures continue to display strength near the $5,200 per ounce level, currently trading at approximately $5,190.
₿ Meanwhile, Bitcoin once again surpassed $71,000 yesterday, but has since pulled back to around $69,865.
