Market Report.
🌍 The financial and geopolitical analysis returns to dissect the evolving global landscape. Since our last report on Thursday, the world has witnessed a series of events that threaten to further destabilize an already fragile economic and security landscape.
🔥 Escalating Middle East Conflict or total withdrawal?
🪖 As U.S. Marines deploy in the area amid rumours that Washington is considering a ground action, the prospect of the United States becoming embroiled in yet another quagmire is becoming all too real.
📰 According with WSJ: “President Trump told aides he is willing to end the U.S. military campaign against Iran even if the Strait of Hormuz remains largely closed.”
🚢 The Strait of Hormuz is open, but not to the USA, Israel, and their partners in Europe: Two Chinese container ships successfully passed through the Strait of Hormuz on their second attempt on Monday. A Greek-operated tanker carrying Saudi crude also recently exited the Gulf via the Strait, bound for India. This was the third such tanker operated by Greek firm Dynacom to leave the region since the war started.
🌡️ The Middle East remains a flashpoint, with tensions intensifying over the past days. Iran-backed Houthi militants launched missile strikes across the region, sending Brent crude oil prices surging past $116 per barrel—a level not seen in years. Analysts warn that the specter of a prolonged confrontation is looming ever larger, with supply chains and energy markets bracing for further disruptions.
🛢️ Donald Trump has signaled his intention to seize Iranian oil, explicitly threatening to take control of Iran’s Kharg Island export hub, a critical artery for global oil flows. Trump’s rhetoric, as shared with the Financial Times, underscores the escalating stakes in a region already on the brink.
🤝 Pakistan has positioned itself as a potential mediator, offering to facilitate dialogue between the United States and Iran. However, the prospects for de-escalation remain uncertain, particularly after Tehran launched targeted attacks on production sites in the UAE and Bahrain.
⚠️ The energy sector is sounding the alarm. Bloomberg reports that the industry is bracing for what could be “the biggest oil supply shock in history”—a stark reminder of the fragility of global energy security in an era of geopolitical upheaval.
🇺🇸 Domestically, President Trump faces growing political headwinds. Approval ratings have plummeted into negative territory in some U.S. media polls, while factions of his MAGA (Make America Great Again) base are openly rebelling against his leadership. Conservative media figures and loyalists are increasingly vocal in their criticism, citing broken promises and blaming Israel for the administration’s foreign policy missteps.
📊 RealClearPolling: Trump currently has a -13-point approval rating.
📰 UK press, The Guardian: Many right-wing and pro-Trump outlets, such as Fox News, the New York Post, and the Wall Street Journal, have taken a mostly cheerleading stance, describing the strikes as “just and imperative” and necessary to “destroy Iran’s war machinery.”
👥 However, there is a generational divide within the MAGA movement, with younger “Gen Z MAGA” supporters opposing the revival of a Bush-era interventionist foreign policy that they thought Trump had repudiated.
🎙️ Outlets like The American Conservative and some podcast hosts have condemned the strikes as an “open betrayal” of Trump’s promises to end “endless wars” and put “America First.”
🏦 Central Banks: Economic Outlook Darkens.
🇪🇺 Europe, too, is grappling with the fallout of global instability. Italy has slashed its growth forecast to just 0.5% (down from 0.7%), citing the ripple effects of the Persian Gulf conflict. Meanwhile, the Bank of France has raised its inflation forecast, signaling concerns over both energy costs and broader economic resilience.
⛽ The European Union energy ministers are set to hold talks today to coordinate their response to the disruption to oil and gas markets caused by the ongoing U.S.-Israel war with Iran: Europe’s heavy reliance on energy imports has left it exposed to soaring prices. European gas prices have jumped over 70% since the war began on February 28th.
🗓️ The ministers will focus on concrete measures to address the tightening of oil and gas markets, aiming to avoid uncoordinated and disruptive national responses. Key priorities include: Filling gas storage for next winter, Stabilizing oil product markets, especially diesel and jet fuel, as supplies tighten & Ensuring secure energy supplies for the EU in the short-term.
🌐 While the EU’s top suppliers are Norway and the U.S., not directly affected by the Middle East disruptions, there are concerns about potential shortages of certain refined products like diesel and jet fuel by April.
🏛️ The Federal Reserve is also closely monitoring these developments. Governor Lisa Cook has issued warnings about inflation risks, while Michael Barr and Philip Jefferson have advocated for maintaining current interest rates to avoid further destabilizing an already volatile financial environment.
🎓 Federal Reserve Chair Jerome Powell made the following comments in a talk at Harvard University:
📌 Powell sees inflation expectations as being well-anchored beyond the short-term impact of rising energy prices due to the Iran conflict. He does not see a need to hike interest rates in response to the oil shock. He seems to be confident that the Fed can look into the short-term inflation impact of the Iran conflict without needing to hike rates
⏳ He noted that Fed rate hikes have a lagged impact, so tightening now would negatively affect the economy later without helping the immediate inflationary pressures from the oil shock. Regarding the private credit market turmoil, Powell said the Fed does not see it as having the makings of a broader systemic event, though they are closely monitoring for potential contagion risks.
🚨 France has recently foiled a terror plot in Paris, with authorities detaining three suspects accused of planning an attack near the offices of Bank of America. The incident underscores the persistent threat of extremism in Europe, particularly in the context of global geopolitical tensions.
☢️ Bloomberg further warns of a “new nuclear age” emerging, as Trump’s willingness to confront adversaries while alienating allies risks accelerating nuclear proliferation. Governments across the North Atlantic and West Pacific are now debating nuclear acquisition “more publicly than ever before.” The global nuclear arsenal is expanding, with nine nations now possessing nuclear weapons. China, in particular, is rapidly increasing its warhead stockpile, raising concerns about a potential arms race in the decades to come.
⚔️ Trade Wars Linger as a Looming Threat.
🇩🇪 Germany is preparing a retaliatory strategy, mapping vulnerabilities in U.S. supply chains to target sectors such as technology, AI investments, or pharmaceutical pricing in the event of a trade clash.
🧩 German officials are mapping out European supply chain dependencies, identifying areas where American companies rely on European goods and services – from tech and AI to pharmaceuticals and specialty chemicals. The idea is to have potential “levers” that Europe could use, such as stricter regulations, new taxes, or operational limits on U.S. tech giants, if tensions with Washington flare up again.
⚖️ However, officials acknowledge there are limits to this approach, as the U.S. military presence in Europe and the dollar’s global dominance mean some pressure points are too risky to touch.
Market View.
🔄 Markets appear to be slowing their recent declines amid speculation that Donald Trump could withdraw from the conflict. However, scepticism remains high, as additional troops have reportedly been deployed to the region, raising the risk of further escalation.
📈 E‑mini S&P 500 futures are halting their losses and have reclaimed the 6,400 level.
💻 Nasdaq 100 futures are also rebounding slightly after having fallen below 23,000 in recent hours, currently trading around 23,280.
🇪🇺 In Europe, DAX 40 futures dropped towards 22,100 before rebounding to approximately 22,780.
📊 Euro Stoxx 50 futures fell below 5,350 but have since recovered to around 5,475.
💵 The US dollar continues its upward trajectory. Yesterday, the DXY index moved above 100.50, pushing EUR/USD back below 1.1500, currently trading near 1.1465.
🥇 Gold futures have risen more than 12% since last Monday, now trading around $4,580 per ounce.
📉 The US 2‑year Treasury yield has pulled back after surpassing 4% on Friday, reflecting the pressure this conflict is placing on US assets.
₿ Finally, Bitcoin, which began the week under heavy pressure and fell to $65,000, is rebounding to approximately $67,120.
