The conflict is exposing an old fact: modern life still runs on oil. Heating, transport, plastics, fertilizers, metals, data centers, supply chains, server farms, airports, suburbs, shopping, shipping, all of it depends more than many people like to admit on a steady flow of fossil fuel.

So, it's kind of a big problem that oil surged above $100 a barrel for the first time since 2022, with Brent briefly nearing $120 before cooling somewhat. A possible coordinated release of emergency oil reserves by G7 countries and the International Energy Agency helped calm the market a little. Saudi Aramco also offered prompt crude supply through rare tenders. 

The Strait of Hormuz remains effectively closed, shipping is paralyzed, and Gulf producers have started cutting output as facilities come under attack. Some analysts think the market is still being oddly relaxed about the scale of the shock. 

For markets, the damage is already spreading. Travel stocks were hit again. Alaska Air, United, Carnival, Norwegian, and American Airlines all came under pressure. Big banks fell too, including JPMorgan, Citigroup, and Bank of America. Nvidia slipped on fears that the conflict could disrupt parts of the chip supply chain. Defense stocks were mixed after Donald Trump said major U.S. weapons makers had agreed to raise munitions production. Energy names, unsurprisingly, went the other way: APA, Devon, Diamondback, New Fortress, Occidental are all up.

The fear spreading through markets is not merely inflation. It is stagflation, that unhappy combination of rising prices and weakening growth. Last week's U.S. jobs data added to that worry. February payrolls fell by 92,000, while economists had expected a gain of 55,000. Some of that miss can be explained by weather and strikes. But only some. The broader trend points to a labor market that is losing momentum.

Fears of rate hikes have returned. Danske Bank believes that major central banks are unlikely to respond with rate hikes, and probably should not. Longer-term inflation expectations, for now, remain anchored.

This is why the coming week matters so much. Wednesday's CPI report will be scrutinized far beyond the usual ritual. If inflation comes in only moderately higher, investors may shrug and say it still reflects the world before this conflict fully hit energy markets. If it comes in hot, fears of a renewed inflation cycle will intensify quickly. Friday's PCE number will matter for the same reason. The Fed is widely expected to keep rates unchanged next week. The issue is not really what it does now, but whether the room to cut later is starting to disappear.

Iran's appointment of Mojtaba Khamenei as supreme leader after the death of Ali Khamenei was widely read as a message of regime continuity and hardline control. Over the weekend, the war expanded further. Israel struck fuel depots near Tehran. An Iranian drone targeted a desalination plant in Bahrain. So far Gulf governments have responded with caution, trying to defend themselves without being pulled directly into a wider war. 

The central question now is duration. How long can Iran absorb American and Israeli strikes? How long can the United States continue shielding regional allies? How long can Gulf producers endure attacks while avoiding direct escalation?

Outside the United States, the picture is equally grim. Asian markets took the first hit today: Japan fell more than 5%, South Korea dropped 6%, Taiwan lost 4.4%, India fell 2.4%, Australia dropped 2.8%, Hong Kong slid 1.8%, and mainland China declined about 1%. Europe is in the red as well, but not as deep, and it is more exposed to the energy shock than the United States. Last week, Wall Street fell, but not catastrophically. The S&P 500 lost about 2%. Europe's main indexes were down more like 6 to 7%.

Other corners of the market are sending similar signals. The dollar has strengthened on risk aversion and fading hopes for Fed cuts. Treasurys have been sold, because the shock is being interpreted less as a simple growth scare and more as an inflationary one. Gold slipped under pressure from deleveraging and a stronger dollar. Agricultural commodities rose, with wheat near two-year highs. Iron ore climbed on expectations of Chinese support for the steel sector. Lithium, by contrast, weakened as forecasts for Middle East battery storage and EV demand were downgraded.

Today's economic highlights:

On today's agenda: the current account in Japan; the monthly and annual inflation rates along with the annual PPI in China; the monthly factory orders and industrial production in Germany; consumer confidence in Switzerland. See the full calendar here.

  • Dollar index: 99.329
  • Gold: $5,110
  • Crude Oil (BRENT): $109.37 (WTI) $101.35
  • United States 10 years: 4.17%
  • BITCOIN: $67,883

In corporate news:

  • Alphabet approved a CEO pay package for Sundar Pichai that includes stock incentives tied to the growth of Waymo and Wing over the next three years.
  • Boeing renewed a multi-year contract with Syensqo for advanced materials used across its commercial and defense programs.
  • Live Nation is reportedly close to a DOJ antitrust settlement that would avoid a forced sale of Ticketmaster in exchange for concessions on ticketing exclusivity and venue practices.
  • Agilent Technologies agreed to acquire Biocare Medical for $950 million in cash to expand its pathology and diagnostics portfolio.
  • Chevron is reportedly in advanced talks with Ultrapar to buy a 30% stake in Brazilian fuel distributor Ipiranga.
  • Dutch intelligence agencies warned that Russian-backed hackers breached Signal and WhatsApp accounts used by officials, military personnel and journalists through social engineering tactics.
  • Reuters highlighted rising stress points in credit markets involving firms such as Blue Owl, BlackRock, Blackstone, First Brands and Tricolor, fueling investor concern over private credit risks.
  • Nvidia-backed AI infrastructure company Nscale raised $2 billion at a $14.6 billion valuation as it prepares for a potential IPO.
  • Blackstone has reportedly hired Citigroup to explore a potential sale of Chinese packaging company ShyaHsin at a valuation of at least $1 billion.
  • Warner Bros. Discovery is reportedly set to be acquired by Paramount Skydance in a $110 billion deal that may include a passive investment from Tencent.
  • Apollo Sports Capital is set to complete its acquisition of a 55% stake in Atletico Madrid this week, valuing the club at about €2.5 billion.
  • 4basebio promoted Christine Wolosin to chief commercial officer as it pushes its commercial growth strategy in synthetic DNA.
  • ABB invests $75 million in India.
  • Vertiv, Lumentum, Coherent, and EchoStar will join the S&P 500 index on March 23, replacing Match Group, Molina, Lamb Weston, and Paycom.
  • Oracle and OpenAI have reportedly abandoned their plans to expand their data center in Texas, according to Bloomberg, but Reuters has sources saying otherwise.
  • Novo Nordisk and Hims & Hers are ending their dispute and partnering to sell obesity treatments, according to Bloomberg.
  • Live Nation is close to a deal in the US without selling Ticketmaster, according to Bloomberg.
  • KKR is considering selling its data center cooling subsidiary for several billion dollars, the FT reveals.
  • Amazon will continue to offer Anthropic's Claude to its non-defense cloud customers.

Analyst Recommendations:

  • Citizens Financial Group, Inc.: Baird upgrades to outperform from neutral with a target price of USD 65.
  • Cognex Corporation: JP Morgan upgrades to neutral from underweight with a target price of USD 55.
  • Coterra Energy Inc.: Texas Capital downgrades to hold from buy and reduces the target price from USD 34 to USD 31.
  • Dow Inc.: RBC Capital upgrades to outperform from sector perform and raises the target price from USD 29 to USD 40.
  • Expeditors International Of Washington Inc.: Wolfe Research upgrades to peerperform from underperform.
  • Ge Vernova Inc.: Rothschild & Co Redburn upgrades to buy from sell with a price target raised from USD 560 to USD 1100.
  • Iqvia Holdings Inc.: TD Cowen upgrades to buy from hold and raises the target price from USD 174 to USD 213.
  • Jefferies Financial Group Inc.: Morgan Stanley downgrades to market weight from overweight and reduces the target price from USD 78 to USD 49.
  • Lyondellbasell Industries N.v.: RBC Capital upgrades to outperform from sector perform with a price target raised from USD 51 to USD 82.
  • Paramount Skydance Corporation: Wells Fargo initiates coverage with an underweight rating and a target price of USD 10.
  • Snap Inc.: President Capital Management Corp downgrades to neutral from buy and reduces the target price from USD 9.10 to USD 5.90.
  • Truist Financial Corporation: Baird upgrades to outperform from neutral with a target price of USD 52.
  • Western Alliance Bancorporation: TD Cowen downgrades to hold from buy and reduces the target price from USD 108 to USD 83.
  • Zions Bancorporation, National Association: Baird upgrades to outperform from neutral with a target price of USD 65.
  • Devon Energy Corporation: Jefferies maintains its hold recommendation and raises the target price from USD 36 to USD 44.
  • Oracle Corporation: Barclays maintains its overweight recommendation and reduces the target price from USD 310 to USD 230.
  • Ovintiv Inc.: Jefferies maintains its buy recommendation and raises the target price from USD 54 to USD 65.
  • Pinterest, Inc.: Arete Research maintains its buy recommendation and reduces the target price from USD 45 to USD 34.
  • The Toro Company: D.A. Davidson maintains its buy recommendation and raises the target price from USD 97 to USD 117.
  • Williams Companies, Inc.: Goldman Sachs maintains its neutral recommendation and raises the target price from USD 64 to USD 78.