Analysis of the interactions between coordinated monetary policy and disruptions in energy markets.
The third week of March 2026 established itself as a historic turning point in the post-pandemic global economic era. Characterized by the convergence of a growing military conflict in the Persian Gulf and a crucial super-cycle of G10 central-bank meetings, this week saw a fundamental reassessment of global risks. As the war between the US-Israeli alliance and Iran entered its twentieth day, the markets' initial shock gave way to a more calculated assessment of a prolonged energy shock. This period was marked by the de facto closure of the Strait of Hormuz, systemic attacks on global energy infrastructure, and a sharp tightening of monetary policy by the main authorities that, until recently, were preparing for a year of aggressive rate cuts.
1. FX & Central Banks
US / Fed: It must juggle its two mandates, but works on the assumption that short-term inflation risks will be significant, even if this war has a destructive effect on long-term growth and consumption.
The correction in the dollar last week is not due to major macroeconomic changes within the country, but rather to a fairly surprising hawkish tone from the European Central Bank. The surprise comes from the speed of the ECB’s pivot in the face of the energy emergency, while the market anticipated a longer wait-and-see stance.
The tone of the Fed’s Dot Plot remains relatively hawkish, with a 25 bp cut planned for 2026 and likewise for 2027.
US real-estate health remains fairly stable, with sales figures that blow past market expectations: -0.6% (consensus) -> 1.8% (actual figures).
FOMC Summary, March 18:
- Rates held: The Fed decided to keep the federal funds rate in the 3.50% to 3.75% range.
- Assessment of the economy: Economic activity is advancing at a "solid" pace, but job creation is judged weak and inflation remains "somewhat elevated."
- Geopolitical uncertainty: The committee is closely monitoring the situation in the Middle East, noting that its consequences for the US economy are still uncertain.
- Vote and dissent: The decision was taken almost unanimously, except for Stephen I. Miran, who voted against to support a 0.25% (25 basis points) rate cut.
Euro (EUR FX): We observe a spectacular drop in open interest on the currency. Speculators remain net long, but they have massively reduced their positions. This shows extreme caution despite the ECB’s anticipated hawkish pivot.
Pound Sterling (GBP): A strong disengagement is visible in the market. Speculators are clearly sellers (shorts). The market was betting on a weak pound ahead of the BoE’s unanimous decision to keep rates unchanged.
Japanese Yen (JPY): We note a sharp drop in open interest. Speculators remain massively short, betting on the yen’s persistent weakness despite the BoJ’s postponement of the rate hike.
Canadian Dollar (CAD): Overall reduction in positions. Speculators are almost at equilibrium, reflecting Canada’s status as a “relative safe haven” in the face of the oil conflict.
Note that the RBA was the first G10 central bank to carry out a “war-related rate hike” on March 17 (+25 bp to 4.10%), serving as an alarm signal for the other monetary authorities.
2. Equities
A sharp drop was recorded toward the middle of last week, owing notably to the Fed’s rate announcements and the conflict in Iran, thus strongly impacting all manufacturing industries. The VIX, too, remains fairly high, which resonates well with the crisis we are going through.
Aviation sector
The term Jet CIF designates a transaction of kerosene (aviation fuel, Jet A-1 type) carried out under the CIF Incoterm (Cost, Insurance, and Freight).
The “Jet CIF” market is currently under extreme strain:
- European dependence: Roughly 50% of European kerosene imports come from the Persian Gulf.
- Impact of the conflict: With about 23% of global maritime kerosene trade transiting through the Strait of Hormuz (currently disrupted by the conflict with Iran), supply in Europe has considerably shrunk.
- Price explosion: This pushed the “jet regrade” to record levels exceeding 400 $/t, signaling a critical fuel shortage for airlines.
Construction, automotive, and AI sectors
Creation of significant opportunities even if the crash does not seem to be over for now. In the tech sector, Jensen Huang (CEO of Nvidia) projected orders exceeding 1,000 billion dollars by 2027 at this week’s GTC conference, which explains why the Nasdaq holds up better than the rest of the market.
Stock indices: S&P 500 vs Nasdaq divergence
- S&P 500 (Consolidated): Explosion in open interest. Speculators are net sellers (shorts).
- Nasdaq-100: Increase in open interest. Unlike the S&P, speculators are net buyers (longs).
A growing mistrust of the general economy offset by an unshakeable faith in tech.
3. Commodities
Gold: Retracement
We are on 9 consecutive days of decline in gold. On the one hand, the dollar strengthens and gold, being quoted in dollars, loses value. The explanation remains fairly simple: gold is a very liquid asset. Following the significant decline we saw last week, investors and funds need cash to meet their margin calls and/or cover their losses.
Moreover, given the conjuncture of the various monetary policies and given that gold yields no return, bonds seem a better alternative for most investors to hedge against risk and ensure a certain profitability.
Gas and Oil
These two assets are strongly influenced by the war in the Middle East. With many oil infrastructures destroyed and the Strait of Hormuz condemned, each country’s oil stocks will quickly diminish.
Moreover, the strikes on LNG facilities in Qatar will lead to a 3% loss of global production for a period of 3 to 5 years. This means the gas shock is not only temporary, but structural for the end of the decade.
Oil itself flirts with 115 $ a barrel. One should expect an inflationary recession if central banks merely raise rates to reduce inflation.
Ready for the next step?
Don't miss any signal. Join our research community for unrivaled macro analysis and quantitative models.
Léo Lombardini
Trader, Economics & Quant
Passionate about market analysis and statistical modeling, Léo oversees the strategic allocation of the model portfolio and the development of Horacle Capital's quantitative frameworks, as well as writing weekly articles.
Learn more about the author →