Oil prices declined for a second consecutive day on Wednesday as expectations grew that peace talks between the U.S. and Iran could resume, potentially restoring supply from the Middle East that has been disrupted by the closure of the Strait of Hormuz.
Brent crude slipped 0.55% to $94.27 per barrel after a sharp 4.6% drop in the previous session, while U.S. West Texas Intermediate fell 1.1% to $90.24 following an even steeper 7.9% decline earlier.
Investor sentiment improved after President Donald Trump suggested that negotiations to end the conflict involving the U.S., Israel, and Iran could restart in Pakistan within days. The earlier breakdown in talks had led Washington to impose a blockade on Iranian ports, but renewed diplomatic hopes are raising expectations that oil and fuel flows could eventually resume.
The conflict has effectively shut down the Strait of Hormuz, a crucial route for transporting crude and refined products from the Gulf to global markets, particularly in Asia and Europe. Although a ceasefire has been in place for two weeks, shipping activity remains severely limited, with vessel traffic far below pre-war levels.
On Tuesday, a U.S. warship reportedly prevented two oil tankers from departing Iran, underscoring ongoing disruptions. Analysts at the Schork Group noted that while diplomatic developments hint at easing restrictions, actual conditions on the ground remain unstable, leaving markets focused on the risk of supply disruptions rather than a full recovery.
Further tightening supply concerns, U.S. officials indicated that sanctions waivers on Iranian oil shipments will not be renewed, and a similar waiver for Russian oil has already expired.
Later in the day, attention will turn to U.S. inventory data from the Energy Information Administration. Expectations are for a modest increase in crude stockpiles, alongside declines in gasoline and distillate inventories. Meanwhile, preliminary data from the American Petroleum Institute suggested that crude inventories rose for a third straight week.
The U.S. dollar declined on Tuesday as investors moved away from the safe-haven currency and shifted toward riskier equities, supported by optimism over potential ceasefire progress between the U.S. and Iran, despite the ongoing naval blockade in the Persian Gulf.
Risk sentiment was further strengthened by a much weaker-than-expected U.S. producer inflation report, easing concerns that the Iran-related energy shock could fuel inflation—especially after a recent surge in consumer prices.
By 17:20 ET (21:20 GMT), the U.S. Dollar Index, which measures the greenback against six major currencies, had dropped 0.3% to 98.12.
The Hormuz blockade continued into its second day, even as Donald Trump signaled that potential negotiations could be on the horizon.
The blockade of the Strait of Hormuz entered its second day even as President Donald Trump highlighted the possibility of renewed negotiations.
The U.S. dollar, which had initially strengthened as a safe-haven asset following the outbreak of the Iran conflict in late February, has recently weakened amid growing optimism that tensions could ease.
This optimism increased on Tuesday after Trump told the New York Post that additional talks “could take place within the next two days” in Pakistan. According to earlier reports, the U.S. and Iran have remained in contact and made some progress toward a lasting ceasefire agreement.
Trump also stated that Iranian officials had reached out to the White House expressing interest in striking a deal, while reiterating that Iran would not be allowed to develop nuclear weapons. The U.S. is reportedly insisting that Iran halt uranium enrichment for 20 years, a key step in nuclear weapons development.
At the same time, the U.S. naval blockade of vessels entering and leaving Iranian ports continued into its second day. The U.S. Central Command said the operation involves over 10,000 personnel, more than a dozen warships, and dozens of aircraft to enforce the restrictions.
CENTCOM reported that within the first 24 hours, no ships managed to pass through the blockade, and six commercial vessels complied with U.S. directives to turn back toward ports in the Gulf of Oman.
British maritime authorities also confirmed that access has been limited for ships attempting to enter or exit Iranian ports, as well as in nearby waters including the Persian Gulf, Gulf of Oman, and parts of the Arabian Sea.
Trump noted that the blockade began on Monday after weekend ceasefire negotiations failed to produce immediate results. The move risks further disrupting already reduced oil flows through the Strait of Hormuz, a critical route that carries about one-fifth of the world’s oil supply.
U.S. producer inflation came in weaker than expected.
U.S. producer inflation came in less severe than expected, drawing significant market attention on Tuesday. The March producer price index (PPI) rose 0.5% month-on-month and 4.0% year-on-year, falling short of forecasts of 1.1% and 4.6%. Meanwhile, core PPI increased by 0.1% over the month and 3.8% compared to a year earlier.
Despite the softer-than-expected overall figures, the annual rise in headline PPI marked the largest increase since February 2023, largely driven by a sharp 8.5% monthly surge in energy prices for final demand.
Even so, the weaker headline data helped ease investor concerns.
Guy LeBas, chief fixed income strategist at Janney, noted on X that expectations had been elevated due to fears of rising energy input costs, which were not fully reflected in the data.
He added that although gas prices are clearly higher, these cost increases may take several months to filter through the economy rather than appearing all at once. This gradual pass-through could complicate monetary policy, as it may delay the Federal Reserve’s confidence that inflation pressures are not spreading beyond the energy sector.
The euro and British pound strengthened, while the yen also gained despite weak economic data.
Among major currencies, both the euro (EUR/USD) and the British pound (GBP/USD) moved higher, supported by the softer U.S. dollar. The euro rose 0.2% to $1.1795, while the pound gained 0.4% to $1.3567.
The Japanese yen also strengthened, with USD/JPY slipping 0.3% to 158.80, despite data showing Japan’s industrial production fell 2% month-on-month in February after a 4.3% increase in January.
In other markets, the Australian dollar (AUD/USD) increased 0.3% to $0.7122, even though economic indicators were weak. According to National Australia Bank, business confidence dropped sharply in March following the Iran conflict, while the Westpac–Melbourne Institute survey showed a steep decline in consumer sentiment in April.
U.S. President Donald Trump said Sunday evening that he was unconcerned about whether Iran would return to negotiations after ceasefire talks over the weekend failed to produce an agreement.
He also confirmed that the United States intends to impose a blockade on the Strait of Hormuz starting Monday morning, accusing Iran of failing to honor its commitment to reopen the vital shipping route. Speaking to reporters at Joint Base Andrews, Trump stated that the U.S. would be fine even if Iran chose not to resume talks.
His remarks followed a report indicating that several countries are attempting to restart diplomatic efforts after lengthy discussions in Islamabad ended without a deal. Despite the breakdown, sources suggested that further negotiations could take place within days, while regional governments are working with Washington to extend a fragile two-week ceasefire.
The Islamabad meeting represented the highest-level direct engagement between U.S. and Iranian officials since 1979, with 21 hours of talks concluding without progress. Vice President JD Vance said the U.S. had clearly outlined its conditions, but Iran declined to accept them.
U.S. demands reportedly included ending uranium enrichment entirely, dismantling key nuclear facilities, surrendering enriched materials, reopening the Strait of Hormuz without fees, promoting broader regional stability, and ceasing support for groups such as Hezbollah and the Houthis. Iran, however, proposed limited enrichment or reducing its stockpile, but the two sides failed to reach a compromise.
In response to Trump’s blockade announcement, Iranian Parliament Speaker Mohammad Bagher Qalibaf warned that Iran would not back down under pressure, stating that any confrontation would be met with force.
The U.S. plans to enforce the blockade on all vessels entering or leaving Iranian ports from 10 a.m. ET on April 13, covering areas along the Arabian Gulf and Gulf of Oman. It remains unclear whether U.S. allies will participate. Trump also criticized NATO for its lack of involvement and said Washington is reassessing its relationship with the alliance.
Oil prices rose on Friday amid renewed concerns over supply disruptions from Saudi Arabia and continued minimal tanker movement through the strategically vital Strait of Hormuz.
Despite the gains, crude was still on track for a weekly decline as market fears eased slightly following a fragile two-week ceasefire between the United States and Iran. At the same time, Israel indicated a possible diplomatic shift, expressing readiness to start direct negotiations with Lebanon soon.
Brent crude increased by $0.96, or 1%, to $96.88 per barrel at 0604 GMT, while West Texas Intermediate (WTI) gained $0.78, or 0.80%, reaching $98.65 per barrel.
Both benchmarks are down roughly 11% so far this week, marking their steepest weekly drop since June 2025, when earlier Israeli-U.S. strikes on Iran were paused.
According to Saudi Arabia’s state news agency SPA, citing the Ministry of Energy, attacks on key energy infrastructure have reduced the kingdom’s oil output capacity by about 600,000 barrels per day and cut throughput on the East-West Pipeline by approximately 700,000 barrels per day.
Analysts at ANZ noted that these developments have intensified concerns about further supply disruptions.
Shipping activity through the Strait of Hormuz remained below 10% of normal levels on Thursday, despite the ceasefire, as Iran asserted control by instructing vessels to stay within its territorial waters.
Although Iran and the U.S. agreed to a two-week ceasefire mediated by Pakistan, clashes reportedly continued afterward.
Experts suggest Pakistan may attempt to broker a longer-term agreement, but its ability to enforce the reopening of the waterway remains limited.
A Tehran official also told Reuters that Iran is seeking to impose transit fees on ships passing through the Strait under any peace arrangement, an idea opposed by Western governments and the U.N. shipping agency.
The conflict, which began on February 28 following U.S. and Israeli airstrikes on Iran, has effectively disrupted one of the world’s most important energy corridors.
Energy consultant John Paisie of Stratas Advisors warned that Brent crude could surge to $190 per barrel if current shipping constraints persist, though prices would be more contained if flows improve, albeit still above pre-war levels.
Mukesh Sahdev, CEO of XAnalysts, emphasized that the critical issue is not whether the Strait of Hormuz reopens, but how quickly normal oil flows can resume.
Meanwhile, JPMorgan estimated that around 50 energy infrastructure sites across the Gulf have been damaged by drone and missile attacks since the conflict began, with approximately 2.4 million barrels per day of refining capacity taken offline.
The dollar stayed fragile on Thursday following broad losses, as investors closely watched whether the uneasy ceasefire between the U.S. and Iran would hold. The truce appeared uncertain, with Israel continuing its conflict with Hezbollah in Lebanon and Tehran accusing both Washington and Tel Aviv of breaching the agreement, calling further peace talks unreasonable. Meanwhile, the Strait of Hormuz remained restricted, with ships requiring permits to pass, prompting higher oil prices as traders awaited clearer conditions.
U.S. President Donald Trump said American military forces would remain deployed around Iran until the terms of the deal were fully met. Analysts noted growing skepticism over whether the ceasefire could last or even be finalized. The dollar index was largely unchanged at 99.07, while the euro dipped slightly, sterling edged higher, and the yen weakened after giving back earlier gains.
The prolonged Middle East tensions have fueled expectations of more expansionary fiscal policy, contributing to yen weakness. Markets are currently pricing in a moderate chance of a Bank of Japan rate hike later this month, though this outlook could shift if the ceasefire collapses. Japan’s weakening consumer confidence and ongoing economic concerns tied to the conflict further complicate the central bank’s decision.
BOJ Governor Kazuo Ueda reiterated that real interest rates remain negative, keeping financial conditions loose. The dollar has benefited overall from the conflict, partly because the U.S. is a net energy exporter, unlike many oil-importing economies such as Japan and parts of Europe.
The five-week conflict has disrupted global energy supplies significantly, and despite the ceasefire, Iran retains increased influence over shipping through the Strait of Hormuz. Upcoming U.S. economic data, including personal spending and inflation measures, could influence the dollar’s direction, with strong figures potentially supporting a rebound.
Elsewhere, the Australian dollar edged lower, the New Zealand dollar gained slightly, and cryptocurrencies declined, with bitcoin and Ethereum both posting losses.
Bitcoin edged higher on Tuesday, recovering from earlier losses as risk appetite improved after Pakistan urged President Donald Trump to extend his deadline for Iran to reopen the vital Strait of Hormuz.
Market sentiment had previously been weighed down by stalled U.S.-Iran negotiations and Trump’s warning that Iran could face severe consequences if no agreement was reached by his deadline.
The world’s largest cryptocurrency was last trading 0.5% higher at $69,845.4 as of 17:43 ET (21:43 GMT).
Pakistan calls for a deadline extension and proposes a two-week ceasefire.
Pakistan, now a key intermediary between the U.S. and Iran, said diplomatic efforts to end the Middle East conflict are advancing steadily and could yield meaningful results in the near term.
Prime Minister Shehbaz Sharif urged President Trump to extend his deadline by two weeks to give negotiations more time, while also calling on Iran to reopen the Strait of Hormuz for the same period as a goodwill gesture. He further appealed to all sides to observe a two-week ceasefire to create space for diplomacy and work toward a lasting resolution.
According to Reuters, Tehran is responding positively to the proposal, while Axios reported that Trump has been informed of Pakistan’s initiative, citing the White House press secretary.
Trump’s Tuesday night deadline approaches.
Earlier on Tuesday, Trump warned that “a whole civilization will die tonight,” while expressing reluctance but suggesting the outcome seemed likely. He had already threatened to strike Iran’s bridges and power infrastructure if no deal was reached by his 20:00 ET deadline.
He also insisted that any ceasefire must include Iran reopening the Strait of Hormuz, which has effectively been closed since the conflict began, pushing global oil prices higher.
Reuters reported that Iran denied any negotiations with the U.S., accusing Washington of seeking surrender under pressure. Meanwhile, Iran’s Tasnim news agency said Tehran could target additional oil facilities, including those linked to Saudi Aramco, if U.S. attacks on energy infrastructure proceed.
An analyst at Nexo Dispatch noted that markets remain cautious rather than panicked, with investors waiting for the deadline to pass before taking a clearer stance.
Inflation data due later this week is in focus.
Bitcoin has increasingly moved in line with overall risk sentiment, as geopolitical tensions overshadow earlier optimism about diplomatic progress.
Attention is now shifting to upcoming U.S. economic data, particularly the March consumer price index due Friday. Rising energy costs tied to the Middle East conflict are expected to lift inflation, which could strengthen expectations that interest rates will stay higher for longer.
Such a backdrop may weigh on Bitcoin, as the asset typically underperforms in a high-rate environment.
According to Nexo’s Kalchev, ongoing energy-driven price pressures mean each inflation reading this week carries outsized importance for crypto—cooler data could revive hopes for rate cuts, while stronger figures would reinforce the higher-for-longer outlook.
Bitcoin ETFs record their largest daily inflows since February.
Bitcoin exchange-traded funds (ETFs) recorded their largest daily inflows since late February on Monday, as investors positioned ahead of the Iran deadline.
The funds saw a total of $471.3 million in inflows, led by BlackRock’s IBIT with $181.9 million. Fidelity’s FBTC and ARKB followed, attracting $147.3 million and $118.8 million, respectively, according to SoSoValue. Notably, no ETF reported any outflows during the session.
Most altcoins also rebounded on Tuesday, moving in line with Bitcoin’s gains.
Ethereum edged up 0.1% to $2,141.62, while XRP rose slightly by 0.1% to $1.3366. Solana gained 1.7%, and Cardano increased 0.4%. Among meme tokens, Dogecoin advanced 1.6%.
Iran has prepared its reply to the proposed ceasefire terms, according to a foreign ministry spokesperson.
Iran has outlined its positions and demands in response to recent ceasefire proposals delivered through intermediaries, a foreign ministry spokesperson said Monday, stressing that negotiations cannot proceed under ultimatums or threats of war crimes.
Spokesperson Esmaeil Baghaei noted that Tehran’s requirements—based on national interests—have already been communicated via intermediary channels, while earlier U.S. proposals, including a 15-point plan, were rejected as excessive.
He emphasized that clearly stating Iran’s legitimate demands should not be seen as compromise, but as confidence in defending its stance. Baghaei added that Iran has prepared its responses and will disclose further details in due course.
US and Iran consider a peace proposal as Trump warns of severe retaliation if the Strait remains closed.
The United States and Iran have received an outline for ending the conflict, but Tehran has refused to immediately reopen the Strait of Hormuz, even after Donald Trump warned of severe consequences if no deal is reached by Tuesday.
According to a source, the proposal follows a two-stage plan: an immediate ceasefire, followed by a broader agreement to be finalized within 15–20 days. Pakistan’s army chief, Asim Munir, has reportedly been in continuous contact with U.S. Vice President JD Vance, envoy Steve Witkoff, and Iran’s foreign minister Abbas Araqchi.
Iran, however, has rejected reopening the Strait under a temporary truce and dismissed imposed deadlines, while also expressing doubts about Washington’s commitment to a lasting ceasefire.
Earlier, Axios reported that the U.S., Iran, and regional mediators were exploring a potential 45-day ceasefire as part of a phased deal toward ending the war.
Trump, posting on Truth Social, issued a deadline of Tuesday evening, threatening further strikes on Iran’s infrastructure if the Strait remains closed.
Meanwhile, airstrikes continued across the region, more than five weeks into the conflict involving the U.S., Israel, and Iran. Tehran has responded by effectively shutting the Strait—through which about 20% of global oil and gas flows—and launching attacks on Israel, U.S. bases, and energy sites in the Gulf.
Officials in the UAE emphasized that any agreement must ensure free passage through the Strait, warning that failing to curb Iran’s nuclear and missile capabilities could lead to greater regional instability.
Despite repeated U.S. claims of weakening Iran’s military capacity, recent Iranian strikes on petrochemical facilities and vessels in Kuwait, Bahrain, and the UAE highlight its continued ability to retaliate.
The conflict has caused heavy casualties: thousands have died in Iran, including many civilians, while Israel and Lebanon have also suffered significant losses as fighting spreads, including clashes with Iran-backed Hezbollah forces.
The U.S. dollar fell on Wednesday, touching a one-week low, as expectations of a possible de-escalation in the Middle East conflict reduced demand for the currency’s safe-haven appeal.
At 17:10 ET (21:10 GMT), the U.S. Dollar Index—which measures the dollar against a basket of six major currencies—was down 0.4% at 99.65.
Trump says Iran has requested a cease-fire and hints at a possible U.S. withdrawal, but ties any pause in fighting to conditions on the ground.
On Wednesday, Trump stated on Truth Social that Iran’s newly installed president had requested a ceasefire, describing him as “less radical and more intelligent” than his predecessors. He claimed the United States would only consider the request once the Strait of Hormuz is fully reopened and secure, adding that U.S. forces would continue striking Iran until then.
He also said that if Iran’s request is confirmed, it could signal a further step toward de-escalation, though uncertainty remains over the status of the Strait of Hormuz, a key global energy route that carries roughly one-fifth of the world’s oil and gas supply and has reportedly been disrupted since the conflict began, contributing to higher oil prices.
In earlier remarks from the Oval Office, Trump suggested the U.S. could begin withdrawing forces within two to three weeks, arguing that the objective of eliminating Iran’s nuclear threat had already been achieved and that no formal agreement would be necessary to end the conflict.
The White House also announced that Trump is scheduled to address the nation at 21:00 ET (01:00 GMT) with an “important update on Iran.”
The dollar posts its strongest monthly performance since July 2025.
The greenback ended Tuesday, closing out March with its strongest monthly performance since July last year.
Rising oil prices, driven by supply disruptions following the closure of the Strait of Hormuz, have raised concerns about a potential inflation shock. This has prompted investors to reassess expectations for central bank rate cuts and, in some cases, price in a higher likelihood of rate hikes.
A “higher-for-longer” interest rate outlook typically supports the U.S. dollar, enhancing its appeal as a safe-haven asset amid ongoing Middle East tensions. The currency has also benefited from the U.S. position as a net energy exporter, as well as a broader shift toward cash holdings.
According to David Morrison, senior market analyst at Trade Nation, the Dollar Index has been a key beneficiary of regional instability. He noted that the dollar surged last month as investors moved into the currency in a classic flight to safety, at the expense of traditional havens such as precious metals, U.S. Treasuries, and currencies like the Japanese yen and Swiss franc.
Morrison added that the index appeared to have broken above long-term resistance near the 100 level, suggesting a potential bottom after a weak year. However, he cautioned that momentum may now be stalling, implying that dollar bulls may need to wait for clearer signals before expecting further sustained gains.
Euro, yen, and sterling end the month lower.
The euro (EUR/USD), sterling (GBP/USD), and Japanese yen (USD/JPY) were largely unchanged on Wednesday.
However, developed market currencies underperformed the U.S. dollar over March. The euro and British pound recorded their weakest monthly results since July and October 2025, respectively, while the yen also posted its worst month since October.
Europe and Japan, both heavily dependent on Middle Eastern supplies of liquefied natural gas and fuel, have been more exposed to the impact of rising oil prices than the United States.
The inflationary pressure from higher oil costs linked to the Iran conflict is already beginning to appear in economic data. Preliminary Eurostat figures showed eurozone inflation is expected to rise to 2.5% in March from 1.9% in February. Energy prices are projected to be the main driver, with annual energy inflation accelerating to 4.9% after a 3.1% decline in the previous month.
In the UK, which is experiencing its fifth oil supply shock in roughly a decade, concerns are growing that rising energy costs could tip the economy toward recession, according to Deutsche Bank economist Sanjay Raja.
Bitcoin edged slightly higher on Wednesday, trimming earlier gains but still holding just above flat as risk assets benefited from optimism over de-escalation in the Middle East. President Donald Trump stated that Iran’s new leadership had reportedly requested a ceasefire.
The world’s largest cryptocurrency had finished March in the prior session with a gain of nearly 2%, ending a five-month losing streak marked by significant declines.
Bitcoin was up 0.3% at $68,478.6 as of 17:26 ET (21:26 GMT).
Trump says Iran has asked for a ceasefire, but U.S. will only consider it once the Strait of Hormuz reopens.
Trump suggested a possible end to the conflict, claiming on Truth Social that “Iran’s New Regime President, much less radicalized and far more intelligent than his predecessors, has just asked the United States of America for a CEASEFIRE!”
He added that the U.S. would “consider” the request once the Strait of Hormuz is “open, free, and clear,” warning that until then, “we are blasting Iran into oblivion or, as they say, back to the Stone Ages.”
If verified by Iran, the statement would signal a notable step toward de-escalation, though uncertainty remains over the Strait of Hormuz—a key energy route handling about one-fifth of global oil and gas flows—which has been effectively disrupted since the conflict began, driving global oil prices higher.
The remarks followed Trump’s earlier comments on Tuesday that the U.S. planned to wind down military operations against Iran within two to three weeks, arguing that Washington had already met its objectives, including damaging Iran’s nuclear ambitions and contributing to regime change in Tehran.
He also suggested that Iran would not need to formally agree to a deal to end the war, leaving markets uncertain about the reopening of the Strait of Hormuz. Reports this week indicated the U.S. may leave any reopening effort to European and Gulf allies rather than take direct action.
Rising energy prices tied to the conflict have been a key inflation concern for markets throughout March, fueling expectations of a more hawkish stance from global central banks—an outcome typically negative for speculative assets such as cryptocurrencies.
Google research highlights potential cryptocurrency vulnerabilities linked to quantum computing.
In a recent white paper, Google researchers warned that cryptocurrencies may be more exposed to advances in quantum computing than previously believed. They noted that quantum machines could potentially undermine elliptic curve cryptography—the encryption method underlying Bitcoin.
Their analysis suggests that breaking this cryptographic system could require fewer than 500,000 physical qubits on a superconducting quantum computer, about 20 times lower than earlier estimates. Although such hardware does not yet exist in practice, the researchers cautioned it could become feasible by around 2029.
They also encouraged the crypto industry to begin preparing a shift toward post-quantum cryptographic systems to safeguard blockchain networks. The study included contributions from organizations such as Coinbase, the Stanford Institute for Blockchain Research, and the Ethereum Foundation.
Altcoins gain ground today as hopes of de-escalation in Iran tensions lift market sentiment.
Broader crypto markets climbed on expectations that the conflict could be winding down.
Ethereum (Ether) rose 2.7% to $2,159.79, while XRP gained 1.1% to $1.3550.
Solana traded slightly higher, and Cardano advanced 3.6%, while BNB slipped 0.4%.
In memecoins, Dogecoin added 0.8%, whereas $TRUMP declined 0.6%.
Despite a broadly flat-to-weaker March driven by war-related risk aversion, altcoins generally held up better than many other speculative assets.
Gold prices edged up slightly as attention remains on the escalating Iran conflict.
Gold edged higher in Asian trading on Monday, recovering modestly after a volatile week, as investors continued to watch the risk of escalation in the U.S.–Israel conflict with Iran.
Spot gold gained 0.4% to $4,509.51 an ounce, with futures rising similarly to $4,537.40. Prices had swung sharply last week, dropping to around $4,000 before rebounding close to $4,500 by Friday.
Other precious metals were mixed, with silver slipping 0.9% while platinum advanced 1.8%.
Analysts at OCBC said the recent rebound in gold appears largely technical, following a steep decline of about 20% since the conflict began. While bearish pressure is easing and momentum indicators are improving, they cautioned that the recovery may struggle to hold unless prices break above key resistance levels at $4,624, $4,670, and $4,850 per ounce.
They also warned that persistently high energy prices could keep inflation elevated, potentially pushing Treasury yields higher and creating a less favorable environment for gold in the near term.
Meanwhile, geopolitical tensions remained high after Iran-backed Houthi forces in Yemen launched attacks on Israel over the weekend, raising fears of a broader conflict. Iran signaled readiness for a possible U.S. ground invasion, amid reports that Washington is deploying additional troops to the Middle East.
U.S. President Donald Trump said negotiations with Iran were progressing and a deal could be near, though he provided no clear timeline and warned that further strikes on Tehran remain possible. He also recently extended a deadline for potential attacks on Iran’s energy infrastructure into early April.
Oil prices jumped above $115 per barrel after Yemen’s Houthi forces launched an attack on Israel.
Oil prices surged in early Monday trading after Yemen’s Houthi group launched attacks on Israel, raising fears of a wider Middle East conflict.
Brent crude jumped 2.2% to $115.08 a barrel, after briefly spiking as high as $116.43.
The Iran-backed Houthis said they had fired multiple missiles at Israel and warned of further strikes, heightening concerns about escalation—especially given their ability to target vessels in the Red Sea.
Tensions remained elevated as Israeli forces struck targets in Tehran, while the U.S. deployed 3,500 troops to the region aboard the USS Tripoli. Iran also signaled readiness for a potential U.S. ground operation.
Oil prices have rallied sharply in March, with Brent up nearly 60%, driven by severe supply disruptions. Iran’s effective blockade of the Strait of Hormuz—a route carrying about 20% of global oil supply—has intensified market fears.
While Pakistan has offered to host talks between Washington and Tehran following a U.S. ceasefire proposal, Iran has largely rejected direct negotiations and accused the U.S. of preparing for a ground invasion.
Donald Trump said the United States and Iran have been engaging both directly and through intermediaries, describing Iran’s new leadership as “very reasonable,” even as additional U.S. troops deployed to the region and Tehran warned it would not accept humiliation.
His comments came after Pakistan announced it was preparing to host potential talks between Washington and Tehran aimed at ending the month-long conflict. Trump expressed confidence a deal could be reached, though he acknowledged uncertainty.
He also suggested that recent strikes, including one that killed Ali Khamenei, had effectively resulted in regime change, noting that the new leadership appears more pragmatic.
The conflict, which began with an Israeli strike on February 28, has spread across the Middle East, causing heavy casualties, disrupting global energy supplies, and weighing on the world economy.
Pakistan’s Foreign Minister Ishaq Dar said regional discussions had focused on ending the war and possibly hosting U.S.-Iran negotiations in Islamabad, though it remains unclear if both sides will attend.
Meanwhile, Iran’s parliamentary speaker Mohammad Baqer Qalibaf accused the U.S. of signaling negotiations while preparing for a potential ground invasion, warning that Iran would resist any attempt at forced submission.
The Pentagon has sent thousands of additional troops to the region, giving Washington the option of launching a ground offensive, while Israel has indicated it will continue strikes against Iranian military targets regardless of diplomatic efforts.
Recent Israeli airstrikes have targeted missile facilities and infrastructure across Iran, while Iranian retaliation has struck sites in Israel. The conflict has also disrupted key shipping routes, including the Strait of Hormuz, driving oil prices sharply higher and rattling global markets.
As tensions escalate, the arrival of more U.S. forces and the possibility of broader regional involvement—including attacks linked to Yemen’s Houthi forces—raise the risk of a prolonged and wider war.
The U.S. dollar rose slightly on Wednesday, rebounding from earlier losses as hopes for Middle East de-escalation faded after Iran rejected a U.S. ceasefire proposal.
At 17:45 ET (21:45 GMT), the U.S. Dollar Index—tracking the greenback against six major currencies—gained 0.2% to 99.62.
The United States has put forward a ceasefire proposal.
While there is some optimism that Washington and Tehran may be exploring ways to end the conflict, markets remain cautious as both sides continue to offer conflicting accounts of how negotiations are progressing.
Reportedly eager to find an exit from the war, President Donald Trump has backed a U.S. proposal outlining a 15-point peace plan to Iran. The plan not only calls for Tehran to dismantle its primary nuclear facilities but also urges the reopening of the Strait of Hormuz — a critical shipping route south of Iran that has been largely shut to tanker traffic in recent weeks. This disruption has pushed energy prices higher and raised concerns about global inflation.
According to Thierry Wizman, global FX and rates strategist at Macquarie, investor optimism was revived by news that the U.S. had presented concrete terms to Iran. However, he cautioned that a ceasefire is unlikely in the near term. Instead, the U.S. may escalate military pressure over the next couple of weeks to push Iran toward meaningful concessions, with major combat potentially reaching a turning point by mid-April. He described the situation as entering a third phase — one defined by both negotiation and conflict, rather than purely one or the other.
Wizman added that the possibility of renewed negotiations signals a more critical stage in the U.S.-Iran conflict. Initially driven by diplomacy, then by direct confrontation, the situation may now evolve into a blend of both. While this dual-track approach could help stabilize market sentiment compared to outright war, it also carries the risk of sharper downside if it fails to deliver lasting stability and security.
Iran has pushed back against the proposal.
On Wednesday morning, the Fars News Agency reported that Tehran does not accept a ceasefire, emphasizing that it seeks a complete end to the conflict rather than a temporary halt in fighting.
Later, Press TV stated that Iran would not allow the United States to dictate when the war should end, citing a senior political figure. According to the report, the official outlined five key demands from Tehran, including a full cessation of attacks as well as international recognition and guarantees of Iran’s authority over the Strait of Hormuz.
However, Axios later cited a U.S. official saying Washington had not received any formal communication from Iran rejecting the ceasefire plan.
Iranian Foreign Minister Abbas Araghchi also denied that negotiations with the U.S. were taking place, according to Reuters. While acknowledging that messages were being passed through intermediaries, he stressed that such exchanges should not be interpreted as formal talks.
In the energy market, Brent crude — the global benchmark — briefly dipped below $100 per barrel on Wednesday, though it remains significantly higher than the roughly $70 level seen before the conflict began in late February.
Rising concerns over energy-driven inflation have strengthened expectations that central banks worldwide may need to adopt a more hawkish policy stance. In Germany, ECB President Christine Lagarde indicated that further tightening could be justified even if the inflation spike proves temporary.
The euro and yen edged higher on Wednesday, while sterling drew attention following the latest UK inflation figures.
The euro saw a slight uptick, with EUR/USD hovering around 1.1560. At the same time, the Japanese yen strengthened, pushing USD/JPY down to 159.33.
Sterling remained largely flat, trading near 1.3365 against the dollar, but came into focus after the release of new consumer inflation data. The UK’s consumer price index rose 3% year-on-year in March, unchanged from February. Notably, the data does not yet reflect the impact of rising oil prices triggered by the Middle East conflict.
According to Sanjay Raja, chief UK economist at Deutsche Bank, the UK’s disinflation trend may be approaching a pause. He noted that February’s inflation reading is already outdated, as households and businesses are beginning to feel the effects of the Iran conflict, particularly through higher fuel costs. Further increases in fuel prices are expected, and even if the conflict ends quickly, energy bills — including electricity and gas — could still climb by double digits over the summer.
Bitcoin surged on Monday as investor appetite for risk improved amid hopes of easing tensions in the Middle East.
Donald Trump highlighted “productive” discussions with Iran and announced that the U.S. would delay planned strikes on Iranian energy facilities for five days. Following these remarks, Bitcoin climbed 4.5% to $70,947.6 after previously trading lower.
However, Iran’s Fars News Agency denied any form of communication with the U.S., stating that no direct or indirect talks had taken place. The report also suggested that Washington’s decision to postpone strikes came after Iran warned it would retaliate by targeting energy infrastructure across West Asia.
Donald Trump highlights “productive” talks, raising hopes for a potential end to the conflict.
Donald Trump claimed that the U.S. had held “productive” discussions with Iran, suggesting a potential path toward ending the conflict. In a social media post, he said both sides had made progress toward a “complete and total resolution” and announced a five-day delay in planned strikes on Iran’s energy infrastructure.
However, officials in Tehran denied that any talks had taken place. Iran’s foreign ministry reiterated that its stance on the Strait of Hormuz and the conditions for ending the conflict remain unchanged.
Reports from The Wall Street Journal, citing Fars News Agency, also stated there had been no direct or indirect communication between the two sides. According to Fars, the U.S. decision to hold off on strikes came after Iran warned it would retaliate by targeting similar infrastructure across West Asia.
Trump later told reporters that the discussions had gone very well and that there was a strong possibility of reaching an agreement, though he emphasized that no outcome was guaranteed.
Meanwhile, Justin Wolfers from the University of Michigan highlighted the uncertainty facing financial markets—whether to trust U.S. statements about negotiations or Iran’s denials.
Earlier, Trump had warned that Iran must reopen the Strait of Hormuz within 48 hours or face military action. In response, Tehran threatened to shut down the waterway entirely and target key energy and water infrastructure in Gulf countries if attacked.
Bitcoin outperforms gold as geopolitical tensions and interest rate concerns weigh more heavily on the precious metal.
Bitcoin has outperformed gold and other precious metals this month since the conflict began, with bullion attracting limited demand despite rising geopolitical tensions.
Bitcoin has gained nearly 6% in March, while spot gold has dropped around 17%. The precious metal came under pressure after hitting a record high in late January, triggering profit-taking and a broader unwinding of long positions.
Even with the escalation involving Iran, gold failed to see strong safe-haven inflows, as concerns over persistent inflation and higher interest rates outweighed its appeal. In contrast, Bitcoin benefited from improving U.S. regulatory sentiment and renewed buying interest after previously falling as much as 50% from its October peak.
However, on a year-to-date basis, gold still leads, rising about 2% compared to Bitcoin’s roughly 19% decline.
Across the broader crypto market, gains followed Bitcoin’s move higher after Donald Trump’s announcement. Ethereum climbed 5.6%, while XRP rose 4.3%. Other major tokens including BNB, Solana, and Cardano also posted gains, alongside memecoins like Dogecoin.
The U.S. dollar declined on Monday, giving up earlier gains as investors reacted to President Donald Trump’s remarks about “productive” discussions with Iran. By 17:15 ET (21:15 GMT), the dollar index—measuring the greenback against six major currencies—had dropped 0.5% to 99.13.
Optimism over easing tensions spreads across global markets.
Hopes of easing tensions spread across global markets. Wall Street posted strong gains, while oil prices plunged after Trump decided to delay missile strikes on key Iranian infrastructure, citing progress in talks with Tehran. In a social media update, he said discussions aimed at achieving a “complete and total resolution” to the conflict.
Trump noted that, based on the positive tone of the talks—which are expected to continue—he had ordered the Pentagon to postpone any military action against Iranian energy facilities for five days. However, Iranian state media denied that any direct negotiations had taken place with the U.S. Officials in Tehran maintained their stance on the Strait of Hormuz and reiterated that their conditions for ending the conflict remain unchanged.
Reports from the The Wall Street Journal, citing Iran’s Fars news agency, also indicated there had been no communication between the two sides. According to Fars, the U.S. decision to step back from targeting Iranian energy sites followed warnings from Iran about potential retaliation across West Asia.
Speaking to reporters, Trump said the talks had gone “very well” and suggested there was a serious chance of reaching an agreement, though he stopped short of making any guarantees.
Market analysts expressed uncertainty over how to interpret the situation. David Morrison from Trade Nation noted that the developments add volatility to trading, especially given the high stakes involved. He also suggested that the lack of clearly defined war objectives may allow the U.S. to step back while claiming success—though Iran has framed the move as a retreat following its warnings.
The euro, pound, and yen showed little movement.
In currency markets, the euro and pound showed little movement, while the yen remained steady. European markets ended higher, supported by optimism that reduced tensions could stabilize energy supplies. This is particularly important for Europe, which depends heavily on oil and gas from the Middle East.
Disruptions to the Strait of Hormuz—through which about 20% of global energy supply passes—as well as attacks on gas infrastructure in Qatar, have recently weighed on the region. Meanwhile, Japan’s currency has also been pressured by rising oil prices, as the country relies on crude imports passing through the same route.
The U.S. President, Donald Trump, intensified his administration’s military stance on Saturday by giving Tehran a 48-hour deadline to fully reopen the Strait of Hormuz. In a social media post, he warned that if Iran failed to eliminate threats to the vital waterway, it would face the “obliteration” of its power infrastructure, with a particular focus on its largest power plants.
This move comes after weeks of maritime disruption that have effectively brought shipping to a standstill in the world’s most critical oil chokepoint, where roughly 20% of global crude oil and liquefied natural gas (LNG) typically passes.
Strategic infrastructure in focus
The latest warning from Donald Trump signals a shift in targeting strategy, expanding beyond military assets to include Iran’s domestic power grid in an effort to maximize pressure on its leadership.
Trump also pushed back against claims that the U.S. has fallen short of its initial objectives, asserting that the campaign is “weeks ahead of schedule” and has already significantly weakened Iran’s naval and air capabilities.
While the White House has indicated that Tehran may be open to negotiations, the President has publicly ruled out talks for now, instead insisting on the unconditional reopening of the Strait of Hormuz.
A strike on Iran’s power plants would likely have consequences far beyond energy shortages at home. Such a move would point to a broader disruption of regional industrial capacity, making any diplomatic resolution increasingly difficult to achieve.
The “Hormuz chokepoint” and market volatility
The effective shutdown of the Strait of Hormuz has unleashed a major shock to global energy supply, as tanker movements have nearly halted and key Persian Gulf producers have been forced to cut output.
The 48-hour deadline set by Donald Trump has injected fresh urgency into global commodities markets. If no change occurs before it expires, a potential shift toward targeting civilian energy infrastructure could significantly alter the region’s risk premium for the rest of 2026.
On Saturday, Israel struck targets in Iran and Beirut as the U.S. sent thousands more Marines to the Middle East. President Donald Trump criticized NATO allies as “cowards” for hesitating to help reopen the Strait of Hormuz.
Since the U.S. and Israel began attacks on Iran on February 28, over 2,000 people have died, and Americans are growing concerned the conflict could expand further in its fourth week. Israel said it targeted Hezbollah in Beirut while intensifying airstrikes against Iran-backed militias, marking the deadliest spillover since Hezbollah fired on Israel on March 2. Israel also launched new attacks on Tehran.
Key energy infrastructure in Iran and the Gulf has been hit, pushing oil prices up 50%, prompting companies like United Airlines to cut planned flights by 5% due to expected prolonged high fuel costs. The Strait of Hormuz, critical for a fifth of global oil and LNG, is largely closed to shipping. Allies have pledged “appropriate efforts” to ensure safe passage, but Germany and France insist fighting must stop first. Iran indicated it will allow Japanese-related vessels to pass.
To ease supply, the U.S. will temporarily waive sanctions to sell 140 million barrels of Iranian oil stranded by the conflict. In Beirut, Israel issued evacuation warnings before its attacks; over 1,000 people have been killed and more than a million displaced.
Israel launched multiple airstrikes on Tehran and central Iran, while Iran fired missiles in retaliation. As Muslims celebrated Eid al-Fitr and Iranians observed Nowruz, Iran’s Supreme Leader Mojtaba Khamenei praised unity and resistance, raising questions about his condition following the death of his father, Ayatollah Ali Khamenei, in the early days of the war.
The U.S. plans to deploy 2,500 Marines with the amphibious ship Boxer, though the mission remains unclear. Polls show nearly two-thirds of Americans expect a large-scale U.S. ground war, yet only 7% support it. No decision has been made on deploying troops into Iran, though potential targets could include Iran’s coast or Kharg Island oil facilities. Trump has said the U.S. is close to achieving its goals of weakening Iran’s military and halting its nuclear ambitions and may scale back military operations.
Trump is expected to pressure Japan to support the Iran conflict during a White House meeting.
Donald Trump is expected to use a White House meeting with Japan’s prime minister, Sanae Takaichi, to seek support for the war against Iran, putting Tokyo in a difficult position as it weighs how much assistance it can offer.
Although Trump has criticized allies for their limited backing of the U.S.-Israeli campaign—while also claiming the U.S. does not need help—he is still urging partners to contribute naval forces to clear mines and protect tankers in the Strait of Hormuz, which has been largely disrupted during the conflict.
The visit, originally intended to reinforce long-standing U.S.-Japan ties, has become more complicated. While Takaichi has advocated for a stronger military posture at home, public opposition to the Iran war has so far prevented Japan from committing to operations in the Gulf.
Meanwhile, other U.S. allies, including Germany, Italy, and Spain, have declined to join any mission in the region, frustrating Trump. Takaichi has stated that Japan has not received a formal request but is reviewing what actions might be possible within constitutional limits.
Analysts note the meeting could prove challenging for Takaichi, who had hoped to influence Trump’s approach to Asia policy—particularly regarding China—but may instead have to respond to immediate demands related to the Middle East.
Japan is also preparing for potential U.S. requests to help produce or co-develop missiles to replenish American stockpiles depleted by conflicts in Iran and Ukraine. At the same time, Tokyo’s diplomatic ties with Iran could offer a channel for mediation, though past efforts have failed.
In addition, Takaichi is expected to express Japan’s intention to join the “Golden Dome” missile defense initiative and announce new investments in the U.S., potentially including tens of billions of dollars in sectors such as energy and critical minerals, building on earlier commitments tied to easing trade tensions.
Oil prices climb after Iran launches attacks on energy infrastructure across the Middle East.
Oil prices climbed on Thursday, with Brent crude surging by as much as $5 per barrel after Iran launched attacks on energy infrastructure across the Middle East in response to a strike on the South Pars gas field—marking a significant escalation in its conflict with the United States and Israel. By 0400 GMT, Brent futures had gained $4.66, or 4.3%, to $112.04 a barrel, after earlier peaking at $112.86. Meanwhile, U.S. West Texas Intermediate (WTI) rose 96 cents, or 1%, to $97.28, having previously jumped more than $3. Brent had already advanced 3.8% on Wednesday, while WTI ended nearly unchanged.
WTI has been trading at its widest discount to Brent in over a decade, driven by releases from U.S. strategic reserves and elevated shipping costs, while renewed strikes on Middle Eastern energy assets have lent additional support to Brent. Analysts noted that the intensifying conflict—targeted attacks on oil infrastructure and the loss of Iranian leadership—could lead to prolonged supply disruptions. They also pointed to the U.S. Federal Reserve’s decision to hold interest rates steady, accompanied by a hawkish outlook, as another factor heightening market concerns amid wartime conditions.
Further escalating tensions, QatarEnergy reported significant damage to its Ras Laffan LNG hub following Iranian missile strikes, while Saudi Arabia said it intercepted ballistic missiles and a drone targeting its gas facilities. Iran had issued evacuation warnings ahead of strikes on oil sites in Saudi Arabia, the UAE, and Qatar, retaliating for earlier attacks on its own facilities in South Pars and Asaluyeh.
South Pars, part of the world’s largest natural gas field shared between Iran and Qatar, was hit in an attack attributed to Israel, though U.S. and Qatari involvement was denied by President Donald Trump. He warned that the U.S. would respond if Iran targeted Qatar and said Israel would refrain from further strikes unless provoked.
Market analysts expect oil prices to remain elevated as tensions show no signs of easing and the Strait of Hormuz remains at risk of disruption. Reports also suggest the U.S. is considering deploying additional troops to the region, with options including securing tanker routes through the Strait—potentially involving both naval and air forces, and possibly ground troops if necessary.
Oil jumps more than 2% as markets assess supply threats from the Iran conflict.
Oil prices rebounded over 2% early Tuesday, recovering part of the previous session’s losses as supply concerns intensified amid major disruptions in the Strait of Hormuz.
Brent crude climbed to around $102.69 a barrel, while WTI rose to about $95.92. The gains follow a sharp selloff in the prior session, when prices dropped after some tankers managed to pass through the key shipping route.
The Strait of Hormuz—responsible for roughly 20% of global oil and LNG trade—has been largely disrupted by the ongoing US-Israel conflict with Iran, now in its third week, heightening fears of supply shortages, rising energy costs, and persistent inflation.
Tensions remain elevated as several US allies declined calls to deploy naval escorts for tankers, while risks of further attacks on shipping continue to threaten stability in the region. Iran has also sought the release of seized Indian tankers as part of efforts to secure safe passage through the Gulf.
The disruption has already forced the UAE to cut oil output by more than half, tightening global supply. In response to rising energy costs, the International Energy Agency is considering additional releases from strategic reserves beyond the 400 million barrels already planned.
Meanwhile, major banks have raised their oil price forecasts, reflecting the risk of prolonged supply disruptions. Scenarios range from a quick resolution that pushes prices back toward $70 to an extended conflict that could drive Brent toward $85 or higher.
Security sources report that drones and rockets were launched at the US embassy in Baghdad.
Several rockets and at least five drones targeted the US embassy in Baghdad early Tuesday, in what Iraqi security sources described as the most severe attack since the US–Israel conflict with Iran began.
Witnesses saw multiple drones heading toward the compound, with air defenses intercepting some, while at least one hit inside the embassy, sparking fire and smoke. Blasts were also reported across the city.
The strike reflects escalating retaliation by Iran-backed militias against US interests in Iraq following the war that started on February 28.
In response, Iraqi forces have increased security across Baghdad, shutting down the fortified Green Zone that houses key government buildings and diplomatic missions.
U.S. Strategy I: Roaring 2020s vs. Stagflating 1970s Redux
In last Tuesday’s QuickTakes, reacting to the latest Middle East conflict, we noted that although markets were already due for a pullback because of excessive bullish sentiment, the escalation increased the likelihood of a deeper correction. We suggested the market could fall around 10% from its peak, potentially reaching 15% if Iran’s Islamic Revolutionary Guard Corps (IRGC) succeeded in sustaining a blockade of the Strait of Hormuz using drones and fast boats.
Since then, much of Iran’s conventional naval capability has reportedly been destroyed. However, as long as the IRGC retains drone capabilities, the strategic waterway could remain effectively constrained. Donald Trump has authorized the United States Navy to escort vessels through the Strait, though the operation may take time to deploy and may not fully eliminate the threat of Iranian drone attacks.
Media reports over the weekend underscored those risks. According to the New York Post, an Iranian suicide drone struck a commercial oil tanker in the Strait, setting it ablaze while U.S. naval protection efforts for shipping lanes could still be weeks away.
Limits of Air Power
Military historians have long debated whether air power alone can decisively win wars. Most conclude it rarely achieves lasting victory by itself. While air strikes can destroy infrastructure, supply chains, and concentrated forces, they cannot control territory, conduct searches, or administer local governance. Nor can they fully eliminate dispersed threats such as drones.
Over the weekend, President Trump declined to rule out deploying ground forces, though he dismissed the idea of using Kurdish fighters as proxies for an invasion of Tehran, saying the conflict was already “complicated enough.” He indicated ground operations would only occur if the adversary were sufficiently weakened.
Domestic Economic Backdrop
At home, economic data has also softened. February’s U.S. employment report came in much weaker than expected, while January retail sales disappointed. As a result, the Federal Reserve Bank of Atlanta’s GDPNow model lowered its estimate for Q1 real GDP growth to 2.1% (annualized), down from 3.0%.
This leaves both the U.S. economy and equity markets caught between geopolitical shocks and slowing domestic momentum. The Federal Reserve faces a similar dilemma: if higher oil prices persist, its dual mandate could be squeezed between rising inflation and weakening employment.
Implications for the Economic and Market Outlook
Rapidly Changing Conditions
Given the speed of developments, scenario probabilities are being adjusted. The base case remains the “Roaring 2020s” with a 60% probability. However, the “Meltup” scenario has been cut from 20% to 5%, while the “Meltdown” scenario—now including the risk of 1970s-style stagflation—has been raised from 20% to 35%.
Looking beyond this year to the rest of the decade, the outlook narrows to two primary possibilities:
Roaring 2020s: 85% probability
Stagflating 1970s Redux: 15% probability
Oil Prices and Market Risk
Historically, sharp oil price spikes have often coincided with recessions and bear markets. One recent exception was the 2022 surge following Russia’s invasion of Ukraine, which produced a bear market but not a recession—highlighting the resilience of the U.S. economy.
A similar pattern could play out today. While the economy may absorb higher energy costs, the current oil shock still increases the likelihood of a 10%–15% correction in equities, even if a full bear market ultimately proves avoidable under current conditions.
War Likely to Continue for Several More Weeks
Our relatively optimistic scenario assumes the conflict will persist for a few more weeks, while the U.S. economy and corporate earnings remain resilient, as they have during previous shocks.
One reason for this resilience is the sharp decline in the economy’s energy intensity—measured as total energy consumption per unit of real GDP. In the United States, energy intensity has fallen dramatically over the past several decades, dropping about 70% between 1950 and 2024 and roughly 62% since 1979.
This structural shift means the U.S. economy is far less sensitive to oil-price shocks than in earlier decades, particularly compared with the 1970s oil crisis period when energy costs had a much larger impact on growth and inflation.
The United States economy has gradually shifted from heavy reliance on energy-intensive manufacturing toward a more service-oriented structure, which has helped reduce overall energy consumption relative to economic output.
Additional factors behind the decline in energy intensity include the introduction of Corporate Average Fuel Economy (CAFE) standards and ongoing technological improvements in internal combustion engines, both of which have improved fuel efficiency across the transportation sector.
At the same time, the expansion of the digital economy—including data centers, cloud computing, and artificial intelligence—has been driving stronger electricity demand. Even so, the growing use of natural gas and renewable energy sources in power generation, as well as their increasing adoption in industrial processes that previously relied on oil, should continue to moderate the economy’s direct dependence on crude oil.
Oil production
U.S. oil production, which includes natural gas plant liquids and renewable fuels/oxygenates, has reached a record level of 24 million barrels per day (mbd), significantly exceeding domestic consumption of 21 mbd (Fig. 7 and Fig. 8). As a result, the United States has become a net exporter of roughly 3.0 mbd (Fig. 9). This represents a dramatic shift compared with 2007, when the country was a net importer of approximately 12 mbd.
A potential return of 1970s-style stagflation
A bear market cannot be ruled out if investors begin to expect a repeat of the stagflationary conditions seen in the 1970s. At that time, the global economy was hit by two major oil shocks. In October 1973, Arab members of Organization of the Petroleum Exporting Countries (OPEC) imposed an oil embargo on the United States and other countries that supported Israel during the Yom Kippur War.
Oil prices surged dramatically, rising about fourfold from roughly $3 to nearly $12 per barrel within only a few months. This led to stagflation—an unusual and painful economic condition characterized by slow economic growth, high unemployment, and accelerating inflation (Fig. 10). The crisis resulted in long queues at gasoline stations, fuel rationing, and a heightened awareness of the United States’ dependence on foreign energy supplies.
The second oil crisis occurred after the Iranian Revolution, which significantly disrupted global oil supplies. As a result, oil prices surged, rising to more than twice their previous level. This shock further weakened an already fragile economy and deepened the stagflationary pressures. Together, the two oil crises contributed to two recessions during the 1970s.
According to Polymarket, the probability of a recession this year rose to a three-month high of 34% on Friday, up from 21% on Wednesday, February 25, just before the conflict began (Fig. 11).
U.S. Strategy II: A Direct Confrontation with the IRGC
When the conflict began on Saturday, February 28, the initial assumption was that it would end quickly. However, by the following Tuesday, that view changed, prompting further analysis in that day’s QuickTakes. A key concern is that by eliminating the leadership of the Iranian regime in the opening hour of the war, the United States and Israel effectively unleashed the regime’s most powerful force—the Islamic Revolutionary Guard Corps (IRGC). Often described as a “state within a state,” the IRGC is believed to control 20–40% of Iran’s economy, including large construction companies, telecommunications networks, and oil engineering firms. This financial base allows it to sustain operations even under severe sanctions.
In April 2019, the United States officially designated the IRGC as a Foreign Terrorist Organization—the first time Washington had applied such a label to a branch of another government. Because of their decentralized structure and access to weapons such as suicide drones, the group would be difficult to eliminate through air power alone.
Donald Trump first publicly demanded Iran’s “unconditional surrender” on Friday, March 6. The following day, he clarified that the phrase meant a situation where Iran could no longer continue fighting. On Sunday morning, he also warned that any new Supreme Leader selected by Iran’s Assembly of Experts “would not last long” without his approval, implying a U.S. veto over the succession process following the death of Ali Khamenei.
Without a central leader, Iran lacks a figure capable of formally accepting unconditional surrender. For example, on Saturday, Iranian President Masoud Pezeshkian issued a public apology for Iran’s “fire-at-will” attacks on neighboring countries. Yet only hours later, the IRGC launched another wave of strikes, highlighting a severe breakdown in command and control after Khamenei’s death on February 28. Even without the regime’s top leader, the IRGC’s decentralized design allows regional commanders to operate independently, already carrying out retaliatory drone and missile attacks against U.S. assets and allies in the Gulf.
One objective of the ongoing air campaign is to weaken the IRGC’s ability to suppress domestic opposition. By striking the Basij—the IRGC’s paramilitary force used for internal control—the United States hopes to open the door for a possible uprising inside Iran. However, from the perspective of financial markets, the war will not truly end until commercial ships can move through the Strait of Hormuz without the threat of IRGC attacks. Once that happens, the stock market’s bullish trend could resume.
U.S. Economy: Domestic Impact
Within the United States, economic data from January and February were collected before the war and present a mixed picture. Data from March will likely reveal the first economic effects of the conflict, including rising inflation and a weakening labor market. One immediate sign of inflationary pressure is the sharp increase in gasoline prices, driven by the surge in crude oil prices (Fig. 12).
Food prices may not increase right away, but fertilizer shortages could push them higher in the months ahead. Roughly 25%–33% of the global nitrogen fertilizer trade—particularly urea and anhydrous ammonia—moves through the Strait of Hormuz. On March 2, an Iranian drone attack struck the Ras Laffan Industrial City in Qatar, the world’s largest export hub for liquefied natural gas. Since natural gas is the main feedstock used to produce nitrogen fertilizers, disruptions there could have significant downstream effects. Meanwhile, Saudi Arabia, Oman, and the United Arab Emirates—all among the world’s top ten exporters of urea—are facing logistical and production challenges because of the ongoing air conflict.
If the blockade remains in place into early April, farmers might be forced to shift away from nitrogen-intensive corn-based fertilizer systems toward soybean alternatives or simply reduce fertilizer usage. Lower fertilizer application typically results in reduced crop yields, which could lead to a secondary food price shock toward the end of 2026.
This conflict represents another major test of the resilience of the U.S. economy since the beginning of the decade. It also challenges the so-called “Roaring 2020s” outlook. Despite the new risks, that optimistic scenario remains the base case with a 60% probability. However, the likelihood of a 1970s-style stagflation scenario has been raised to 35%, while the probability of a market melt-up has been reduced to 5% for the rest of 2026.
Recent economic data suggest that the labor market weakened in February and retail sales were soft in January. On the positive side, productivity growth has been particularly strong in recent quarters. If that trend continues, higher productivity could help mitigate some of the stagflationary pressures created by the war.
Employment
The January employment report came in significantly stronger than expected, whereas the February report was much weaker than forecasts. Severe weather conditions and a labor strike negatively affected February’s figures. As a result, nonfarm payrolls declined by 92,000 last month.
In addition, the January payroll figure was slightly revised downward by 4,000 to 126,000, while December’s data was adjusted from a previously reported gain of 48,000 to a decline of 17,000 (Fig. 13). Meanwhile, the unemployment rate increased marginally, rising to 4.4% in February from 4.3% in January.
The positive development is that average hourly earnings increased by 0.4% month over month in February, while the average workweek remained unchanged. Consequently, our Earned Income Proxy, which estimates wages and salaries within personal income, rose by 0.3% in February, reaching a new record high (Fig. 14).
The Federal Reserve is facing a policy dilemma: a softening labor market, which would normally justify cutting the federal funds rate, versus rising energy and fertilizer costs linked to the Iran conflict, which could push inflation higher and argue for keeping rates unchanged or even tightening policy.
This clash of signals complicates the Fed’s next move. Weak employment data suggests the economy may need monetary support, while higher oil and commodity prices risk reigniting inflation, forcing policymakers to remain cautious about easing.
Retail Sales
In January, retail sales declined by 0.2% month over month, while December’s figures, previously reported as showing moderate growth, were revised downward to no change compared with the previous month.
Among sectors, nonstore retailers experienced a 1.9% monthly increase, whereas motor vehicle and parts dealers recorded a 0.9% decline (Fig. 15). Sales at gasoline stations also dropped 2.9%.
One positive sign was a 0.3% month-over-month rise in core retail sales, which excludes several more volatile categories.
The rollout of last year’s One Big Beautiful Bill Act is expected to support consumer spending in the weeks ahead. A “February rebound” in retail activity is likely as record-high tax refunds—about 20% larger on average than last year—begin reaching households’ bank accounts.
Productivity
Labor productivity—defined as output per hour worked—increased at an annualized rate of 2.8% in Q4 2025. This marks the third consecutive quarter in which productivity growth has surpassed the long-term average of 2.1%, a benchmark calculated from data beginning in the late 1940s (Fig. 16).
At the same time, unit labor costs rose by only 1.3% year over year in Q4 2025, which helped contain inflationary pressures in the economy (Fig. 17).
GDPNow
As noted earlier, the newest economic data prompted the Federal Reserve Bank of Atlanta’s GDPNow model to lower its forecast for first-quarter 2026 economic growth from 3.0% to 2.1% (Fig. 18).
Oil prices increased on Monday as the ongoing conflict involving the United States, Israel, and Iran continued to disrupt oil production and transportation across the Middle East, despite a call from Donald Trump for international cooperation to protect the strategic Strait of Hormuz.
Brent crude futures climbed by $2.30, or 2.2%, reaching $105.44 per barrel at 0903 GMT, while U.S. West Texas Intermediate crude rose $1.29, or 1.3%, to $100 per barrel.
Both benchmarks have jumped more than 40% this month, reaching their highest levels since 2022. The surge followed U.S.–Israeli strikes on Iran, which led Tehran to halt shipments through the Strait of Hormuz—an essential route for global energy trade—disrupting roughly one-fifth of the world’s oil and LNG supplies.
On Monday, oil-loading activities were suspended at the UAE’s Fujairah port after a drone strike triggered a fire in the emirate’s petroleum industrial area, according to two sources who spoke to Reuters.
Fujairah, located outside the Strait of Hormuz, serves as an export hub for around 1 million barrels per day of the UAE’s flagship Murban crude oil, equivalent to roughly 1% of global oil demand.
The International Energy Agency warned on Thursday that the conflict in the Middle East is causing the most severe oil supply disruption on record, as major producers including Saudi Arabia, Iraq, and the United Arab Emirates have reduced output since the war began.
According to PVM analyst Tamas Varga, investors appear to understand that if just two weeks of disruption in the Strait of Hormuz have already caused significant damage to production, exports, and refining, a prolonged conflict could have far more serious consequences, particularly as global inventories continue to decline.
Analysts from ING said on Monday that recent U.S. strikes on Kharg Island over the weekend have heightened concerns about oil supply, as the majority of Iran’s crude exports are shipped through the island.
Although the attacks appeared to focus on military installations rather than energy infrastructure, ING noted that they still threaten supply stability. This is because Iranian crude is currently among the few oil flows still passing through the vital Strait of Hormuz.
During the weekend, Donald Trump warned that additional strikes could target Kharg Island—an export hub responsible for roughly 90% of Iran’s oil shipments—after U.S. forces hit military facilities there, prompting retaliatory actions from Tehran.
On Sunday, Trump called on other countries to assist in safeguarding this critical energy corridor and said that Washington was holding discussions with several nations about jointly monitoring and securing the strait.
Trump also stated that the United States remained in communication with Iran, though he expressed skepticism that Tehran was ready to engage in meaningful negotiations to bring the conflict to an end.
Meanwhile, the International Energy Agency announced on Sunday that more than 400 million barrels of strategic oil reserves would soon be released into the market—a record intervention intended to stabilize prices amid disruptions caused by the Middle East conflict.
According to the agency, reserves from countries in Asia and Oceania will be made available immediately, while supplies from Europe and the Americas are expected to enter the market by the end of March.
SEB analyst Meyersson said that as the conflict moves into its third week, the absence of a clear resolution is increasing global market anxiety about the possibility of an uncontrolled escalation.
However, U.S. Energy Secretary Chris Wright said on Sunday that he expected the war to end within the next few weeks, which could allow oil supplies to recover and energy prices to decline.
U.S. President Donald Trump warned that he could authorize strikes on Iran’s oil infrastructure on Kharg Island if Tehran continues attacks on vessels passing through the strategically crucial Strait of Hormuz. The threat added further uncertainty to global markets already facing one of the most significant supply disruptions in history.
Trump accompanied the warning with a social media message claiming that U.S. forces had “completely destroyed” military targets on Kharg Island. The island functions as the main export terminal for roughly 90% of Iran’s crude shipments and is located about 300 miles northwest of the Strait of Hormuz.
However, the president clarified that American strikes had not targeted Kharg’s oil infrastructure. He added that if Iran or any other party attempted to block the safe passage of ships through the Strait of Hormuz, Washington could reconsider that restraint.
Trump also stated that Iran lacked the capability to defend itself against U.S. military action. In a post on Truth Social, he urged Iran’s armed forces and their allies to surrender, warning that continuing the conflict could further devastate the country.
Iran’s military responded on Saturday by warning that any attack on its oil or energy facilities would be met with retaliation against installations belonging to oil companies cooperating with the United States in the region, according to Iranian media reports.
Iran’s semi-official Fars News Agency reported that more than 15 explosions were heard on Kharg Island during the U.S. strikes. Sources said the attacks hit air-defense systems, a naval installation, and airport infrastructure, while leaving oil facilities untouched.
Energy markets were closely monitoring whether the strikes had damaged Kharg Island’s complex network of pipelines, storage tanks, and export terminals. Even minor disruptions could further constrain global oil supply and intensify volatility in energy markets.
Elsewhere in the region, Iran’s Islamic Revolutionary Guard Corps announced that it had carried out additional strikes against Israel in coordination with Lebanon’s Hezbollah, according to Iran’s Tasnim News Agency.
Meanwhile, the Israel Defense Forces said on Friday that its air force had attacked more than 200 targets across western and central Iran within the past 24 hours, including missile launchers, air-defense systems, and weapons manufacturing facilities.
The United States has also suffered losses. The U.S. military confirmed that all six crew members aboard a refueling aircraft that crashed in western Iraq had died.
According to The Wall Street Journal, citing U.S. officials, five U.S. Air Force tanker aircraft stationed at a base in Saudi Arabia were damaged in an Iranian missile strike and were undergoing repairs.
Gulf and Lebanon emerge as key flashpoints
Oil markets have experienced sharp price swings in response to Trump’s shifting comments about the potential duration of the conflict, which began on February 28 when large-scale U.S. and Israeli airstrikes targeted Iran. The fighting quickly expanded into a wider regional confrontation with major implications for global energy and financial markets.
Lebanon has become another focal point of the conflict, with Israeli forces and Hezbollah exchanging strikes in and around Beirut.
In addition to missile and drone attacks against Israel and U.S.-aligned Gulf states, Iran’s Islamic Revolutionary Guard Corps has attempted to disrupt shipping through the Strait of Hormuz, a vital route that carries about 20% of the world’s fossil fuel supplies.
Trump said on Friday that the United States Navy would soon begin escorting oil tankers through the waterway.
Although he previously suggested the war might last only a few weeks, Trump declined to predict a timeline for its end, saying the conflict would continue for as long as necessary.
Despite the fighting, Iran has continued exporting crude oil while several Gulf producers have halted shipments due to concerns about potential Iranian attacks.
Satellite imagery reviewed by TankerTrackers.com showed multiple very large crude carriers loading oil at Kharg Island earlier in the week. Iran exported between 1.1 million and 1.5 million barrels per day from the start of the war through midweek.
Bob McNally, president of Rapidan Energy Group, said Trump’s remarks could push markets to focus on the possibility that the current energy disruption — already the largest on record — might worsen and persist longer than expected.
Some industry analysts doubt Kharg Island’s oil infrastructure will remain untouched. Josh Young, chief investment officer at Bison Interests, remarked that bombing the island without hitting its oil facilities would be pointless.
War spreads across the Middle East
Iran’s new supreme leader, Mojtaba Khamenei, said in his first public remarks that the Strait of Hormuz would remain closed and warned neighboring countries to shut down U.S. military bases on their soil or risk becoming targets themselves.
European governments are now discussing measures to protect their interests. France has been consulting with European, Asian, and Gulf Arab partners on plans to deploy warships to escort commercial tankers through the Strait of Hormuz, according to French officials.
After nearly two weeks of fighting, about 2,000 people have been killed — the majority in Iran, with significant casualties also reported in Lebanon and increasing losses in Gulf states that have rarely been on the front lines of regional conflicts.
Millions of civilians have been displaced. In Lebanon, as Israeli airstrikes continued to hit the outskirts of Beirut, the country’s interior minister said authorities were struggling to accommodate the hundreds of thousands of people seeking refuge in the capital.
All major asset classes were still showing positive year-to-date returns as of Friday’s close. However, market conditions can shift dramatically over a single weekend.
The ongoing joint U.S.–Israel military operation against Iran is expected to persist for days, potentially even weeks. While the longer-term market impact remains uncertain, it is reasonable to expect that the prevailing bullish sentiment — already exhibiting signs of exhaustion in certain segments — may become another casualty of escalating tensions in the Middle East.
Through February 27, foreign equities and commodities had emerged as the top performers in 2026, based on ETF benchmarks. Yet assumptions that seemed firmly grounded just a week ago now appear outdated in light of rapidly evolving geopolitical developments.
The central issue now is the degree of vulnerability facing the global economy. In short, the longer the conflict persists, the greater the risk of economic blowback. At present, the likelihood of a swift resolution appears limited, particularly as the war expands across the Middle East, including Iran’s strike on Saudi oil infrastructure.
According to Torbjorn Soltvedt, an analyst at Verisk Maplecroft, the attack on Ras Tanura Refinery represents a meaningful escalation, placing Gulf energy infrastructure directly in Iran’s crosshairs. He noted that a prolonged period of instability is likely, as Iran attempts to inflict economic pressure by targeting tankers, regional energy facilities, trade corridors, and U.S. security partners.
Should the conflict drag on and oil prices remain elevated, the global economic impact could be substantial. In 2025, approximately 31% of all seaborne crude shipments passed through the Strait of Hormuz, according to analytics firm Kpler. Given Iran’s strategic positioning, it retains the capacity to disrupt — if not completely halt — shipping flows through this critical chokepoint.
Norbert Rücker, head of economics at Julius Baer, emphasized that the broader economic consequences hinge largely on the uninterrupted flow of oil and gas through Hormuz. The gravest risk, he suggested, is not necessarily a full closure, but significant damage to key regional energy infrastructure.
Kpler further cautioned that any meaningful shutdown — or even a prolonged de facto closure driven by insurers withdrawing coverage — would likely trigger simultaneous supply shocks across multiple commodity markets.
How long the conflict will endure remains highly uncertain. On Sunday, Donald Trump indicated that the military campaign could last “four weeks or less,” though such timelines in geopolitical conflicts are often fluid.
Energy markets are already reacting. Crude prices are climbing, with the international Brent Crude benchmark trading near $78 per barrel this morning — its highest level in more than a year.
The Trump administration’s stated objective of pursuing regime change in Iran points to the possibility of a protracted conflict. On Sunday, Donald Trump urged “Iranian patriots who yearn for freedom” to seize the moment and reclaim their country — rhetoric that signals ambitions extending beyond limited military strikes.
However, achieving regime change would be extraordinarily difficult. Although Iran’s Supreme Leader, Ali Khamenei, was reportedly killed in Saturday’s airstrikes, the Islamic Revolutionary Guard Corps remains a formidable power center. The Revolutionary Guard — Iran’s dominant military institution with vast economic holdings that help finance its operations — has likely prepared for sustained confrontation following years of tensions and prior strikes by the U.S. and Israel. Airpower alone is unlikely to dismantle what amounts to the regime’s praetorian guard.
According to Jonathan Panikoff, now affiliated with the Atlantic Council, the decisive factor will ultimately be internal dynamics. Once U.S. and Israeli strikes subside, any movement to end the regime would depend on whether rank-and-file security forces stand aside or align with popular unrest. Otherwise, those elements of the regime that retain control of weapons are likely to use force to preserve power.
Regime change in Iran is currently viewed as only moderately probable. Betting markets on Polymarket assign roughly a 42% likelihood to that outcome. The takeaway: expectations for a swift resolution appear limited, with the conflict likely to persist until one side concedes strategic ground.
However, the longer-term outlook may look different. Sanam Vakil, director of the Middle East and North Africa Program at Chatham House, argues that over time the survival of the Islamic Republic in its current form is doubtful. In his assessment, the regime as it exists today may ultimately prove unsustainable.
If that scenario unfolds, the central question shifts to succession: what replaces the current leadership — and whether any transition ushers in greater stability or instead fuels further instability within Iran and across the broader Middle East.
Over the weekend, the United States and Israel launched coordinated missile and drone strikes on Iran, targeting key military facilities in an attempt to curb Tehran’s nuclear ambitions. The operation reportedly killed Iran’s Supreme Leader, Ayatollah Ali Khamenei, marking a dramatic escalation and sharply increasing regional tensions. Iran responded swiftly with a wide-ranging missile campaign aimed not only at Israel but also at several Gulf states, including Qatar, the United Arab Emirates, and Bahrain. The fallout rippled across the region, prompting multiple Gulf nations to close their airspace and suspend equity trading.
Energy markets were also disrupted. Shipping activity through the Strait of Hormuz—a strategic chokepoint responsible for roughly 20% of global oil flows—slowed dramatically as tanker operators rerouted vessels for security reasons. Meanwhile, Qatar temporarily halted liquefied natural gas production at the world’s largest export terminal following a drone strike. U.S. President Donald Trump indicated that American military operations would persist, suggesting tensions could remain elevated in the near term.
From a market standpoint, energy represents the primary transmission channel of this crisis into global financial assets. Prolonged or severe disruptions to oil and gas supply could push up inflation expectations, dampen business sentiment, and heighten cross-asset volatility. Simply put, the longer and more intense the geopolitical shock, the greater the potential market fallout.
This dynamic was visible when markets reopened Monday. Brent crude briefly climbed to $82 per barrel amid concerns over tighter supply. Sustained price strength would likely reinforce inflation pressures, with knock-on effects for equities and interest rates. However, for oil to remain structurally elevated, investors would likely need confirmation of a more extended—or even complete—closure of the Strait of Hormuz. Such a development would mark a significant escalation beyond current disruptions and warrant a larger risk premium in energy markets. Political factors within Iran, particularly how the Islamic Revolutionary Guard Corps (IRGC) chooses to respond, will be critical. Whether the IRGC de-escalates or intensifies its actions will determine how much of the current market reaction reflects temporary risk pricing versus a genuine physical supply shock.
Oil Rallies After Tanker Flows Stall in the Strait of Hormuz
With developments unfolding quickly, tracking energy prices remains one of the clearest ways to gauge both the intensity and staying power of the geopolitical risk. Oil and natural gas markets typically react swiftly to new headlines, making them a real-time indicator of whether tensions are easing, stabilizing, or escalating further. As a result, close monitoring of these markets will be crucial in assessing how the conflict may shape global financial conditions in the coming days and weeks.
The United States has built up its most significant military footprint in the Middle East since 2003, deploying two aircraft carriers and F-22 stealth fighters. Indirect negotiations in Geneva between US envoys Steve Witkoff and Jared Kushner and Iranian officials concluded Thursday without progress. The Trump administration has cautioned that Iran will face “drastic consequences” if it fails to agree to meaningful nuclear concessions.
Israel has activated bomb shelters and warned Lebanon that its infrastructure could be targeted if Hezbollah becomes involved in any US–Iran confrontation. The US State Department authorized the departure of non-essential personnel and family members from the US Embassy in Israel on February 27, following similar instructions for the embassy in Beirut issued on February 23. Meanwhile, reports suggest the US 5th Fleet in Bahrain has been scaled back to fewer than 100 essential personnel.
China has urged its citizens to leave Iran immediately. South Korea escalated its advisory to a “Level 3” red alert, instructing nationals to depart. Australia has offered voluntary departure to diplomatic dependents in the UAE, Qatar, and Jordan, citing a worsening security environment. Several European countries, including Finland, Sweden, and Serbia, have also recommended that their citizens evacuate Iran.
Commercial carriers such as KLM have begun suspending regional flights. Governments are encouraging citizens to exit while commercial routes remain available, warning that air corridors could close quickly if hostilities erupt.
Does this mean a US–Israel strike on Iran is imminent? Possibly—but diplomatic channels remain active. The State Department confirmed that Secretary of State Marco Rubio will travel to Israel early next week. Meanwhile, reports indicate that Omani Foreign Minister Badr Al Busaidi is set to meet Vice President JD Vance and other US officials in Washington in previously undisclosed talks aimed at preventing escalation.
Oil markets are ending February on firm footing, with prices rising about $1 per barrel during the final trading week as tensions intensify. This week’s indirect talks in Geneva produced no tangible outcome, and Trump’s 10–15 day deadline is fast approaching. At the same time, attention to the upcoming OPEC+ summit has been muted—potentially opening the door for Saudi Arabia to surprise markets with another production increase for April.
The recovery in oil prices, combined with a reshuffling of global equity allocations, has recently delivered a notable lift to US energy ETFs (see chart). However, today’s modest $1.50 rise in crude suggests markets may have already priced in the risk of a swift conflict—or remain unconvinced that one is imminent.
Saudi Arabia could still opt to raise output, but much of that additional supply would need to transit the Strait of Hormuz, a critical chokepoint that Iran has repeatedly threatened to shut down.
Between 2023 and 2025, the 10-year US Treasury yield moved largely in tandem with the price of Brent crude (see chart), reflecting a strong correlation between energy prices and long-term interest rates.
In recent weeks, however, that relationship has diverged. While oil prices have climbed, the 10-year yield has declined. This shift suggests that investors may be rotating into bonds as a safe haven, anticipating that a renewed conflict in the Middle East could trigger broader geopolitical instability and economic uncertainty.
It was notable that the 10-year yield slipped below 4.00% today, even after a stronger-than-expected PPI inflation print.
More broadly, both nominal and real 10-year yields have traded within a relatively narrow range since 2023 (see chart). In our view, that sideways pattern is likely to persist through the remainder of the year.
Bitcoin (BitfinexUSD) is rebounding from its weekend slide, trading above the $67,000 mark as investors process a dramatic shift in Middle Eastern geopolitics.
The bounce comes after intense volatility sparked by coordinated U.S. and Israeli strikes on Iran. President Donald Trump stated that the operation led to the death of Supreme Leader Ayatollah Ali Khamenei. Although Tehran initially rejected the reports, Iranian state media later confirmed his death, triggering sharp reactions across global financial markets.
As highlighted in Saturday’s analysis, Bitcoin has a consistent pattern of sharply dropping on unexpected geopolitical shocks before stabilizing. That pattern appears to be unfolding again. After falling to nearly $63,000 yesterday, the cryptocurrency has gradually attracted renewed capital flows as the initial wave of panic selling eases.
Ethereum and XRP are also participating in the broader recovery. ETH/USD has moved back toward the $2,000 level, while XRP is trading near $1.40, with investors anticipating a key March 1 deadline that could bring greater regulatory clarity in the United States.
Regime change dynamics and shifting sentiment
Khamenei’s death was a decisive and largely unforeseen development. The swift return of buyers into Bitcoin reflects a growing belief among traders that the most severe phase of military escalation may have already passed.
At the same time, optimism is tempered by uncertainty surrounding the power vacuum in Tehran. As Iran’s highest authority for decades, Khamenei’s absence leaves open questions about the country’s leadership transition and broader regional stability.
President Trump’s remarks encouraging Iranians to “reclaim their country” indicate that Washington may be aiming for structural regime change. For crypto investors, the coming days represent a critical period of observation. If Iran manages a controlled leadership transition without broadening the conflict, Bitcoin’s rebound could remain intact. However, a drawn-out internal or regional confrontation could quickly pressure the $67,000 support level once more.
Escalation risks and Bitcoin’s “safe haven” debate
Despite the recovery, the possibility of a wider regional conflict persists. Iran’s Revolutionary Guards have reportedly carried out strikes against neighboring states hosting U.S. forces, and casualties have been reported following retaliatory action involving Israel. This ongoing cycle of retaliation continues to unsettle institutional crypto participants.
The central issue now is whether Bitcoin can genuinely function as a “digital gold” hedge during geopolitical crises — or whether it will keep behaving like a high-beta technology asset that reacts sharply to shifts in global risk sentiment.
The United States and Israel carried out coordinated strikes on Iran on Saturday, killing Supreme Leader Ali Khamenei and triggering a fresh wave of conflict across the Middle East.
The attacks unsettled neighboring Gulf Arab oil producers as concerns mounted over further escalation, particularly after Iran retaliated with missile launches toward Israel.
According to four trading sources, several major oil companies and leading commodity traders temporarily halted crude and fuel shipments through the Strait of Hormuz following the strikes.
Key Reactions from Analysts
Helima Croft, Head of Commodities Research, RBC Capital:
Croft said the long-term impact on oil prices will depend on whether the IRGC retreats under sustained airstrikes or escalates further, potentially increasing the costs of what she described as Washington’s second regime-change effort in just over two months.
She added that regional leaders had cautioned Washington about the spillover risks of renewed confrontation with Iran, warning that oil prices above $100 per barrel would pose a serious threat.
Croft also emphasized that OPEC’s ability to cushion supply shocks is limited. Aside from Saudi Arabia, most OPEC+ members are already producing near capacity, meaning any announced output increase may have little practical effect.
Jorge Leon, SVP and Head of Geopolitical Analysis, Rystad Energy:
Leon noted that while alternative infrastructure exists to bypass the Strait of Hormuz, a prolonged disruption could effectively remove 8–10 million barrels per day from the market—significant in a world consuming roughly 100 million barrels daily.
He suggested countries with strategic petroleum reserves may release supplies if the disruption drags on. Absent quick de-escalation, he expects oil prices to reprice sharply higher at the start of the week.
Eurasia Group energy analysts:
They anticipate oil prices will surge when markets reopen. If fighting continues into Sunday, prices could jump $5–$10 above the current $73 level, especially given Iran’s claim that it has closed the Strait of Hormuz and reports of tanker disruptions.
Barclays energy analysts:
Barclays warned that markets may confront worst-case supply fears on Monday. Brent crude could climb to $100 per barrel as traders assess the risk of major supply interruptions amid intensifying regional instability.
Vishnu Varathan, Head of Macro Research (Asia ex-Japan), Mizuho, Singapore:
Varathan said recurring regional attacks may become the new norm, keeping oil prices elevated as both production and transit routes remain vulnerable. OPEC could face pressure to boost output, though a 10–25% risk premium on oil prices would not be excessive—even without a full blockade of the Strait of Hormuz, which he described as a potential 50% premium event.
Christopher Wong, Strategist, OCBC, Singapore:
Wong expects geopolitical risk premiums to rise as markets open. Safe-haven assets like gold are likely to gap higher, while oil could strengthen on supply concerns. Meanwhile, risk assets and high-beta currencies may experience early volatility, particularly if retaliation or regional spillover intensifies.
Nick Ferres, CIO, Vantage Point Asset Management, Singapore:
Ferres argued that energy remains undervalued and should rally at the start of the week—alongside gold.
Thunderous explosions and massive fireballs from missiles launched by Iran across the Gulf underscored a long-feared reality for regional leaders: Tehran can carry the fight directly to their territory. The attacks are likely to solidify Arab governments’ backing for joint action by the United States and Israel.
Even on the Palm Jumeirah — Dubai’s most exclusive enclave — blasts shook buildings and struck a luxury hotel, sending residents scrambling as missiles and interceptors streaked overhead. The scenes made clear that the conflict had spilled beyond Iran’s borders, just as Tehran had cautioned.
“What has now been demonstrated is that we — not the United States — are directly exposed,” said Ebtesam Al-Ketbi of the Emirates Policy Center. “When Iran attacked, it hit the Gulf first, claiming it was targeting U.S. bases.”
Analysts say Tehran’s strikes are designed to show that no American ally in the region is out of reach and to increase the price of supporting Washington’s campaign. But they warn that any error in judgment could turn calibrated signaling into full-scale war.
Gulf officials argue that by hitting oil-producing neighbors, Iran is widening the battlefield and putting global energy supplies at risk, not merely regional stability. For rapidly expanding economies such as Saudi Arabia, Qatar and the United Arab Emirates — all reliant on open skies, safe sea lanes and steady trade — a broader confrontation would be severely destabilizing.
By casting the confrontation as a campaign for regime change in Iran, President Donald Trump has raised the stakes, increasing the likelihood that Tehran could retaliate more aggressively, observers say.
If Iran were to misjudge and directly attack Gulf Cooperation Council states, the nature of the conflict would shift dramatically. Regional governments would be under intense pressure to respond as lives and strategic assets come under threat.
Some Gulf analysts contend that Iran is undermining its own strategic interests by striking neighboring states. While Tehran insists it is targeting U.S. military installations, Gulf capitals view the attacks as clear violations of sovereignty.
In recent indirect talks with Washington aimed at defusing tensions, Iran signaled willingness to negotiate over its nuclear program but refused to discuss its ballistic missile arsenal or its backing of regional militias. Tehran has suggested that such issues be handled in a regional dialogue excluding the United States — a proposal Gulf states argue would weaken rather than strengthen the existing security framework, given their longstanding reliance on U.S. protection.
From their perspective, Iran’s missile capabilities and network of proxies pose immediate threats. Without external security guarantors, they see little credibility in a regional-only arrangement.
Meanwhile, Trump’s rhetoric has shifted notably. Whereas he previously described potential U.S. strikes as leverage to secure a nuclear agreement, he has more recently framed them in terms that imply regime change. Unlike the large-scale 2003 invasion of Iraq under George W. Bush, which involved a prolonged troop deployment and occupation, the current strategy appears focused on limited air operations designed to achieve swift, visible outcomes while minimizing American casualties and domestic political fallout.
The bet is that a short, decisive campaign would yield political benefits, whereas a drawn-out war — especially one disrupting oil flows or the broader economy — could carry heavy costs.
Should the conflict expand to include U.S. bases, diplomatic missions, energy infrastructure, or the crucial maritime corridor of the Strait of Hormuz, the economic and political repercussions for the United States, the Gulf, and global markets would escalate sharply.
In a post on Truth Social, Donald Trump warned Iran not to carry out any additional retaliatory strikes against the United States or its Middle East allies. He said Tehran had threatened large-scale attacks on neighboring countries seen as aligned with Washington.
The remarks suggest that Iran’s military capabilities remain operational despite the reported killing of its Supreme Leader, Ali Khamenei. The wave of retaliatory strikes indicates that Tehran has not been deterred by his death.
Iran reportedly targeted the United Arab Emirates, striking Dubai International Airport and the Burj Khalifa, the world’s tallest building. It also launched attacks on Bahrain’s capital, as well as Qatar and Kuwait. In response, several Gulf states have warned they may retaliate against Iran.
Qatar has shut down its main airport in Doha, while Dubai International Airport has also been closed following the strikes.
It remains uncertain whether Trump’s threat to respond with significantly greater force will deter further escalation. It is also unclear what he meant by saying, “We will hit them with a force that has never been seen before.”
Impact of the Conflict on Global Trade and the Energy Sector
Earlier today, we noted that the sudden closure of Dubai International Airport caused widespread flight cancellations due to its vital role as a global transit hub. Leading Gulf airlines — Emirates, Qatar Airways, and Etihad Airways — have suspended services indefinitely.
In addition, three major Japanese shipping companies have halted operations in the Gulf following a U.S. naval warning. These include Nippon Yusen (TYO:9101), Mitsui O.S.K. Lines (OTC:MSLOY), and Kawasaki Kisen Kaisha (TYO:9107).
Analysts at RBC Capital Markets say that U.S. strikes on Iran and Tehran’s counterattacks have created a cascading effect across the Gulf. The Strait of Hormuz is now viewed as “effectively closed,” disrupting roughly 20% of global LNG exports and about 90% of Japan’s crude oil imports.
They warn that crude oil prices could spike sharply as tensions intensify and diplomatic efforts remain stalled. Investors are advised to closely track developments in the region and assess their potential implications for oil and LNG markets.
Oil prices moved modestly higher in Asian trading on Friday, building on strong gains from the prior two sessions and putting major benchmarks on course for roughly a 6% weekly advance, as rising tensions between the U.S. and Iran heightened concerns about potential supply disruptions in the Middle East.
By 22:41 ET (03:41 GMT), Brent for April delivery climbed 0.2% to $71.81 a barrel, while West Texas Intermediate (WTI) crude rose 0.5% to $66.78 a barrel.
Both contracts were hovering near their highest levels since early August and were set to record weekly gains of more than 6%.
Oil near six-month high on US-Iran tensions
Investor anxiety has intensified after U.S. President Donald Trump warned Tehran that “bad things” could follow if a nuclear agreement is not reached within roughly 10–15 days, raising the possibility of military action.
According to a Wall Street Journal report, Trump is considering a limited strike on Iranian targets to pressure Tehran into accepting a nuclear deal.
Any escalation involving Iran — a key OPEC producer — could jeopardize shipments through the Strait of Hormuz, a vital passageway that handles about one-fifth of global oil trade, thereby increasing the market’s sensitivity to geopolitical risk.
This week’s rally also marked a rebound from earlier losses, when prices slipped at the start of the week on hopes that U.S.-Iran negotiations were making progress. The renewed tough rhetoric has since restored a geopolitical risk premium, pushing crude back toward multi-week highs.
US crude inventories drop sharply – EIA
Data from the U.S. Energy Information Administration on Thursday showed crude stockpiles fell by around 9 million barrels last week, defying expectations for a 1.7 million-barrel increase.
The report also indicated declines in gasoline and distillate inventories, both coming in below forecasts, suggesting solid demand from refiners and consumers.
Markets are now awaiting the release of the U.S. Personal Consumption Expenditures (PCE) Price Index later on Friday — the Federal Reserve’s preferred measure of inflation.
Following recent hawkish Fed minutes that signaled policymakers are in no rush to cut interest rates, the PCE data could offer additional insight into the central bank’s policy trajectory.
WTI prices could stage a rebound as supply concerns intensify amid escalating US-Iran tensions and stalled Ukraine-Russia negotiations.
Talks between Washington and Tehran have yielded little concrete progress, with Iranian officials only اشاره to a broad framework for a potential nuclear agreement, leaving uncertainty over future crude exports.
Meanwhile, peace discussions between Ukraine and Russia held in Geneva concluded without a breakthrough, sustaining geopolitical risks that may continue to underpin oil prices.
West Texas Intermediate (WTI) crude slips slightly on Thursday after plunging 4.9% in the previous session, hovering around $65.00 per barrel during Asian trading. Despite the recent drop, oil prices may find support from potential supply disruptions linked to rising US-Iran tensions and stalled Ukraine-Russia peace efforts.
Negotiations between Washington and Tehran remain unresolved. Iranian officials have pointed to a “general agreement” on the framework of a possible nuclear deal, but key differences persist. US Vice President JD Vance stated that Iran failed to meet Washington’s red lines, while US President Donald Trump reiterated that military action remains an option. Reports suggest that any potential US strike could develop into a prolonged campaign, with Israel advocating for an outcome aimed at regime change in Iran.
Meanwhile, peace talks in Geneva between Ukraine and Russia concluded without tangible progress, according to Reuters. Ukrainian President Volodymyr Zelenskiy accused Moscow of stalling US-backed diplomatic efforts to end the four-year conflict. Trump has urged Kyiv to consider a deal that could involve significant concessions, even as Russian forces continue attacking energy infrastructure and making battlefield advances.
On the trade front, India’s state-run Bharat Petroleum Corporation Limited (BPCL) reportedly made its first-ever purchase of Venezuelan crude, while HPCL Mittal Energy Limited resumed buying cargoes from Venezuela for the first time in two years.
In US inventory data, the American Petroleum Institute (API) reported a 0.609 million-barrel decline in weekly crude stocks, partially offsetting the previous week’s massive 13.4 million-barrel build — the largest increase since January 2023.
Oil prices moved sideways in Asian trading on Monday, as attention centered on renewed diplomatic engagement between the U.S. and Iran, with investors wary of possible supply disruptions in the Middle East.
Trading activity remained subdued due to public holidays in China and the U.S., while weak Japanese growth figures added to worries about slowing demand. Brent crude for April delivery slipped 0.2% to $67.65 per barrel by 21:15 ET (02:15 GMT).
U.S.– Iran nuclear talks to resume
The U.S. and Iran are set to hold a second round of discussions in Switzerland this week regarding Tehran’s nuclear program, following the restart of negotiations earlier in February. However, diplomatic efforts coincided with Washington deploying a second aircraft carrier to the Middle East and signaling readiness for extended military action should talks collapse.
President Donald Trump reiterated warnings that Iran must agree to a deal or risk further military measures. Over the weekend, Iranian officials indicated a willingness to make concessions on their nuclear activities in exchange for relief from tough U.S. sanctions, adding that the next move rests with Washington.
Tensions between the two countries have recently supported oil prices, as traders factored in a higher geopolitical risk premium amid fears of renewed conflict that could disrupt Iranian oil output.
OPEC+ considering renewed output increases
At the same time, some of oil’s geopolitical premium was tempered by a Reuters report suggesting that OPEC+ intends to restart production hikes from April. Higher output would enable member countries to capitalize on recent price gains, though increased supply could weigh on prices over the longer term.
The group is scheduled to meet on March 1.
Oil markets were pressured throughout 2025 by concerns of excess supply in 2026. Although OPEC+ gradually raised production last year, it paused further increases in December due to persistent oversupply worries.
Nonetheless, crude prices climbed to a six-month high in early 2026 amid escalating Middle East tensions, while signs of global economic resilience fueled expectations that demand would stay firm.
Oil prices slipped in Asian trading on Monday as the United States and Iran indicated they would continue negotiations over Tehran’s nuclear program, easing concerns about heightened tensions in the Middle East.
Crude prices were also weighed down by a firmer U.S. dollar ahead of a busy week of key U.S. economic data, extending losses after a roughly 2% decline last week. Investors are additionally awaiting major economic releases from China, the world’s largest oil importer.
Brent crude futures for April dropped 0.7% to $67.57 a barrel by 21:17 ET (02:17 GMT), while West Texas Intermediate futures also fell 0.7% to $63.12 a barrel.
U.S. and Iran agree to press ahead with nuclear negotiations
Washington and Tehran said over the weekend that indirect nuclear negotiations will continue following what both sides described as constructive talks in Oman on Friday.
The statements helped ease fears of an imminent military confrontation in the Middle East, particularly after the United States had earlier deployed several warships to the region.
Concerns over a potential conflict had previously pushed traders to build a higher risk premium into oil prices, with former President Donald Trump also issuing threats of military action against Iran.
However, the likelihood of a full-scale war in the region now appears reduced, even as Tehran indicated it will continue advancing its nuclear enrichment activities.
Markets await key U.S. and China economic data
Attention this week is also on a slate of major economic data from the world’s largest oil-consuming economies.
In the United States, January nonfarm payrolls figures are due on Wednesday, followed by CPI inflation data on Friday. These releases will be closely scrutinized for further signals on the interest-rate outlook, as markets continue to assess the direction of monetary policy under Warsh.
In China, January CPI data is also scheduled for release on Friday, providing fresh insight into conditions in the world’s biggest oil importer.
The data arrives just ahead of China’s week-long Lunar New Year holiday, which is expected to boost fuel demand across the country.
Assessing the daily charts for gold and silver futures against a backdrop of rising trader anxiety, it is clear that the outcome of the meeting between U.S. and Iranian diplomats could soon determine the next directional move once markets receive clearer signals.
Volatility in both gold and silver futures has surged, leaving prices highly sensitive to the meeting’s outcome. Gold futures opened at $4,722.30, dipped to an intraday low of $4,671.74, and then rallied to trade near the session high around $4,907—just below immediate resistance at $4,938.55. This price action reflects mounting concern as U.S.–Iran talks begin amid fears of a potential direct conflict.
Despite the heightened tension, the situation remains unresolved. The U.S. is reportedly pressing Iran to freeze its nuclear program, dismantle its uranium stockpile, and expand discussions to include ballistic missiles, regional proxy support, and human rights issues. Iran, however, has stated that talks will be limited strictly to its nuclear program, and it remains unclear whether these fundamental differences have been bridged.
In recent weeks, President Donald Trump has warned of military action if a deal is not reached, while the U.S. has deployed thousands of troops and significant naval and air assets to the region. Iran has responded with threats of retaliation, including strikes on U.S. military targets in the Middle East and Israel.
This marks the first direct engagement between U.S. and Iranian officials since last June’s Israel–Iran conflict, during which U.S. forces struck Iran’s three primary nuclear facilities. Iran has since claimed that its uranium enrichment activities ceased following those attacks.
Meanwhile, precious metals have endured an extended selloff since last week. Initial pressure stemmed from President Trump’s nomination of Kevin Warsh as the next Federal Reserve chair, a move interpreted as less dovish and supportive of a stronger U.S. dollar. The dollar is now on track for its strongest weekly performance since early October, with soft labor data doing little to halt its advance.
Looking ahead, any indication that talks may ease tensions between the U.S. and Iran could spark renewed selling in gold and silver, even though both futures have already rebounded modestly from their intraday lows. At this stage, dissecting technical rebounds or exhaustion signals may be premature. Instead, the focus remains squarely on the diplomatic outcome and whether it ultimately de-escalates the situation—or deepens existing tensions.
Looking at the current positioning of the spot gold–silver ratio, today’s session saw it test an intraday high of 72.77 and a low of 65.10, with the ratio currently trading around 66.39. This movement suggests that gold and silver futures may revisit price levels last seen between December 1 and 16, 2025—when gold futures were trading in the $4,207 to $4,340 range and silver futures were between $57 and $65.
Gold futures are currently trading above the key 50-EMA support near $4,580, while remaining capped below the immediate 9-EMA resistance around $4,885, after successfully holding above the short-term 20-EMA support at approximately $4,824.
Meanwhile, silver futures are holding above the key 100-EMA support near $62.692, but continue to trade below the immediate resistance at the 50-EMA around $74.252.
In summary, any constructive outcome from the meeting could prompt renewed selling pressure across both precious metals, while renewed disagreement between the two countries may spark a bout of buying. However, any upside could remain vulnerable to fresh selling, as follow-up commentary from the U.S. President after the meeting is likely to play a decisive role in shaping market sentiment.
WTI prices slipped but were still on course for roughly 12% monthly gains, underpinned by elevated geopolitical risk premiums.
Iran warned of an unprecedented response following renewed threats from President Trump over nuclear negotiations.
Meanwhile, the Trump administration loosened some sanctions on Venezuela’s oil sector on Thursday to attract U.S. investment.
West Texas Intermediate (WTI) crude edged lower after three consecutive sessions of gains, trading near $64.00 a barrel during Asian hours on Friday. Still, the benchmark remained on track for about a 12% monthly increase, supported by a strengthening geopolitical risk premium.
Geopolitical tensions stayed elevated after Iran warned it would “defend itself and respond like never before” following renewed threats from U.S. President Donald Trump, who urged Tehran to engage in nuclear negotiations. Iranian officials cautioned that any provocation would be met with retaliation.
Tensions escalated further after the European Union designated Iran’s Islamic Revolutionary Guard Corps as a terrorist organization. Concerns were compounded by reports that the United States was bolstering its military presence near Iran, while Tehran announced live-fire military exercises in the strategically vital Strait of Hormuz, heightening worries over regional security.
Markets are closely watching the potential impact of these developments on shipping through the Strait of Hormuz, a critical chokepoint between Iran and the Arabian Peninsula that handles daily flows of crude oil and LNG. According to Dow Jones Newswires, Westpac Strategy Group warned that any regime change in Iran would likely be disorderly, unlike the U.S-backed removal of Venezuela’s Nicolas Maduro or targeted strikes such as those on Fordow.
Separately, the Trump administration eased certain sanctions on Venezuela’s oil sector on Thursday to attract U.S. investment following President Nicolas Maduro’s removal earlier this month. The U.S. Treasury authorized transactions involving Venezuela’s government and state-run PDVSA, allowing U.S. firms to produce, transport, sell, and refine Venezuelan crude.
Earlier this month, oil prices also drew support from supply disruptions in Kazakhstan, freeze-offs in the United States, and tighter U.S. restrictions on Russian oil purchases, helping underpin prices this year despite lingering expectations of global oversupply.
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