The S&P500 dropped 2% this week. This moderate decline was not reflective of the stress throughout global markets. Myriad speculative Bubbles faltered.
At Tuesday’s lows, the South Korean KOSPI Index was down 20% from the previous Friday’s high. Wednesday's sharp rally cut the week’s losses to 10.6%. Japan’s Nikkei 225 index fell 5.5%, with Japan’s TOPIX Bank Index hit 7.6%. Major indices were down 5.1% in Taiwan, 7.9% in Indonesia, 8.0% in Thailand, 4.6% in the Philippines, and 6.0% in Vietnam. Stocks were down 6.8% in Pakistan and 6.7% in Turkey.
European equities were under heavy selling pressure. Losses included France’s CAC40 at 6.8%, Spain’s IBEX 7.0%, Italy’s MIB 6.5% and Germany’s DAX at 6.7%. Ominously, Europe’s STOXX 600 Bank Index was clobbered 8.2%, the largest weekly loss since “liberation day.” Italian banks sank 9.6%. UK’s FTSE 100 equities index dropped 5.7%.
Global equities were hammered. But I would be more concerned by the week’s bond market drubbings. Unprecedented leverage, having accumulated throughout global markets, ensures latent fragility. And when the tide starts to go out, markets have a pretty clear understanding of who has been swimming in their birthday suits. UK yields spiked 39 bps this week to a five-month high of 4.63%, this biggest jump since gilt deleveraging crisis week, September 23, 2022. Italian yields surged 35 bps to a six-month high of 3.62%, and Greek yields jumped 33 bps to an almost one-year high of 3.60%.
Local bond yields spiked 72 bps in Peru (6.60%), 58 bps in Brazil (14.15%), 50 bps in Poland (5.53%), 46 bps in Hungary (6.94%), 45 bps in Czech Republic (4.84%), 40 bps in Turkey (28.86%), 38 bps in Romania (6.67%), 37 bps in South Africa (8.62%) and 24 bps in Mexico (9.03%). Emerging Market CDS jumped 10 this week to a five-month high of 145 bps, with the largest two-week gain (17bps) since April.
War will stoke inflationary pressures – and is certain to increase already monster fiscal deficits. Not the 50 bps “liberation day” yield spike, but Treasuries were liquidated aggressively. In a portentous repeat of April dynamics, safe haven buying was MIA. Five-year Treasury yields surged 23 bps to 3.73%, while 10-year yields jumped 20 bps to 4.14%. As they tend to do in unstable markets, MBS took it on the chin. Benchmark MBS yields spiked 26 bps to 5.07% - the largest weekly rise since “liberation day.” “Muni Bonds See Biggest Decline Since Tariff Fueled-Selloff.”
Treasuries are prominent throughout levered strategies. They are also integral to scores of hedging strategies. Importantly, systemic deleveraging risks quickly escalate when Treasury yields surge in the face of “risk off” market dynamics.
Bloomberg: “Credit Traders Are Unwinding Their Gigantic Bullish Position.” In a problematic development for highly levered trades (i.e., “basis” and “carry trades”), “swap” market volatility this week went into overdrive. The 30-year Treasury (vs. overnight swaps) swap rate dropped 5.6 this week to negative 79 bps, essentially matching the decline from “liberation day” week April 11th (down 5.7bps) – which was the largest drop since December 2022. The five-year inflation expectations “breakeven rate” surged 17 bps to an almost one-year high of 2.62%.
High-yield CDS jumped another 18 this week to a near nine-month high of 349 bps, with a notable two-week surge of 42 bps. The seven bps jump in investment-grade CDS (to 10-month high 58 bps) was the largest two-week gain since April.
European subordinated Bank CDS jumped 10 to 111 bps (high since May) – with the largest two-week gain (20bps) since the week of April 11th. It’s worth noting that a couple UK banks led the global bank CDS leaderboard, with NatWest CDS jumping six to 60 bps and Barclays five to 69 bps. European high-yield (“crossover”) CDS surged 28.5 to 289 bps, the largest weekly move since “liberation day” week (64bps). Friday’s 15 bps jump was the largest daily move since September.
“Fuel Prices Double in Asia as Supplies from Middle East Collapse.” “Aluminum Records Biggest Weekly Gain Since 2023 on Iran Crisis.” “Iran Conflict Sparks Global Rush For Critical Fertilizers.” “Fertiliser supplies threatened by closure of Hormuz, prices soar.” “Wheat, Corn Futures Rise as Iran War Disrupts Fertilizer Supply.” “Wheat Climbs the Most Since 2024 as Grains Follow Surging Crude.” “Iran War Threatens Vital Supplies to Farmers.”
The Bloomberg Commodities Index jumped 8.0% (to a near four-year high), the largest weekly advance since Russia’s invasion of Ukraine. Crude’s (WTI) 36% advance was the “largest weekly gain in history.”
I can’t help but believe the President bet that the incredible strength of U.S. and Israeli military forces ensured a quick and decisive victory. And while war justifications have gone through a series of modifications, I’ll assume Trump and Netanyahu simply couldn’t resist a weakened and vulnerable Iran. Secretary Hegseth likes to use sports analogies. For President Trump, there are elements of a “heat check.”
All indications suggest American and Israeli militaries have performed exceptionally. Trump and Hegseth exude confidence – clearly emboldened and resolute. And we can pray this gets wrapped up in a few weeks. It’s reasonable to presume that the U.S., Israel and the world will be safer following the downfall of Iran’s extremist regime.
The problem I have, as someone who has been alarmed by mounting risks of “World War III”, is that this war is exactly how one might script the start of a major global confrontation.
March 6 – Washington Post (Noah Robertson, Ellen Nakashima and Warren P. Strobel): “Russia is providing Iran with targeting information to attack American forces in the Middle East, the first indication that another major U.S. adversary is participating — even indirectly — in the war, according to three officials familiar... The assistance…, signals that the rapidly expanding conflict now features one of America’s chief nuclear-armed competitors with exquisite intelligence capabilities. Since the war began Saturday, Russia has passed Iran the locations of U.S. military assets, including warships and aircraft, said the three officials, who spoke on the condition of anonymity... ‘It does seem like it’s a pretty comprehensive effort,’ one of the people said… When asked this week about his message to Russia and China, which are among Iran’s most powerful backers, Defense Secretary Pete Hegseth said that he didn’t have one and that ‘they’re not really a factor here’.”
It’s difficult to believe that Russia and China will not be factors as this war unfolds. Iran is a close ally. And I have little confidence that the Trump administration carefully thought through ramifications – some potentially monumental. Certainly, this move has stunned the world. Countries, previously known as allies, are flabbergasted. Friendly Middle East nations must be absolutely enraged. And while this Pete Hegseth “warrior ethos” show might play well with MAGA, it certainly does not instill confidence for much of the country or the world.
Odds are not remote that this goes terribly wrong. In an acutely unstable and hostile world, our nation has become only more isolated. It was ill-advised timing to embark on a major war with myriad risks so elevated. Our military’s supply of key munitions has become worryingly depleted. Throughout the Gulf, interceptor inventories are said to be dangerously low. A catastrophic scenario of unrelenting attacks on regional energy infrastructure cannot be dismissed. The Strait of Hormuz turning into a disaster zone is also within the realm of possibility.
The Iran War also has the potential to be disastrous for a vulnerable Ukraine. Their shortage of Patriot missiles and interceptors will become a pressing issue, certainly to be exploited by Putin. And a more aggressive Russian military assault will force Europe into a more forceful Ukrainian defense, increasing the likelihood of overt confrontation.
“We’re going to have to choose that person along with Iran. We’re going to have to choose that person.” Politico: “Asked how much influence he expects to have over Iran’s future leadership, Trump replied: ‘I’m going to have a big impact, or they’re not going to have any settlement, because we’re not going to have to go do this again’.” “People are loving what’s happening… Cuba’s going to fall, too.” “I have to be involved in the appointment, like with Delcy in Venezuela.” “What we did in Venezuela, I think, is… the perfect scenario.” “It’s going to work very easily. It’s going to work like in Venezuela.”
I’ll borrow a line from the New Republic’s Alex Shephard. “Trump burbles on as if long-term implications are woke.” Clearly, circumstances in Iran have nothing in common with Venezuela.
March 1 – The New Arab: “The killing of Iran’s Supreme Leader Ayatollah Ali Khamenei has triggered an immediate and emotionally charged response from Shia outside Iran, from senior clerics and militant leaders across the Muslim world, to protesters on the streets of South Asian and Middle Eastern cities. While Tehran has entered a formal transition period, reactions beyond its borders reflect the extent to which Khamenei was seen not only as Iran’s leader, but as a central political and symbolic figure for parts of the wider Shia world. Khamenei’s influence extended well beyond Iran’s state structure. As Supreme Leader under the doctrine of Velayat-e Faqih, he combined religious authority with ultimate political control over the Islamic Republic… In Iraq, Grand Ayatollah Ali Sistani, the country’s most senior Shia cleric, issued a statement mourning Khamenei and acknowledging his ‘unique role in leading the Islamic Republic of Iran for many years is evident to all’. Sistani urged the ‘great Iranian people’ to ‘maintain their unity, to stand firm and thwart the aggressors’ sinister goals’.”
“There will be no deal with Iran except UNCONDITIONAL SURRENDER!”
I have not heard of one analyst schooled in history who believes Iran will surrender without one hell of a fight. If the President is serious, expect bombing 24/7 - for the duration. I’m not sure the American public and global community will have the stomach for what will be day-after-day of horrific “collateral damage.” It’s only a matter of how devastating the unfolding tragedy becomes for the desperate Iranian population.
We are fortunate to live thousands of miles from two major wars, with the Iran War potentially evolving into a proxy war parallel with the war in Ukraine. The President clearly doesn’t recognize the vulnerability of U.S. and global market Bubbles – the unprecedented speculative leverage - the growing fragility of the U.S. Credit system – the potential for de-risking/deleveraging to unleash instability and mayhem. With both sides gaining further momentum this week, the Credit problems vs. AI arms race collision course accelerated this week. To be sure, after the past week’s happenings, we’re now much closer to speculative deleveraging, triggering market illiquidity, panic and dislocation.
With atrocious timing, the outbreak of war is quite a booster for festering Credit issues. Unless TACO makes a miraculous appearance, the Trump “put” is a major war casualty. And with the war posing significant inflationary risk, confidence in the Fed “put” is not where fragile markets need it to be. In short, things could really run amok.
Blue Owl slumped another 6.3% this week, boosting y-t-d losses to 33.8%. Blackstone was down 2.6% (down 28.4 y-t-d), and Ares Management fell 1.8% (down 31.9%). KKR was squeezed 4.2% higher (28.4%), and Apollo recovered 3.9% (24.9%).
The KBW Bank Index dropped 3.6% this week, and the Broker/Dealers lost 3.7%. Goldman Sachs fell another 4.4% and Morgan Stanley lost 3.8%. Providing evidence of hedge fund de-risking, the Goldman Sachs Most Short Index outperformed, gaining 2.3% this week (up 8.8% y-t-d).
March 3 – Bloomberg (Rene Ismail): “Business development companies are sitting on a massive pile of leveraged loans, which could be sold to meet redemption requests and push spreads wider, according to Deutsche Bank AG analysts. BDCs — private debt funds that bundle direct loans — own nearly $143 billion of leveraged loans…, more than the $120 billion currently held by leveraged loan funds. The BDC market is already down about 11% so far this year… Redemption requests have been picking up across BDCs in recent quarters, fueled in part by anxiety over the potential for AI to disrupt the business models of the software industry, a mainstay of both the private credit and leveraged loan markets. Further withdrawals could force private debt managers to liquidate those loans. ‘If BDCs start to place greater weight on the outflow risk, more selling will emerge in dollar-denominated leveraged loans, and we would expect a broader spread widening to emerge,’ wrote the analysts…”
March 3 – Bloomberg (Laura Benitez): “Apollo Global Management Inc. Chief Executive Officer Marc Rowan warned that a shakeout is coming for private credit firms as the industry faces a wave of concerns about rising defaults on loans to software companies. For weeks, private credit executives have faced questions from investors over whether the $1.8 trillion industry can withstand sustained pressure if the software sector is upended by artificial intelligence in the coming years. Rowan’s comments came as business development companies have been hit by redemptions in recent weeks amid those broader investor concerns. ‘This will be a shakeout — I don’t think it is going to be short term,’ Rowan said... ‘It was foreseeable. It was predictable. And all you can do is have been a good underwriter, a good risk manager, have done a small number of stupid things’.”
March 3 – New York Times (Steven Erlanger): “The Islamic Republic of Iran’s first priority is to survive. To do that, its leaders will want to drive up the cost of the war for President Trump — in terms of American casualties, energy costs and inflation — to try to persuade him to declare victory and go home. Faced with the overwhelming firepower of the United States and Israel, diplomats and analysts say, Iran is working to enlarge the battlefield from its own territory to the broader region. The goals are to damage oil and gas infrastructure in neighboring countries, shut the Strait of Hormuz to shipping and curtail air traffic — all to disrupt the economies of the Persian Gulf and drive up global energy prices and inflation. Iran will also be trying to exhaust the number of expensive missile interceptors held by its enemies. ‘The war has become a test of wills and stamina,’ said Vali Nasr of the Johns Hopkins School of Advanced International Studies… ‘Iran is facing qualitatively superior militaries, so the strategy is to test their will by expanding the battlefield, complicating the war and increasing the danger to the world economy’.”
Scorched Earth.
For the Week:
The S&P500 slumped 2.0% (down 1.5% y-t-d), and the Dow dropped 3.0% (down 1.2%). The Utilities declined 1.4% (up 9.7%). The Banks fell 3.6% (down 6.5%), and the Broker/Dealers slumped 3.7% (down 3.8%). The Transports sank 6.2% (up 6.4%). The S&P 400 Midcaps were hammered 4.6% (up 3.2%), and the small cap Russell 2000 was slammed 4.1% (up 1.7%). The Nasdaq100 declined 1.3% (down 2.4%). The Semiconductors sank 7.2% (up 6.1%). The Biotechs dropped 5.2% (down 3.8%). With bullion down $107, the HUI gold index slumped 11.7% (up 23.2%).
Three-month Treasury bill rates ended the week at 3.5758%. Two-year government yields surged 19 bps to 3.56% (up 9bps y-t-d). Five-year T-note yields jumped 23 bps to 3.73% (unchanged). Ten-year Treasury yields rose 20 bps to 4.14% (down 3bps). Long bond yields gained 15 bps to 4.76% (down 9bps). Benchmark Fannie Mae MBS yields surged 26 bps to 5.07% (up 2bps).
Italian 10-year yields spiked 35 bps higher to 3.62% (up 7bps y-t-d). Greek 10-year yields surged 33 bps to 3.60% (up 16bps). Spain's 10-year yields jumped 29 bps to 3.35% (up 6bps). German bund yields rose 22 bps to 2.86% (unchanged). French yields surged 29 bps to 3.51% (down 5bps). The French to German 10-year bond spread widened seven to 65 bps. U.K. 10-year gilt yields spiked 39 bps to 4.63% (up 15bps). U.K.’s FTSE equities index sank 5.7% (up 3.5% y-t-d).
Japan’s Nikkei 225 Equities Index dropped 5.5% (up 10.5% y-t-d). Japan’s 10-year “JGB” yields gained five bps to 2.17% (up 11bps y-t-d). France’s CAC40 sank 6.8% (down 1.9%). The German DAX equities index slumped 6.7% (down 3.7%). Spain’s IBEX 35 equities index sank 7.0% (down 1.3%). Italy’s FTSE MIB index dropped 6.5% (down 1.8%). EM equities were slammed. Brazil’s Bovespa index dropped 5.0% (up 11.3%), and Mexico’s Bolsa index slumped 5.8% (up 4.6%). South Korea’s Kospi was hammered 10.6% (up 32.5%). India’s Sensex equities index dropped 2.9% (down 7.4%). China’s Shanghai Exchange Index dipped 0.9% (up 3.9%). Turkey’s Borsa Istanbul National 100 index sank 6.7% (down 13.6%).
Federal Reserve Credit increased $6.0 billion last week to $6.576 TN, with a 12-week rise of $85.6 billion. Fed Credit was down $2.314 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit has expanded $2.849 TN, or 76%. Fed Credit inflated $3.765 TN, or 134%, since November 7, 2012 (695 weeks). Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt slipped $1.3 billion last week to $3.074 TN. “Custody holdings” were down $229 billion y-o-y, or 6.9%.
Total money market fund assets (MMFA) gained $201 billion to a record $7.817 TN - with a 33-week surge of $794 billion, or 17.7% annualized. MMFA were up $791 billion, or 11.3%, y-o-y - having ballooned a historic $3.233 TN, or 70%, since October 26, 2022.
Total Commercial Paper declined $9.7 billion to $1.397 TN. CP expanded $76 billion, or 5.7%, y-o-y.
Freddie Mac 30-year fixed mortgage rates increased two bps to 6.00% (down 63bps y-o-y) - just off the low since September 2022. Fifteen-year rates rose three bps to 5.47% (down 32bps). Bankrate’s survey of jumbo mortgage borrowing costs had the 30-year fixed rate down two bps to 6.25% (down 58bps).
Currency Watch:
For the week, the U.S. Dollar Index gained 1.3% to 98.855 (up 0.5% y-t-d). On the upside, the Canadian dollar increased 0.5%. On the downside, the South African rand declined 3.7%, the South Korean won 3.2%, the Mexican peso 3.2%, the Brazilian real 2.2% the New Zealand dollar 1.7%, the euro 1.6%, the Swedish krona 1.6%, the Australian dollar 1.2%, the Japanese yen 1.1%, the Singapore dollar 1.0%, the Swiss franc 0.9%, the Norwegian krone 0.7%, and the British pound 0.5%. China's (offshore) renminbi declined 0.61% versus the dollar (up 1.21% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index surged 8.1% (up 19.9% y-t-d). Spot Gold declined 2.0% to $5,172 (up 19.7%). Silver sank 9.9% to $84.5426 (up 18.0%). WTI Crude surged $23.88, or 35.6%, to $90.90 (up 58%). Gasoline jumped 32.2% (up 60%), and Natural Gas rose 11.4% to $3.186 (down 14%). Copper fell 4.2% (up 2%). Wheat rose 3.4% (up 21%), and Corn gained 1.9% (up 2%). Bitcoin rallied $2,600 or 3.9%, to $68,400 (down 22.0%).
Market Instability Watch:
March 4 – Reuters (Promit Mukherjee and David Ljunggren): “The risks posed to debt markets by hedge funds and private credit might be growing faster than the ability of monitoring agencies to understand and mitigate them, Bank of Canada Governor Tiff Macklem said… ‘Economic uncertainty is already high — we cannot afford to add financial instability to the mix,’ he said. Macklem said risks to growth were greater than normal and tilted to the downside.”
March 2 – Financial Times (Ian Smith, Emily Herbert, Rachel Rees, Leslie Hook and Costas Mourselas): “Big investors have turned to gold and the US dollar rather than the traditional safety of government bonds, as anxiety grows over an inflation shock threatened by the war in Iran. Gold raced close to a record high on Monday, jumping as much as 2.6% to more than $5,400 a troy ounce… But government bonds, typically a haven in stormy markets, weakened as traders braced for a rise in inflation… ‘We are seeing bonds again failing to provide protection against risk-off events, even as gold delivers,’ said Seb Barker, chief market strategist at hedge fund firm Marshall Wace. He said events in the Gulf ‘reinforce’ the case for increasing allocations to what he called ‘non-bond safe haven assets’.”
March 3 – Bloomberg (Sangmi Cha): “Panic swept through South Korea’s trading floors as concerns over the Middle East conflict sent the world’s hottest stock market to its biggest-ever selloff. The Kospi Index plunged 12% — following a 7.2% drop on Tuesday — as heavyweights Samsung Electronics Co., SK Hynix Inc. and Hyundai Motor Co. tumbled. The rout triggered a 20-minute trading halt early in the Wednesday session… A key volatility gauge jumped to its highest level since 2008.”
March 5 – CNBC (Lee Ying Shan): “South Korea’s Kospi jumped as much as 12% on Thursday, staging a sharp rebound from its worst session, and on course to clock its best day… The index subsequently pared gains, rising 9.6%...”
March 4 – Bloomberg (Alex Harris): “Investors are rushing into US money-market funds, lifting total assets to a record $8.271 trillion, as the war in Iran fuels a broad flight to safety. Some $49 billion flowed into money-market funds in the week ending March 3, according to… Crane Data LLC. About $18.5 billion alone came in on Tuesday as the effects of the US-Israeli strikes on Iran reverberated across markets. The latest funds boosted this year’s inflows to more than $162 billion.”
March 1 – Bloomberg (Todd Gillespie and Sridhar Natarajan): “Lloyd Blankfein, who led Goldman Sachs… through the 2008 financial crisis, is now ringing alarm bells as Wall Street steers cash from US savers into its latest lending binge: private credit. The financial system appears to be inching toward another potential catastrophe with everyday Americans exposed to some of the losses, Goldman’s former longtime chief executive officer said… the assets at issue can be hard to analyze, may feature hidden leverage and can become tough to sell. ‘One has to worry about opaque assets where there’s illiquidity,’ he said… ‘We’re getting close to the end of late stages of cycles on this — and we’re due for a kind of a reckoning’.”
U.S. Credit Trouble Watch:
March 5 – Bloomberg (Paul J. Davies): “As private credit boomed, the gray beards of banking questioned how these young firms would cope with failing borrowers when a bust came. But a different problem is rearing its head first for one popular type of vehicle in this $1.8 trillion asset class. Often it’s not bad loan losses that get you, it’s liquidity draining away. Wealthy investors are increasingly demanding their cash back from some private credit funds, put off by falling interest rates and the prospect of rising corporate defaults. These firms typically lend to companies at terms of five years or so, and they’re having to become inventive about how to balance these hard-to-sell assets against the redemption requests. No one really wants to block quarterly payouts because they worry it would hurt their reputation.”
March 3 – Bloomberg (Laura Benitez, Allison McNeely and Layan Odeh): “Amid the worst start to the year for their stocks in more than a decade, leaders of Wall Street’s biggest private markets firms had a surprising message: investors have reason to be concerned. From Blue Owl Capital Inc. to Blackstone Inc., private credit funds across the industry are facing a wave of withdrawals and analysts are warning default rates could soar if AI disrupts corporate America as much as some experts expect. And in private equity, managers are struggling to offload assets and return cash to investors, forcing them to turn to expensive forms of debt to extract returns from businesses they’ve acquired. ‘People made choices: If you wanted a higher dividend, you could take more risk,’ Apollo Global Management Inc. Chief Executive Officer Marc Rowan said… ‘That felt really good on the way up. That’s not going to feel so good on the way down’.”
March 3 – Axios (Emily Peck): “An experiment in democratizing private markets looks to be on the way out: Retail investors don’t seem to have the stomach for it. What happened with Blue Owl, a private credit firm that had retail investors clamoring for their money back, sparking a mini crisis that was a PR mess for the company, sent its stock price down sharply, and rattled investors about the entire sector… Blue Owl is exhibit A for a particular segment of private credit: business development companies, or BDCs, a structure created by Congress decades ago to funnel investments to smaller businesses. They’re often publicly traded and attract ordinary, or retail, investors. Around 40% of Blue Owl’s $307 billion of assets under management are from individuals…”
March 3 – Bloomberg (Rene Ismail): “Business development companies are sitting on a massive pile of leveraged loans, which could be sold to meet redemption requests and push spreads wider, according to Deutsche Bank AG analysts. BDCs — private debt funds that bundle direct loans — own nearly $143 billion of leveraged loans, the bank said…, more than the $120 billion currently held by leveraged loan funds. The BDC market is already down about 11% so far this year…, with recent earnings announcements indicating loan value markdowns and dividend cuts. Redemption requests have been picking up across BDCs in recent quarters…”
March 1 – Financial Times (Eric Platt and Amelia Pollard): “Wealthy investors who ploughed hundreds of billions of dollars into private credit are pulling back, cutting off a key source of funds that investment giants including Blackstone, Blue Owl and Ares Management have used to fuel their growth. New commitments to so-called non-traded business development companies — the fast-growing funds targeted at retail and wealthy individuals — slid 40% to $3.2bn in January compared with December, according to investment bank RA Stanger. The slump in fundraising is likely to pose an important test for an industry invested in loans that rarely or never trade, with executives telling the FT they believe that outflows could soon begin to overwhelm the volume of inflows to some of the largest funds.”
March 2 – Financial Times (Eric Platt): “Blackstone’s flagship private credit fund was hit with $1.7bn of net outflows in the first quarter after an exodus from the asset class cut off a crucial source of fundraising for the private investment giant. Redemption requests from the $82bn Blackstone private credit fund, known as Bcred, rose to 7.9% of its assets in the first quarter, eclipsing a 5% threshold that allows the private investment group to limit payouts to withdrawing investors. The redemptions will be closely watched across the wider $2tn private credit industry as an early sign of retail investors’ increasing unease with the asset class. It will also provide a test for so-called semi-liquid funds that have proliferated across Wall Street, which offer retail investors the ability to exit periodically even though the funds are invested in assets that rarely or never trade.”
March 5 – Bloomberg (Silas Brown and Libby Cherry): “BlackRock Inc. slashed the value of a private loan to zero at the end of 2025, just three months after assessing it at 100 cents on the dollar, marking the second sudden wipeout to recently hit its private-credit division. The roughly $25 million loan to Infinite Commerce Holdings, a so-called Amazon aggregator…, is now worthless, BlackRock TCP Capital Corp. reported… The wipeout was part of the broader loan losses that BlackRock signaled in late January, when it disclosed that the private-credit fund was preparing to mark down the net value of its assets by 19%.”
March 3 – Wall Street Journal (Matt Wirz): “Blackstone’s BX Jonathan Gray had been a steady voice of optimism as cracks began appearing in the private-credit industry. He downplayed the risk of individual investors cashing out their investments, pointing to the surge of new investments coming in. Now, the momentum has shifted. Outflows topped inflows by a record $1.7 billion in Blackstone’s massive $82 billion private-credit fund in its latest quarter. The fund, known as Bcred, paid back shareholders owning 7.9% of the fund who redeemed their investments in the most recent financial quarter… The figure exceeds the minimum 5% that managers of such ‘semiliquid’ funds are required to redeem, reflecting the extraordinary steps asset managers are taking to calm clients amid mounting fear about potential losses in private credit.”
March 1 – Wall Street Journal (Gregory Zuckerman, Matt Wirz and Peter Rudegeair): “Doug Ostrover and Marc Lipschultz seemed to have private credit figured out. The executives joined forces to launch fund manager Blue Owl Capital, turning it into a powerhouse in the booming business of lending to private companies without the use of banks. They pounced on trends early, zeroing in on lending to software companies, plowing money into artificial intelligence and selling their funds to wealthy individuals. Ostrover and Lipschultz became instant billionaires, buying a hockey team, a piece of a football team and luxury real estate. Now, the foundations of their empire are cracking—raising questions about the once-sizzling industry’s future and transfixing Wall Street… Spooked by a series of shocks in the wider credit market, individual investors who put cash into some Blue Owl funds have been asking for their money back. The firm recently said it was unloading loans to raise cash for investor payouts.”
March 5 – Bloomberg (John McCrank): “US leveraged-loan funds had net outflows of over $1 billion for a second-straight week as the war in Iran adds uncertainty to a market that’s been reeling from fears that AI will undermine entire sectors of the software industry. Investors pulled $1.47 billion from the funds for the week… That follows net withdrawals of $1.54 billion the previous week, the biggest exodus since last April’s tariff-driven turmoil.”
March 3 – Bloomberg (Aashna Shah and Erin Hudson): “Municipal bonds deepened their selloff on Tuesday, with benchmark yields risingas much as 11 bps, as geopolitical unrest in the Middle East and surging oil prices roiled US Treasuries for a second day. Ten-year muni yields rose 11 bps to 2.63%..., marking the biggest gain since April when volatility from President Donald Trump’s tariff policies rocked the market…”
March 3 – Bloomberg (Allison McNeely): “A forecast last week from UBS Group AG analysts that private credit default rates could reach 15% was ‘absolutely wrong,’ Ares Management Corp.’s Chief Executive Officer Mike Arougheti said. ‘It was actually irresponsible,’ he said… ‘This is part of the problem when you have someone who’s actually never been in a segment of the market making commentaries’ about default outlooks. The 15% rate represents the UBS analysts’ worst-case scenario, which would only take place if artificial intelligence triggers an ‘aggressive’ disruption among corporate borrowers. Otherwise, they generally expect defaults to rise by about 5% before the broader credit market stabilizes in late 2026.”
Iran War Watch:
March 2 – New York Times (Tyler Pager): “Six American service members were killed, and U.S. military jets were shot out of the sky. Investors are bracing for market turmoil, fearing prolonged disruption to oil supplies. President Trump says the military campaign against Iran could extend for weeks… With his decision Friday to authorize war against Iran, Mr. Trump is taking the biggest gamble of his presidency, risking the lives of American troops, more deaths and instability in the world’s most volatile region, and his own political standing. Mr. Trump, facing declining approval ratings and staring down the possibility that Republicans will lose control of Congress in the midterms, plunged the United States into what is shaping up to be its most expansive military conflict since the 2003 invasion of Iraq.”
March 3 – Wall Street Journal (Jared Malsin and Omar Abdel-Baqui): “The U.S. is facing increasing risks to its military forces and diplomatic presence in the Middle East as Iran is launching waves of missile and drone attacks across the region that are testing its ability to defend a swath of territory. U.S. Central Command said that six servicemembers had been killed in the three-day-old campaign on Monday. The six died in a drone strike on a base in Kuwait… Bases that house U.S. forces have also come under attack in Iraq, Saudi Arabia and Bahrain. The challenge for U.S. forces is handling Iranian attacks across a huge swath of the Middle East while trying to coordinate air defense with local allies.”
March 2 – Financial Times (Najmeh Bozorgmehr and Andrew England): “Iranian forces have launched a plan devised by Ayatollah Ali Khamenei and Tehran’s top commanders to sow chaos across the Middle East, create upheaval in global markets and raise the stakes in the hope of pressuring the US and Israel to halt their attack. A regime insider told the FT that the supreme leader… and his lieutenants began working on a ‘detailed’ plan after Israel’s devastating 12-day war… last June. This plan included attacks on energy facilities and strikes that would cause disruptions to air travel in the region, he said. ‘We had no choice but to escalate and start a big fire so everyone would see,’ the regime insider said. ‘When our red lines were crossed in violation of all international laws, we could no longer adhere to the rules of the game.’”
March 5 – New York Times (David E. Sanger): “Sitting beside Germany’s chancellor in the Oval Office…, President Trump offered a brief moment of insight into the decision-making process in the White House on the most consequential of matters: Whether to take the country to war. His decision to order the attack on Iran, he said, was mostly a matter of gut instinct about Iranian intentions. ‘We were having negotiations with these lunatics, and it was my opinion that they were going to attack first,’ he said, while his guest, Friedrich Merz, sat expressionless. ‘I think they were going to attack first, and I didn’t want that to happen. So if anything, I might’ve forced Israel’s hand. But Israel was ready and we were ready’.”
March 4 – Financial Times (Neri Zilber and James Shotter): “Israel is preparing for a multi-week military onslaught alongside the US to fully ‘dismantle’ key pillars of Iran’s theocratic state and the Revolutionary Guards that protect the Islamic republic, said current and former Israeli officials. A senior Israeli military official said Israel’s objective was to ‘dismantle the regime’s military infrastructure, including the IRGC’ as well as Iranian nuclear sites, military production facilities and space and cyber capabilities. ‘We’re preparing for several long weeks,’ the official said… A former senior Israeli official who is familiar with the current war plans warned that ‘this will take time… There is a lot of work to be done. Iran is huge’.”
March 5 – Financial Times (Alexandra White): “Donald Trump has said he must be involved in picking Iran’s supreme leader and that Ayatollah Ali Khamenei’s son Mojtaba would not be acceptable to the US as the country’s next leader. ‘We want to be involved in the process of choosing the person who is going to lead Iran into the future, so we don’t have to go back every five years and do this again and again,’ Trump told Reuters… ‘We’re going to have to choose that person along with Iran. We’re going to have to choose that person.’ The US president’s comments mark a step up in his ambitions to enact US-led regime change in Tehran and signal he hopes to replicate American action to change the leadership of Venezuela.”
March 5 – Axios (Barak Ravid and Zachary Basu): “President Trump told Axios… he needs to be personally involved in selecting Iran’s next leader — just as he was in Venezuela… Trump acknowledged that Mojtaba Khamenei, son of assassinated supreme leader Ali Khamenei, is the most likely successor — while making clear he finds that outcome unacceptable. For several days, the Iranian regime has postponed the announcement... But statements by Iranian politicians… suggested an announcement could be imminent. ‘They are wasting their time. Khamenei’s son is a lightweight. I have to be involved in the appointment, like with Delcy [Rodriguez] in Venezuela,’ Trump said.”
March 5 – Bloomberg (Dan Williams, Christine Burke, and Kateryna Kadabashy): “Iran launched a fresh wave of missile and drone strikes across the Gulf on Thursday evening, with attacks reported in the United Arab Emirates, Bahrain, Qatar and Kuwait. Bahrain’s oil refinery was hit and set on fire, and there were reports of explosions near Abu Dhabi’s international airport. The UAE earlier warned Dubai residents of incoming projectiles… Qatar also told residents to remain indoors, while the US said it’s suspending operations at its embassy in Kuwait. After a period when the intensity of Iran’s missile and drone attacks had waned, the latest assaults showed that Tehran still has the capability to hit targets across the region simultaneously.”
March 5 – CNBC (Dan Mangan): “Iran’s foreign minister said… his country is ‘not asking for a ceasefire’ from the United States and Israel, ‘and we don’t see any reason why we should negotiate’ after nearly a week of war. Foreign Minister Abbas Araghchi also said… that Iran is ‘confident’ that it can confront the U.S. military if President Donald Trump decides to invade the nation with ground troops. ‘And that would be a big disaster for them,’ Araghchi told NBC… He also said that after six days of war against Iran, ‘It is clear that the U.S. has failed to achieve its main goal, which was clean, rapid victory.’ ‘They failed to achieve that, and now they are trying to justify why they did attack us. And they have, you know, presented so many different reasons, but none of them worked,’ Araghchi said. ‘And now they are talking about, you know, plan B. And I, I believe that, you know, plan B would be even a bigger failure’.”
March 2 – Bloomberg (Gerry Doyle and Golnar Motevalli): “Just three days into the conflict, the Iran war has become attritional. Waves of drone attacks by the Islamic Republic are putting pressure on the defenses of the US and its partners from Bahrain to the United Arab Emirates, depleting weapons stockpiles… The drones have in recent days hit US bases, oil infrastructure and civilian buildings… US-made Patriot air-defense missiles have been largely successful in stopping the Iranian Shaheds and other ballistic missiles, with interception rates over 90%, according to the UAE. But using $4 million missiles to destroy $20,000 drones illustrates a problem that has haunted Western military planners since early in the Ukraine war: The cheap weapons can chew up resources meant for much more complex threats.”
March 4 – Reuters (Anna Hirtenstein, Andrew Mills and Jonathan Saul): “Iranian drone attacks could disrupt the Strait of Hormuz for months, but how long the Islamic Republic could sustain its missile barrage is less clear, according to intelligence sources... Since the U.S. and Israel attacked Iran on Saturday, Iran has launched hundreds of missiles and more than 1,000 drones at Gulf states allied with Washington. Most were intercepted by air defences, but some residential and commercial buildings, infrastructure and U.S. military bases have sustained damage. Tehran is a major drone manufacturer and has the industrial capacity to produce around 10,000 per month…”
March 2 – Wall Street Journal (Yaroslav Trofimov): “Persian Gulf nations targeted by Iran have, so far, managed to limit the damage by deploying sophisticated U.S.-made air defenses against the hundreds of drones and missiles that have rained on their cities. With costly interceptors and radar, all integrated with the U.S. military, the oil-rich Gulf Arab states have fielded some of the most advanced air defenses in the world… ‘The intensity of interceptor usage that we have seen over the last couple of days can’t be maintained for more than another week—probably a couple of days at most, and then they will feel the pain of interceptor shortage,’ said Fabian Hoffmann, a missile expert at the University of Oslo.”
March 4 – Financial Times (Mehul Srivastava, Andrew England and Steff Chávez): “Gulf states are anxiously waiting for the US military to deliver supplies of interceptors for air-defence systems as they try to fend off volleys of Iranian missiles and swarms of drones, regional officials said. Missiles for those interceptors, part of aerial defence systems sold to Gulf states by major US manufacturers for billions of dollars, have been in short supply since the start of the war in Ukraine after decades of under-investment in their procurement. Iran’s relentless barrages are testing alliances, further exposing holes in western production capacity and underscoring the benefits… of asymmetrical warfare… ‘We’re concerned — we don’t have enough,’ said one senior Gulf official. ‘All of us in the Gulf don’t have enough. We have asked for more interceptors, but our friends are not yet giving [them to] us’.”
March 5 – Reuters (Laila Bassam): “Hezbollah has deployed elite fighters to confront Israeli forces in southern Lebanon, sending them back into the border region from which they withdrew after a war in 2024, three Lebanese sources familiar… said, as the Iran-backed group wades deeper into the conflict in the Middle East. Members of Hezbollah’s Radwan force had received orders to join the battle and block advances by Israeli tanks…”
March 4 – Bloomberg (Magdalena Del Valle and David Gura): “Real change in Iran will require a sustained US military focus in the Middle East that could wear down US weapons stockpiles and leave it vulnerable to attacks from other adversaries such as Russia and China, former Secretary of State Antony Blinken said. The top diplomat in Joe Biden’s administration told Bloomberg… he worries about a scenario where ‘we so deplete our arsenal, and it takes a long time to rebuild it, that that puts us in a disadvantageous position when it comes to, say, a China or a Russia.’ His remarks come on the fifth day of combat operations… as concerns grow that this conflict could end up becoming a war of attrition. ‘They want to try to inflict so much pain that we can’t sustain the effort,’ Blinken said of the Iranians. But ultimately, whether the US can continue will depend on ‘markets and munitions,’ he said.”
March 4 – Axios (Barak Ravid and Marc Caputo): “Militants from several Kurdish Iranian factions are preparing for a possible ground offensive against Iran’s regime in the northwestern part of the country, according to U.S. and Israeli officials and a senior official in one of the factions. A Kurdish ground offensive coordinated with the U.S.-Israeli bombing campaign against Tehran could increase pressure on the regime and encourage an internal rebellion that could spread to other parts of Iran… These Kurdish factions have thousands of soldiers along the Iran-Iraq border and control strategic areas.”
Iran War Ramifications Watch:
March 5 – Bloomberg (Olivia Solon, Loni Prinsloo, Marissa Newman, and Omar El Chmouri): “For millennia, wartime combatants have sought to hobble the infrastructure of their adversaries by poisoning wells, burning bridges or, more recently, attacking railways, refineries and airports. In the war now unfolding across the Middle East, another kind of target has been added to the list: data centers. Drone strikes have damaged three facilities operated by Amazon.com Inc. in the United Arab Emirates and Bahrain. And Israel and the US have hit at least two data centers in Tehran… according to Holistic Resilience, a nonprofit mapping airstrikes. Attacking such facilities can ‘paralyze banks, paralyze government offices’ and key industries, says Daniel Efrati, chief executive officer of NED Data Centers…”
March 4 – Financial Times (Lee Harris, Jamie John and Malcolm Moore): “The cost of insuring a ship sailing through the Strait of Hormuz has soared 12-fold, even after Donald Trump vowed to backstop trade through the key oil chokepoint. Shipowners have been quoted millions of dollars for cover to cross the Strait or sail in nearby high-risk waters, brokers said, as premiums jumped as high as 3% of the cost of a ship…, up from about 0.25% before the war. The US president said… the US Development Finance Corporation would provide insurance and guarantees ‘at a very reasonable price… for the Financial Security of ALL Maritime Trade, especially energy, travelling through the Gulf’.”
March 4 – Financial Times (Malcolm Moore): “The Gulf’s biggest oil producers are facing a race against time to resume exports before their storage tanks fill up, with Saudi Arabia estimated to have as little as two weeks before it would have to cut production. Iraq on Tuesday became the first major exporter to begin reducing output, announcing it was winding down production at three of its largest oilfields. Further oilfields across the region are poised to shut down over the coming days, taking millions of barrels of crude off the market, unless energy shipments through the Strait of Hormuz are able to resume.”
March 3 – Reuters (Pablo Sinha): “Crude oil supplies from Iraq and Kuwait could start shutting in within days if the Strait of Hormuz remains closed, potentially cutting 3.3 million barrels per day (bpd) by day eight of the Middle East conflict, J.P. Morgan analysts said... Iraq and Kuwait have roughly three and 14 days… before they would be forced to halt crude exports that pass through the strait… In a prolonged closure, losses could escalate to 3.8 million bpd around day 15 and 4.7 million bpd by day 18… Iraq will be forced to cut its oil production by more than 3 million bpd in a few days if oil tankers cannot move freely through the Strait of Hormuz…”
March 4 – Financial Times (Ian Johnston, Verity Ratcliffe, Sarah White and Sebastien Ash): “The war in the Middle East pushed up European gas prices to their highest level since 2023 earlier this week, leaving the continent facing another energy crunch four years after Russia’s full-scale invasion of Ukraine. With shipping through the pivotal Strait of Hormuz in effect at a standstill and Iranian strikes on Qatar forcing the world’s second biggest liquefied natural gas supplier to stop production, European gas prices have gained 70% since Friday. ‘It’s a double punch. Europe is only coming out of an industrial energy crunch and now we’ve got the next one,’ said Henning Gloystein, an energy expert at Eurasia Group.”
March 5 – Bloomberg (Nicholas Lua, Weilun Soon, and Serene Cheong): “A deepening energy crunch across Asia is impacting all corners of the oil market, with suppliers of everything from shipping fuel to cooking gas beginning to cut back on sales in order to manage shrinking stockpiles. A widening conflict in the Persian Gulf… has upended the energy trade by all but halting traffic through the Strait of Hormuz… The impact has been swift, even for wealthy markets with extensive storage.”
March 5 – Financial Times (Alice Hancock and Kana Inagaki): “Shipping companies are struggling to reroute and land cargoes of fresh food and live animals stuck as the Middle East conflict disrupts trade and starts to cause congestion at ports outside the Gulf. About 90 container ships are stuck in the Gulf out of a total of 425 that were due to cross the Strait of Hormuz when the vital trade artery was in effect shut by the conflict. Most have been left stranded or seeking other ports… Many contain refrigerated food for Middle Eastern consumers. Four hold shipments of live animals destined for halal consumption…”
March 2 – Reuters (Lisa Baertlein): “Container ships account for roughly 100 of the 750 ships ensnared in the Strait of Hormuz backups following U.S. and Israeli attacks on Iran, Jeremy Nixon, CEO of container carrier Ocean Network Express (ONE), said… ‘About 10% of the container ship global fleet is caught up in this,’ Nixon said at S&P Global Market Intelligence’s TPM26 container shipping conference in Long Beach.”
March 3 – Bloomberg (Alex Longley): “The cost of booking the world’s biggest oil tankers on the industry’s benchmark route hit a fresh record as shipping traffic through the Strait of Hormuz remains all-but halted. Earnings for hauling crude from the Middle East to China exceeded $481,000 a day on Tuesday… Shipping costs were already soaring before the war due to rising global oil supplies and a South Korean shipowner snapping up vessels.”
March 4 – Bloomberg (Leen Al-Rashdan and Danny Lee): “The financial and logistical troubles the Iran war is causing for the global aviation industry are compounding by the day, with the number of canceled flights to Middle East hubs surpassing 20,000 since fighting began. Emirates, the world’s largest international airline, extended its suspension of flights to Dubai through the end of Saturday, a full week since the US and Israel launched their joint attack. Qatar Airways extended its service halts into Friday. Of the 36,000 scheduled flights to or from the Middle East since Feb. 28, more than half have been canceled… That equates to about 4.4 million seats. Thousands of passengers have been stranded in the Gulf region…”
March 4 – Financial Times (Leslie Hook, Camilla Hodgson and Rachel Millard): “The war in Iran has caused smelter closures and ‘force majeure’ declarations across the aluminium industry in the Middle East, threatening a supply crunch in the key industrial metal with global stocks already close to historic lows. Several big producers have declared they are no longer able to honour their contracts… The Qatalum smelter started a controlled shutdown this week after its gas supplier Qatar Energy said it could no longer provide gas to the plant. Norsk Hydro said a full restart could take six to 12 months.”
March 5 – Bloomberg (David Fickling): “A world where we can cook up AI videos in seconds from the apps on our phones might seem remote from the physical realities of warfare in the seaways of the Persian Gulf. In fact, they’re closely intertwined. That’s because the building blocks of the technology industry are deeply dependent on petroleum flowing through the Strait of Hormuz… More than half of the DRAM and NAND chips that provide electronic devices with their short- and long-term memory are manufactured in South Korea. About 70% of the advanced processing chips found in smartphones, PCs and data centers are made in Taiwan. Those two countries, in turn, are among the most dependent on liquefied natural gas exports from Qatar.”
March 4 – Financial Times (Susannah Savage): “The conflict in Iran is disrupting fertiliser production and exports in the Middle East, tightening global supplies and raising fears of higher food prices… The Middle East is one of the world’s largest fertiliser producers, while the Strait of Hormuz is a crucial shipping route for exports. About 35% of global urea exports pass through the waterway… Urea is the most widely used nitrogen fertiliser, which in turn underpins around half of global food production. The route also handles 45% of global sulphur exports, a key ingredient used to produce phosphate fertilisers, as well as significant volumes of ammonia, a key ingredient for nitrogen fertilisers.”
March 3 – Associated Press (Kelvin Chan): “Damage to three Amazon Web Services facilities in the Middle East from Iranian drone strikes highlights the rapid growth of data centers in the region, as well as the industry’s vulnerability to conflict. The company’s cloud computing division, Amazon Web Services, said… two data centers in the United Arab Emirates were ‘directly struck’ and another facility in Bahrain was also damaged after a drone landed nearby. ‘These strikes have caused structural damage, disrupted power delivery to our infrastructure, and in some cases required fire suppression activities that resulted in additional water damage,’ AWS said…”
March 5 – Bloomberg (Alfred Cang): “China’s government has told the country’s top oil refiners to suspend exports of diesel and gasoline as an escalating conflict in the Persian Gulf disrupts the arrival of crude from one of the world’s largest producing regions. While the country is only the third-largest supplier of oil products into the region — its vast refining sector primarily serves domestic demand — China’s curbs just six days into a war reflect a scramble across Asia to prioritize domestic needs as the crisis in the Middle East deepens.”
Trump Administration Watch:
March 1 – Reuters (Jason Lange): “Only one in four Americans approves of U.S. strikes on Iran that have plunged the Middle East into chaos, while about half — including one in four Republicans — believe President Donald Trump is too willing to use military force, according to a Reuters/Ipsos poll. Some 27% of respondents said they approved of the strikes…, while 43% disapproved and 29% were not sure.”
March 1 – Reuters (Gram Slattery and Erin Banco): “Following the killing of Iran’s Supreme Leader Ayatollah Ali Khamenei on Saturday, many senior U.S. officials remain skeptical that the U.S. and Israeli military operation against the Islamic Republic will lead to a regime change in the near term. Before and after the start of the attack, U.S. officials, including U.S. President Donald Trump, had suggested that toppling the nation’s repressive governing system was one of several U.S. goals, in addition to crippling Iran’s ballistic missile and nuclear programs. ‘I call upon all Iranian patriots who yearn for freedom to seize this moment ... and take back your country,’ Trump said…”
March 3 – Axios (Ben Geman): “President Trump said the U.S. will ‘immediately’ offer ‘political risk insurance and guarantees’ for energy tankers and other ships in the Gulf region, and that the Navy will escort tankers through the Strait of Hormuz if needed. The White House is trying to ease oil price spikes that are starting to boost U.S. gasoline prices… Trump said the financial assurances would be offered through the U.S. Development Finance Corp. at a ‘very reasonable price.’ ‘If necessary, the United States Navy will begin escorting tankers through the Strait of Hormuz, as soon as possible,’ he wrote. ‘No matter what, the United States will ensure the FREE FLOW of ENERGY to the WORLD’.”
March 4 – Wall Street Journal (Lydia Wheeler, James Fanelli and Louise Radnofsky): “A federal trade-court judge… ordered the Trump administration to start refunding the more than $130 billion it collected in the global tariffs invalidated by the Supreme Court last month. Following a hearing involving a filtration company’s fight for a refund, Judge Richard Eaton at the Manhattan-based Court of International Trade issued a written order directing the administration to begin the process of refunding importers… More than 2,000 lawsuits have been filed by companies—including big names such as Costco Wholesale, FedEx and Pandora Jewelry—seeking to recoup their money.”
March 5 – CNBC (Kevin Breuninger): “President Donald Trump… suggested his administration will turn its sights to Cuba after U.S. military operations in Iran are finished. ‘What’s happening with Cuba is amazing,’ Trump… ‘We think that we want to fix — finish this one first, but that will be just a question of time before you and a lot of unbelievable people are going to be going back to Cuba, hopefully not to stay,’ Trump said…”
Constitution Watch:
March 2 – Financial Times (Stefania Palma and Kaye Wiggins): “The US government has dropped its legal effort to enforce punitive executive orders targeting top law firms, abandoning a fight that rocked Big Law after Donald Trump’s return to the presidency. The White House… terminated its appeal efforts in four cases involving Jenner & Block, Perkins Coie, WilmerHale and Susman Godfrey… All four firms successfully challenged Trump after he issued what could have been damaging executive orders against them. Abandoning the cases marks a dramatic U-turn by the government in a tussle that raised existential questions in the legal community.”
Trade War Watch:
March 3 – Bloomberg (Tyler Kendall and Courtney Subramanian): “The US plans to complete several trade investigations that will allow President Donald Trump to impose new tariffs within five months to replace the levies struck down by the Supreme Court, US Trade Representative Jamieson Greer said. Greer’s comments… offered the most concrete timeline yet for how long the White House will need to rebuild Trump’s tariff regime. After the Feb. 20 court ruling, the president applied a global baseline tariff, which he can maintain for as many as 150 days without congressional approval. ‘By the time the five-month period has elapsed, we’ll have completed investigations,’ Greer said… ‘We know there are countries out there with deals who are very interested in keeping the deals’.”
March 3 – Bloomberg (Tyler Kendall and Daniel Basteiro): “Donald Trump said he will ‘cut off all trade with Spain’ after the country denied access to its military bases for his bombing campaign against Iran, spurring a sharp rebuke from Madrid that the US president must respect international trade agreements. ‘I told Scott to cut off all dealings with Spain,’ Trump said…, referring to US Treasury Secretary Scott Bessent.”
New World Order Watch:
March 5 – Bloomberg (Janice Huang): “Yuan financing has never been as popular as it is now, with more countries and foreign companies tapping the market… Bonds, either sold within China by overseas entities or issued elsewhere, raised a record 218 billion yuan ($31.6bn) already this year, as the Indonesian government and Wall Street’s Morgan Stanley joined the binge. That adds to the equivalent of $167 billion borrowed via notes and loans in 2025, a tripling in just five years.”
Ukraine Watch:
March 4 – Wall Street Journal (Bojan Pancevski and Drew Hinshaw): “Russia is one of the biggest winners in the early days of the largest U.S. military confrontation in decades, as Iranian missiles deplete stocks of Patriot interceptors that Ukraine needs for its defense. Even before the Iran campaign, production bottlenecks in the U.S.-made Patriot system had drained Ukraine’s reserves and left European allies on yearslong waiting lists. Those shortfalls have allowed Russia to punch through gaps in Ukraine’s air defenses, devastating its power infrastructure and casting Ukrainian cities into blackouts. U.S. and Gulf states have fired hundreds of interceptors in the opening days of the war to repel Iranian missile and drone barrages. Gulf states possess only days of interceptors under sustained attack, analysts estimate…”
March 3 – Politico (Tim Ross, Veronika Melkozerova, Esther Webber and Zoya Sheftalovich): “Europeans struggling to cope with Donald Trump’s inflammatory interventions may be about to discover there’s one thing worse: Not being the object of his attention anymore. As Trump’s ongoing operation against Iran takes priority with Pentagon planners and the White House, European officials fear he will lose interest in ending Russia’s full-scale war in Ukraine... The practical impact if the U.S. becomes embroiled in a drawn-out conflict in the Middle East could be even more severe than the political effect: Ukraine may be starved of the American-made weapons it needs to resist daily Russian missile attacks… ‘Everyone understands that for us, this is our life — the appropriate weapons,’ Ukrainian President Volodymyr Zelenskyy told reporters... ‘If there are long-term hostilities in the Middle East, this will certainly affect the supply. I am sure of this’.”
U.S./Russia/China/Europe/Iran Watch:
March 2 – Associated Press: “Russia… condemned the U.S.-Israeli strikes on Iran as ‘a preplanned and unprovoked act of armed aggression against a sovereign and independent U.N. member state,’ demanding an immediate halt to the military campaign and a return to diplomacy… Foreign Ministry accused ‘Washington and Tel Aviv’ of ‘hiding behind’ concerns about Iran’s nuclear program while actually pursuing regime change. It warned the attacks risked triggering a ‘humanitarian, economic and possibly radiological catastrophe’ in the region and accused the U.S. and Israel of ‘plunging the Middle East into an abyss of uncontrolled escalation’.”
March 1 – Politico (Phelim Kine): “Beijing denounced the killing of Iran’s Supreme Leader Ayatollah Ali Khamenei in U.S.-Israeli airstrikes and called for an end of military operations in the Middle East. ‘The attack and killing of Iran’s supreme leader is a grave violation of Iran’s sovereignty and security,’ the Chinese government said… ‘China firmly opposes and strongly condemns it,’ it said. ‘We urge for an immediate stop to the military operations, no further escalation of the tense situation and joint effort to maintain peace and stability in the Middle East and the world at large,’ the statement said.”
March 4 – Telegraph (Chris Price): “Vladimir Putin has threatened to cut off gas supplies to Europe as the war in Iran sends energy prices soaring. The Russian president said… he will instruct the Kremlin to consider shifting Russia’s gas exports away from Europe and to more profitable markets in Asia following the outbreak of war in the Middle East. Putin said…: ‘Other markets are opening now. Maybe it’s better for us to end supplies to the European market right now? To go to those markets that are opening now and get a foothold there’.”
March 4 – Financial Times (Barney Jopson and Amy Mackinnon): “As he warned that the US risked triggering a spiral of war with its ‘illegal’ attack on Iran, Spain’s Prime Minister Pedro Sánchez also delivered a pointed rebuke to Donald Trump that no other European leader would dare to make. Arguing that politicians should make people’s lives better, Sánchez said: ‘It is absolutely unacceptable that those leaders who are incapable of fulfilling that duty use the smoke of war to hide their failures and, in the process, line the pockets of a few — the only ones who win when the world stops building hospitals to start making missiles.’ It was the kind of jibe — an allusion to plutocracy and inequality — rarely heard so explicitly from an EU leader.”
March 2 – Financial Times (George Parker, Jim Pickard and Lucy Fisher): “Sir Keir Starmer has hit back at attacks by Donald Trump over Britain’s failure to support the US offensive in Iran, declaring: ‘This government does not believe in regime change from the skies’… Starmer told the House of Commons that the UK would only take part in military action if there was ‘a lawful basis and a viable, thought-through plan’.”
March 4 – Politico (Camille Gijs and Aitor Hernandez-Morales): “President Donald Trump’s threat to impose a trade embargo on Spain has delivered yet another jolt to the European Union, forcing European leaders to rally around Madrid. Trump launched his broadside on Tuesday after Madrid declined to allow U.S. warplanes to use its air bases to attack Iran. Prime Minister Pedro Sánchez stood firm on Wednesday, describing the five-day-old war launched by the U.S. and Israel on Iran as illegal. French President Emmanuel Macron rushed to Sánchez’s side, expressing solidarity against ‘recent threats of economic coercion’ made against Spain. European Council President António Costa doubled down and stressed that ‘the EU will always ensure that the interests of its Member States are fully protected’.”
March 4 – Wall Street Journal (David Luhnow, Max Colchester and Bertrand Benoit): “For the past year, most European leaders took pains not to offend President Trump. The Iran conflict has brought a swift end to that honeymoon—for at least two leaders. The leaders of Britain and Spain ratcheted up their war of words with the president…, spelling out why they didn’t back the U.S. attack on Iran, calling it both illegal and unwise. ‘We can’t play Russian roulette with the destiny of millions of people,’ Spanish Prime Minister Pedro Sánchez said. ‘The powers involved in this conflict should immediately stop the hostilities’.”
AI Bubble/Arms Race Watch:
March 1 – Axios (Madison Mills): “Anthropic’s Claude hit No. 1 in U.S. app downloads Saturday, overtaking ChatGPT, after the Pentagon blacklisted the company for refusing to loosen safeguards for military use of its AI model… Anthropic lost its Pentagon contract Friday over a dispute about military use of Claude, shortly after President Trump blasted it as a ‘Radical Left AI company.’ Anthropic drew red lines against using its AI for mass surveillance and autonomous lethal weapons. Hours later, OpenAI — maker of ChatGPT — announced its own Pentagon deal after the Defense Department agreed to red lines similar to Anthropic’s.”
Bubble and Mania Watch:
March 2 – Bloomberg (Anna J Kaiser and Kurt Wagner): “Meta Platforms Inc. founder Mark Zuckerberg… purchased a $170 million mansion on Miami’s ‘billionaire bunker,’ a private island in Biscayne Bay… The sale at 7 Indian Creek Island Road sets a record for most expensive home sale in Miami-Dade County. Developer Vlad Doronin’s $120 million sale of his Star Island mansion in 2025 previously held the record.”
Federal Reserve Watch:
March 3 – Bloomberg (Amara Omeokwe and Enda Curran): “Kevin Warsh is still months away from taking the helm at the Federal Reserve, but his ability to deliver the interest-rate cuts President Donald Trump expects is facing hurdles as the US economy, and his future colleagues, tilt in the opposite direction. Most Fed officials see no compelling reason to rush additional rate cuts, given inflation is still elevated and the labor market seems to be stabilizing. The biggest surge in oil prices in four years… might only add to their reluctance. Several policymakers have also voiced skepticism over the ideas underpinning Warsh’s vision for lower rates, which centers on the promise that a technology revolution is about to deliver a low-inflation economic boom, and on his pledge to downsize the Fed’s balance sheet.”
March 5 – Reuters (Matt Ott): “Richmond Fed president Tom Barkin said still high inflation and stronger recent jobs numbers may shift the Fed’s risk outlook at a time when the U.S. conflict with Iran could further push up key consumer prices… ‘With the PCE numbers that we’re expecting next week, you’ve got a couple months of relatively high inflation. That certainly puts pause to any conclusion that we’re done fighting this,’ Barkin said…”
March 3 – Bloomberg (Catarina Saraiva): “Federal Reserve Bank of Kansas City Jeff Schmid reiterated that inflation is too high, adding that the latest numbers suggest it’s nearly a percentage point above the US central bank’s target. ‘Inflation has been above the Fed’s objective for nearly five years now,’ Schmid said… ‘I don’t think we have room to be complacent’… Schmid said inflationary pressures are apparent both in tariff-impacted goods and in services.”
March 3 – Reuters (Michael S. Derby): “Federal Reserve Bank of Minneapolis President Neel Kashkari said… the Iran conflict has increased uncertainty about the U.S. economic outlook and made it harder to know what lies ahead for central bank interest rate policy. In terms of the outlook, ‘I had a lot of confidence up until a couple of days ago,’ before the joint U.S.-Israel attack on Iran started, Kashkari said… ‘The question I think that we are wrestling with, and markets are wrestling with, is, how long is this going to last? How bad is it going to get? Is it going to look more like Russia-Ukraine, or is it going to look more like Hamas attacking Israel, and that's going to have effects on monetary policy,’ Kashkari said.”
U.S. Economic Bubble Watch:
March 4 – Bloomberg (Jarrell Dillard): “The US service economy expanded in February at the fastest pace since mid-2022, powered by robust orders growth and business activity. The Institute for Supply Management’s services index rose 2.3 points to 56.1… The survey highlighted a broad strengthening in the largest part of the economy prior to the US-Israeli attacks on Iran.”
March 5 – Associated Press (Matt Ott): “The number of Americans applying for unemployment benefits last week was unchanged from the week before, a sign that layoffs remain at historically low levels. U.S. filings for jobless aid for the week ending Feb. 28 matched the previous week’s 213,000… Analysts… forecast 215,000… The total number of Americans filing for jobless benefits for the previous week… jumped by 46,000 to 1.87 million…”
March 2 – Bloomberg (Vince Golle): “US manufacturing expanded in February but input prices soared at the fastest pace since 2022, stoking fears of an inflation resurgence even before this weekend’s attacks on Iran. The Institute for Supply Management’s gauge of prices paid for manufacturing inputs jumped 11.5 points to 70.5, the highest level since overall inflation peaked nearly four years ago… Twelve manufacturing industries reported growth in February, led by printing, textile mills and primary metals. Five industries contracted, including apparel and furniture.”
China Watch:
March 5 – Associated Press (Ken Moritsugu and Chan Ho-Him): “China has signaled continuity rather than change for its economy, setting a slightly lower target for growth this year in the midst of a property slump and other headwinds at home and growing uncertainty abroad. Premier Li Qiang announced a target of 4.5% to 5% annual growth in his report presented to the… the National People’s Congress. That compares to actual 5% growth last year and a target of about 5% in the three years before. It’s the lowest growth target since 1991. ‘While recognizing our achievements, we are also clear-eyed about the difficulties and challenges we face,’ Li said…”
March 5 – Reuters (Laurie Chen and Eduardo Baptista): “China’s new five-year policy blueprint laid out its ambitions to aggressively adopt artificial intelligence throughout the world’s second-biggest economy and dominate emerging technologies such as quantum computing and humanoid robots. The country will ‘seize the commanding heights of science and technological development’ and seek ‘decisive breakthroughs in key core technologies’, according to the plan released on Thursday… A separate report... ‘China now leads the world in research and development and application in fields such as AI, biomedicine, robotics and quantum technology, and new breakthroughs were made in the independent R&D of chips,’ it said.”
March 5 – Bloomberg: “China signaled it’s modestly dialing down fiscal stimulus this year… The broad budget deficit projected by the Ministry of Finance will decline to around 9.5% of gross domestic product this year from the 9.9% in its 2025 plan…”
February 28 – Reuters (Liangping Gao and Ryan Woo): “China’s new home prices fell at the fastest pace in more than three years in February…, underscoring the property sector's struggle to find a floor despite a stream of policy support. New home prices in 100 cities slipped 0.04% month-on-month, reversing a 0.18% gain in January and marking the steepest decline since December 2022…”
February 27 – Bloomberg: “China’s capital markets rebounded last year, fueled by a surge in equity refinancing and bond issuance… Companies raised 1.26 trillion yuan ($183bn) through A‑share markets in Shanghai and Shenzhen, an increase of 833 billion yuan from a year earlier…”
March 2 – Financial Times (Joe Leahy): “China is set to enact a landmark law requiring ethnic minorities to use Mandarin Chinese as their main language of instruction, overturning decades-old policies that date back to the era of Mao Zedong… The sweeping law marks the latest effort in a ‘Sinicisation’ campaign under Chinese leader Xi Jinping, which critics say aims to force the country’s dozens of ethnic minorities to assimilate into Han-dominated society in the name of promoting inter-ethnic harmony.”
Central Banker Watch:
March 4 – Wall Street Journal (Paul Vieira): “Global authorities must step up their surveillance of lending by nonbank players such as hedge funds and institutional investors to minimize risks to financial stability, Bank of Canada Gov. Tiff Macklem said. Stronger banking regulations introduced following the 2008-09 financial crisis have shifted riskier activities to nonbank participants such as hedge funds, pension funds and asset managers, diversifying risk and improving access to financing, he said. ‘But risks have not disappeared—they’ve migrated,’ Macklem said, adding that ‘our global surveillance and regulatory frameworks haven’t kept pace with the change.’ ‘Risks may be growing faster than our ability to understand and mitigate them,’ the central-bank chief said. ‘Economic uncertainty is already high—we cannot afford to add financial instability to the mix,’ he said.”
March 5 – Bloomberg (Mark Schroers, Jana Randow, and Lizzy Burden): “Inflation is a bigger concern than economic growth as the European Central Bank assesses the implications of the war in Iran, according to Governing Council member Joachim Nagel. The extent to which the 21-nation bloc will be hurt by higher energy prices and trade disruption will depend on how long the war continues… ‘At the moment, I would say, there’s more impact coming on the inflation front’ compared with ‘what I see on the economy side,’ Nagel said, adding that ‘we have to wait’ to pass judgment.”
Europe Watch:
March 3 – Wall Street Journal (Don Nico Forbes): “Eurozone inflation picked up unexpectedly in February, and could accelerate further if the rise in energy prices that followed U.S. and Israeli attacks on Iran is sustained. Consumer prices in the 21-member currency area were 1.9% higher than a year earlier compared with a 1.7% rise in January… That was above a consensus of economists…”
EM Watch:
March 3 – Bloomberg (Heng Xie and Nicolle Yapur): “Emerging market currencies fell by the most since 2023, extending a broad selloff, as escalating tensions in the Middle East fueled fears of global inflation, jeopardizing interest-rate cuts in several economies.”
Leveraged Speculation Watch:
March 3 – Bloomberg (Amanda Cantrell): “Soros Fund Management Chief Investment Officer Dawn Fitzpatrick said investors are in for a ‘painful’ 18 to 24 months as markets grapple with geopolitical risks and the threat of AI disruption. ‘Market participants are dealing with an enormous amount of uncertainty,’ Fitzpatrick said…, referring to falling stocks of software companies perceived to be at risk from AI and the conflict in the Middle East, among other factors. ‘Under the surface, there’s a lot of fatigue from all of that.’
March 2 – Financial Times (Euan Healy and Robert Smith): “US hedge fund Elliott Management has a roughly £200mn exposure to a UK-based mortgage provider that collapsed last week amid fraud allegations, reigniting fears of poor underwriting standards in the booming asset-backed lending market.”
Social, Political, Environmental, Cybersecurity Instability Watch:
March 3 – Reuters (Pete Schroeder and Michelle Price): “The U.S. financial services industry is on heightened alert for potential cyberattacks amid the unfolding U.S. war in Iran, with firms stepping up monitoring for threats that often rise during periods of geopolitical conflict, said executives and analysts… Cybersecurity has long been a top priority for the financial services industry, which operates critical U.S. infrastructure, including payments, clearing and settlement systems, as well as trading platforms and Treasury markets, making it a top target of cyberattacks, according to industry data.”
March 4 – Financial Times (Clive Cookson): “Sea levels across the world are already ‘much higher’ than most scientific assessments have assumed, according to new research, making coasts even more vulnerable to rising oceans as a result of global warming. The study at Wageningen University in the Netherlands found that actual sea levels are on average about 30cm higher globally than estimates produced by the usual scientific models.”
Geopolitical Watch:
The S&P500 slumped 2.0% (down 1.5% y-t-d), and the Dow dropped 3.0% (down 1.2%). The Utilities declined 1.4% (up 9.7%). The Banks fell 3.6% (down 6.5%), and the Broker/Dealers slumped 3.7% (down 3.8%). The Transports sank 6.2% (up 6.4%). The S&P 400 Midcaps were hammered 4.6% (up 3.2%), and the small cap Russell 2000 was slammed 4.1% (up 1.7%). The Nasdaq100 declined 1.3% (down 2.4%). The Semiconductors sank 7.2% (up 6.1%). The Biotechs dropped 5.2% (down 3.8%). With bullion down $107, the HUI gold index slumped 11.7% (up 23.2%).
Three-month Treasury bill rates ended the week at 3.5758%. Two-year government yields surged 19 bps to 3.56% (up 9bps y-t-d). Five-year T-note yields jumped 23 bps to 3.73% (unchanged). Ten-year Treasury yields rose 20 bps to 4.14% (down 3bps). Long bond yields gained 15 bps to 4.76% (down 9bps). Benchmark Fannie Mae MBS yields surged 26 bps to 5.07% (up 2bps).
Italian 10-year yields spiked 35 bps higher to 3.62% (up 7bps y-t-d). Greek 10-year yields surged 33 bps to 3.60% (up 16bps). Spain's 10-year yields jumped 29 bps to 3.35% (up 6bps). German bund yields rose 22 bps to 2.86% (unchanged). French yields surged 29 bps to 3.51% (down 5bps). The French to German 10-year bond spread widened seven to 65 bps. U.K. 10-year gilt yields spiked 39 bps to 4.63% (up 15bps). U.K.’s FTSE equities index sank 5.7% (up 3.5% y-t-d).
Japan’s Nikkei 225 Equities Index dropped 5.5% (up 10.5% y-t-d). Japan’s 10-year “JGB” yields gained five bps to 2.17% (up 11bps y-t-d). France’s CAC40 sank 6.8% (down 1.9%). The German DAX equities index slumped 6.7% (down 3.7%). Spain’s IBEX 35 equities index sank 7.0% (down 1.3%). Italy’s FTSE MIB index dropped 6.5% (down 1.8%). EM equities were slammed. Brazil’s Bovespa index dropped 5.0% (up 11.3%), and Mexico’s Bolsa index slumped 5.8% (up 4.6%). South Korea’s Kospi was hammered 10.6% (up 32.5%). India’s Sensex equities index dropped 2.9% (down 7.4%). China’s Shanghai Exchange Index dipped 0.9% (up 3.9%). Turkey’s Borsa Istanbul National 100 index sank 6.7% (down 13.6%).
Federal Reserve Credit increased $6.0 billion last week to $6.576 TN, with a 12-week rise of $85.6 billion. Fed Credit was down $2.314 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit has expanded $2.849 TN, or 76%. Fed Credit inflated $3.765 TN, or 134%, since November 7, 2012 (695 weeks). Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt slipped $1.3 billion last week to $3.074 TN. “Custody holdings” were down $229 billion y-o-y, or 6.9%.
Total money market fund assets (MMFA) gained $201 billion to a record $7.817 TN - with a 33-week surge of $794 billion, or 17.7% annualized. MMFA were up $791 billion, or 11.3%, y-o-y - having ballooned a historic $3.233 TN, or 70%, since October 26, 2022.
Total Commercial Paper declined $9.7 billion to $1.397 TN. CP expanded $76 billion, or 5.7%, y-o-y.
Freddie Mac 30-year fixed mortgage rates increased two bps to 6.00% (down 63bps y-o-y) - just off the low since September 2022. Fifteen-year rates rose three bps to 5.47% (down 32bps). Bankrate’s survey of jumbo mortgage borrowing costs had the 30-year fixed rate down two bps to 6.25% (down 58bps).
Currency Watch:
For the week, the U.S. Dollar Index gained 1.3% to 98.855 (up 0.5% y-t-d). On the upside, the Canadian dollar increased 0.5%. On the downside, the South African rand declined 3.7%, the South Korean won 3.2%, the Mexican peso 3.2%, the Brazilian real 2.2% the New Zealand dollar 1.7%, the euro 1.6%, the Swedish krona 1.6%, the Australian dollar 1.2%, the Japanese yen 1.1%, the Singapore dollar 1.0%, the Swiss franc 0.9%, the Norwegian krone 0.7%, and the British pound 0.5%. China's (offshore) renminbi declined 0.61% versus the dollar (up 1.21% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index surged 8.1% (up 19.9% y-t-d). Spot Gold declined 2.0% to $5,172 (up 19.7%). Silver sank 9.9% to $84.5426 (up 18.0%). WTI Crude surged $23.88, or 35.6%, to $90.90 (up 58%). Gasoline jumped 32.2% (up 60%), and Natural Gas rose 11.4% to $3.186 (down 14%). Copper fell 4.2% (up 2%). Wheat rose 3.4% (up 21%), and Corn gained 1.9% (up 2%). Bitcoin rallied $2,600 or 3.9%, to $68,400 (down 22.0%).
Market Instability Watch:
March 4 – Reuters (Promit Mukherjee and David Ljunggren): “The risks posed to debt markets by hedge funds and private credit might be growing faster than the ability of monitoring agencies to understand and mitigate them, Bank of Canada Governor Tiff Macklem said… ‘Economic uncertainty is already high — we cannot afford to add financial instability to the mix,’ he said. Macklem said risks to growth were greater than normal and tilted to the downside.”
March 2 – Financial Times (Ian Smith, Emily Herbert, Rachel Rees, Leslie Hook and Costas Mourselas): “Big investors have turned to gold and the US dollar rather than the traditional safety of government bonds, as anxiety grows over an inflation shock threatened by the war in Iran. Gold raced close to a record high on Monday, jumping as much as 2.6% to more than $5,400 a troy ounce… But government bonds, typically a haven in stormy markets, weakened as traders braced for a rise in inflation… ‘We are seeing bonds again failing to provide protection against risk-off events, even as gold delivers,’ said Seb Barker, chief market strategist at hedge fund firm Marshall Wace. He said events in the Gulf ‘reinforce’ the case for increasing allocations to what he called ‘non-bond safe haven assets’.”
March 3 – Bloomberg (Sangmi Cha): “Panic swept through South Korea’s trading floors as concerns over the Middle East conflict sent the world’s hottest stock market to its biggest-ever selloff. The Kospi Index plunged 12% — following a 7.2% drop on Tuesday — as heavyweights Samsung Electronics Co., SK Hynix Inc. and Hyundai Motor Co. tumbled. The rout triggered a 20-minute trading halt early in the Wednesday session… A key volatility gauge jumped to its highest level since 2008.”
March 5 – CNBC (Lee Ying Shan): “South Korea’s Kospi jumped as much as 12% on Thursday, staging a sharp rebound from its worst session, and on course to clock its best day… The index subsequently pared gains, rising 9.6%...”
March 4 – Bloomberg (Alex Harris): “Investors are rushing into US money-market funds, lifting total assets to a record $8.271 trillion, as the war in Iran fuels a broad flight to safety. Some $49 billion flowed into money-market funds in the week ending March 3, according to… Crane Data LLC. About $18.5 billion alone came in on Tuesday as the effects of the US-Israeli strikes on Iran reverberated across markets. The latest funds boosted this year’s inflows to more than $162 billion.”
March 1 – Bloomberg (Todd Gillespie and Sridhar Natarajan): “Lloyd Blankfein, who led Goldman Sachs… through the 2008 financial crisis, is now ringing alarm bells as Wall Street steers cash from US savers into its latest lending binge: private credit. The financial system appears to be inching toward another potential catastrophe with everyday Americans exposed to some of the losses, Goldman’s former longtime chief executive officer said… the assets at issue can be hard to analyze, may feature hidden leverage and can become tough to sell. ‘One has to worry about opaque assets where there’s illiquidity,’ he said… ‘We’re getting close to the end of late stages of cycles on this — and we’re due for a kind of a reckoning’.”
U.S. Credit Trouble Watch:
March 5 – Bloomberg (Paul J. Davies): “As private credit boomed, the gray beards of banking questioned how these young firms would cope with failing borrowers when a bust came. But a different problem is rearing its head first for one popular type of vehicle in this $1.8 trillion asset class. Often it’s not bad loan losses that get you, it’s liquidity draining away. Wealthy investors are increasingly demanding their cash back from some private credit funds, put off by falling interest rates and the prospect of rising corporate defaults. These firms typically lend to companies at terms of five years or so, and they’re having to become inventive about how to balance these hard-to-sell assets against the redemption requests. No one really wants to block quarterly payouts because they worry it would hurt their reputation.”
March 3 – Bloomberg (Laura Benitez, Allison McNeely and Layan Odeh): “Amid the worst start to the year for their stocks in more than a decade, leaders of Wall Street’s biggest private markets firms had a surprising message: investors have reason to be concerned. From Blue Owl Capital Inc. to Blackstone Inc., private credit funds across the industry are facing a wave of withdrawals and analysts are warning default rates could soar if AI disrupts corporate America as much as some experts expect. And in private equity, managers are struggling to offload assets and return cash to investors, forcing them to turn to expensive forms of debt to extract returns from businesses they’ve acquired. ‘People made choices: If you wanted a higher dividend, you could take more risk,’ Apollo Global Management Inc. Chief Executive Officer Marc Rowan said… ‘That felt really good on the way up. That’s not going to feel so good on the way down’.”
March 3 – Axios (Emily Peck): “An experiment in democratizing private markets looks to be on the way out: Retail investors don’t seem to have the stomach for it. What happened with Blue Owl, a private credit firm that had retail investors clamoring for their money back, sparking a mini crisis that was a PR mess for the company, sent its stock price down sharply, and rattled investors about the entire sector… Blue Owl is exhibit A for a particular segment of private credit: business development companies, or BDCs, a structure created by Congress decades ago to funnel investments to smaller businesses. They’re often publicly traded and attract ordinary, or retail, investors. Around 40% of Blue Owl’s $307 billion of assets under management are from individuals…”
March 3 – Bloomberg (Rene Ismail): “Business development companies are sitting on a massive pile of leveraged loans, which could be sold to meet redemption requests and push spreads wider, according to Deutsche Bank AG analysts. BDCs — private debt funds that bundle direct loans — own nearly $143 billion of leveraged loans, the bank said…, more than the $120 billion currently held by leveraged loan funds. The BDC market is already down about 11% so far this year…, with recent earnings announcements indicating loan value markdowns and dividend cuts. Redemption requests have been picking up across BDCs in recent quarters…”
March 1 – Financial Times (Eric Platt and Amelia Pollard): “Wealthy investors who ploughed hundreds of billions of dollars into private credit are pulling back, cutting off a key source of funds that investment giants including Blackstone, Blue Owl and Ares Management have used to fuel their growth. New commitments to so-called non-traded business development companies — the fast-growing funds targeted at retail and wealthy individuals — slid 40% to $3.2bn in January compared with December, according to investment bank RA Stanger. The slump in fundraising is likely to pose an important test for an industry invested in loans that rarely or never trade, with executives telling the FT they believe that outflows could soon begin to overwhelm the volume of inflows to some of the largest funds.”
March 2 – Financial Times (Eric Platt): “Blackstone’s flagship private credit fund was hit with $1.7bn of net outflows in the first quarter after an exodus from the asset class cut off a crucial source of fundraising for the private investment giant. Redemption requests from the $82bn Blackstone private credit fund, known as Bcred, rose to 7.9% of its assets in the first quarter, eclipsing a 5% threshold that allows the private investment group to limit payouts to withdrawing investors. The redemptions will be closely watched across the wider $2tn private credit industry as an early sign of retail investors’ increasing unease with the asset class. It will also provide a test for so-called semi-liquid funds that have proliferated across Wall Street, which offer retail investors the ability to exit periodically even though the funds are invested in assets that rarely or never trade.”
March 5 – Bloomberg (Silas Brown and Libby Cherry): “BlackRock Inc. slashed the value of a private loan to zero at the end of 2025, just three months after assessing it at 100 cents on the dollar, marking the second sudden wipeout to recently hit its private-credit division. The roughly $25 million loan to Infinite Commerce Holdings, a so-called Amazon aggregator…, is now worthless, BlackRock TCP Capital Corp. reported… The wipeout was part of the broader loan losses that BlackRock signaled in late January, when it disclosed that the private-credit fund was preparing to mark down the net value of its assets by 19%.”
March 3 – Wall Street Journal (Matt Wirz): “Blackstone’s BX Jonathan Gray had been a steady voice of optimism as cracks began appearing in the private-credit industry. He downplayed the risk of individual investors cashing out their investments, pointing to the surge of new investments coming in. Now, the momentum has shifted. Outflows topped inflows by a record $1.7 billion in Blackstone’s massive $82 billion private-credit fund in its latest quarter. The fund, known as Bcred, paid back shareholders owning 7.9% of the fund who redeemed their investments in the most recent financial quarter… The figure exceeds the minimum 5% that managers of such ‘semiliquid’ funds are required to redeem, reflecting the extraordinary steps asset managers are taking to calm clients amid mounting fear about potential losses in private credit.”
March 1 – Wall Street Journal (Gregory Zuckerman, Matt Wirz and Peter Rudegeair): “Doug Ostrover and Marc Lipschultz seemed to have private credit figured out. The executives joined forces to launch fund manager Blue Owl Capital, turning it into a powerhouse in the booming business of lending to private companies without the use of banks. They pounced on trends early, zeroing in on lending to software companies, plowing money into artificial intelligence and selling their funds to wealthy individuals. Ostrover and Lipschultz became instant billionaires, buying a hockey team, a piece of a football team and luxury real estate. Now, the foundations of their empire are cracking—raising questions about the once-sizzling industry’s future and transfixing Wall Street… Spooked by a series of shocks in the wider credit market, individual investors who put cash into some Blue Owl funds have been asking for their money back. The firm recently said it was unloading loans to raise cash for investor payouts.”
March 5 – Bloomberg (John McCrank): “US leveraged-loan funds had net outflows of over $1 billion for a second-straight week as the war in Iran adds uncertainty to a market that’s been reeling from fears that AI will undermine entire sectors of the software industry. Investors pulled $1.47 billion from the funds for the week… That follows net withdrawals of $1.54 billion the previous week, the biggest exodus since last April’s tariff-driven turmoil.”
March 3 – Bloomberg (Aashna Shah and Erin Hudson): “Municipal bonds deepened their selloff on Tuesday, with benchmark yields risingas much as 11 bps, as geopolitical unrest in the Middle East and surging oil prices roiled US Treasuries for a second day. Ten-year muni yields rose 11 bps to 2.63%..., marking the biggest gain since April when volatility from President Donald Trump’s tariff policies rocked the market…”
March 3 – Bloomberg (Allison McNeely): “A forecast last week from UBS Group AG analysts that private credit default rates could reach 15% was ‘absolutely wrong,’ Ares Management Corp.’s Chief Executive Officer Mike Arougheti said. ‘It was actually irresponsible,’ he said… ‘This is part of the problem when you have someone who’s actually never been in a segment of the market making commentaries’ about default outlooks. The 15% rate represents the UBS analysts’ worst-case scenario, which would only take place if artificial intelligence triggers an ‘aggressive’ disruption among corporate borrowers. Otherwise, they generally expect defaults to rise by about 5% before the broader credit market stabilizes in late 2026.”
Iran War Watch:
March 2 – New York Times (Tyler Pager): “Six American service members were killed, and U.S. military jets were shot out of the sky. Investors are bracing for market turmoil, fearing prolonged disruption to oil supplies. President Trump says the military campaign against Iran could extend for weeks… With his decision Friday to authorize war against Iran, Mr. Trump is taking the biggest gamble of his presidency, risking the lives of American troops, more deaths and instability in the world’s most volatile region, and his own political standing. Mr. Trump, facing declining approval ratings and staring down the possibility that Republicans will lose control of Congress in the midterms, plunged the United States into what is shaping up to be its most expansive military conflict since the 2003 invasion of Iraq.”
March 3 – Wall Street Journal (Jared Malsin and Omar Abdel-Baqui): “The U.S. is facing increasing risks to its military forces and diplomatic presence in the Middle East as Iran is launching waves of missile and drone attacks across the region that are testing its ability to defend a swath of territory. U.S. Central Command said that six servicemembers had been killed in the three-day-old campaign on Monday. The six died in a drone strike on a base in Kuwait… Bases that house U.S. forces have also come under attack in Iraq, Saudi Arabia and Bahrain. The challenge for U.S. forces is handling Iranian attacks across a huge swath of the Middle East while trying to coordinate air defense with local allies.”
March 2 – Financial Times (Najmeh Bozorgmehr and Andrew England): “Iranian forces have launched a plan devised by Ayatollah Ali Khamenei and Tehran’s top commanders to sow chaos across the Middle East, create upheaval in global markets and raise the stakes in the hope of pressuring the US and Israel to halt their attack. A regime insider told the FT that the supreme leader… and his lieutenants began working on a ‘detailed’ plan after Israel’s devastating 12-day war… last June. This plan included attacks on energy facilities and strikes that would cause disruptions to air travel in the region, he said. ‘We had no choice but to escalate and start a big fire so everyone would see,’ the regime insider said. ‘When our red lines were crossed in violation of all international laws, we could no longer adhere to the rules of the game.’”
March 5 – New York Times (David E. Sanger): “Sitting beside Germany’s chancellor in the Oval Office…, President Trump offered a brief moment of insight into the decision-making process in the White House on the most consequential of matters: Whether to take the country to war. His decision to order the attack on Iran, he said, was mostly a matter of gut instinct about Iranian intentions. ‘We were having negotiations with these lunatics, and it was my opinion that they were going to attack first,’ he said, while his guest, Friedrich Merz, sat expressionless. ‘I think they were going to attack first, and I didn’t want that to happen. So if anything, I might’ve forced Israel’s hand. But Israel was ready and we were ready’.”
March 4 – Financial Times (Neri Zilber and James Shotter): “Israel is preparing for a multi-week military onslaught alongside the US to fully ‘dismantle’ key pillars of Iran’s theocratic state and the Revolutionary Guards that protect the Islamic republic, said current and former Israeli officials. A senior Israeli military official said Israel’s objective was to ‘dismantle the regime’s military infrastructure, including the IRGC’ as well as Iranian nuclear sites, military production facilities and space and cyber capabilities. ‘We’re preparing for several long weeks,’ the official said… A former senior Israeli official who is familiar with the current war plans warned that ‘this will take time… There is a lot of work to be done. Iran is huge’.”
March 5 – Financial Times (Alexandra White): “Donald Trump has said he must be involved in picking Iran’s supreme leader and that Ayatollah Ali Khamenei’s son Mojtaba would not be acceptable to the US as the country’s next leader. ‘We want to be involved in the process of choosing the person who is going to lead Iran into the future, so we don’t have to go back every five years and do this again and again,’ Trump told Reuters… ‘We’re going to have to choose that person along with Iran. We’re going to have to choose that person.’ The US president’s comments mark a step up in his ambitions to enact US-led regime change in Tehran and signal he hopes to replicate American action to change the leadership of Venezuela.”
March 5 – Axios (Barak Ravid and Zachary Basu): “President Trump told Axios… he needs to be personally involved in selecting Iran’s next leader — just as he was in Venezuela… Trump acknowledged that Mojtaba Khamenei, son of assassinated supreme leader Ali Khamenei, is the most likely successor — while making clear he finds that outcome unacceptable. For several days, the Iranian regime has postponed the announcement... But statements by Iranian politicians… suggested an announcement could be imminent. ‘They are wasting their time. Khamenei’s son is a lightweight. I have to be involved in the appointment, like with Delcy [Rodriguez] in Venezuela,’ Trump said.”
March 5 – Bloomberg (Dan Williams, Christine Burke, and Kateryna Kadabashy): “Iran launched a fresh wave of missile and drone strikes across the Gulf on Thursday evening, with attacks reported in the United Arab Emirates, Bahrain, Qatar and Kuwait. Bahrain’s oil refinery was hit and set on fire, and there were reports of explosions near Abu Dhabi’s international airport. The UAE earlier warned Dubai residents of incoming projectiles… Qatar also told residents to remain indoors, while the US said it’s suspending operations at its embassy in Kuwait. After a period when the intensity of Iran’s missile and drone attacks had waned, the latest assaults showed that Tehran still has the capability to hit targets across the region simultaneously.”
March 5 – CNBC (Dan Mangan): “Iran’s foreign minister said… his country is ‘not asking for a ceasefire’ from the United States and Israel, ‘and we don’t see any reason why we should negotiate’ after nearly a week of war. Foreign Minister Abbas Araghchi also said… that Iran is ‘confident’ that it can confront the U.S. military if President Donald Trump decides to invade the nation with ground troops. ‘And that would be a big disaster for them,’ Araghchi told NBC… He also said that after six days of war against Iran, ‘It is clear that the U.S. has failed to achieve its main goal, which was clean, rapid victory.’ ‘They failed to achieve that, and now they are trying to justify why they did attack us. And they have, you know, presented so many different reasons, but none of them worked,’ Araghchi said. ‘And now they are talking about, you know, plan B. And I, I believe that, you know, plan B would be even a bigger failure’.”
March 2 – Bloomberg (Gerry Doyle and Golnar Motevalli): “Just three days into the conflict, the Iran war has become attritional. Waves of drone attacks by the Islamic Republic are putting pressure on the defenses of the US and its partners from Bahrain to the United Arab Emirates, depleting weapons stockpiles… The drones have in recent days hit US bases, oil infrastructure and civilian buildings… US-made Patriot air-defense missiles have been largely successful in stopping the Iranian Shaheds and other ballistic missiles, with interception rates over 90%, according to the UAE. But using $4 million missiles to destroy $20,000 drones illustrates a problem that has haunted Western military planners since early in the Ukraine war: The cheap weapons can chew up resources meant for much more complex threats.”
March 4 – Reuters (Anna Hirtenstein, Andrew Mills and Jonathan Saul): “Iranian drone attacks could disrupt the Strait of Hormuz for months, but how long the Islamic Republic could sustain its missile barrage is less clear, according to intelligence sources... Since the U.S. and Israel attacked Iran on Saturday, Iran has launched hundreds of missiles and more than 1,000 drones at Gulf states allied with Washington. Most were intercepted by air defences, but some residential and commercial buildings, infrastructure and U.S. military bases have sustained damage. Tehran is a major drone manufacturer and has the industrial capacity to produce around 10,000 per month…”
March 2 – Wall Street Journal (Yaroslav Trofimov): “Persian Gulf nations targeted by Iran have, so far, managed to limit the damage by deploying sophisticated U.S.-made air defenses against the hundreds of drones and missiles that have rained on their cities. With costly interceptors and radar, all integrated with the U.S. military, the oil-rich Gulf Arab states have fielded some of the most advanced air defenses in the world… ‘The intensity of interceptor usage that we have seen over the last couple of days can’t be maintained for more than another week—probably a couple of days at most, and then they will feel the pain of interceptor shortage,’ said Fabian Hoffmann, a missile expert at the University of Oslo.”
March 4 – Financial Times (Mehul Srivastava, Andrew England and Steff Chávez): “Gulf states are anxiously waiting for the US military to deliver supplies of interceptors for air-defence systems as they try to fend off volleys of Iranian missiles and swarms of drones, regional officials said. Missiles for those interceptors, part of aerial defence systems sold to Gulf states by major US manufacturers for billions of dollars, have been in short supply since the start of the war in Ukraine after decades of under-investment in their procurement. Iran’s relentless barrages are testing alliances, further exposing holes in western production capacity and underscoring the benefits… of asymmetrical warfare… ‘We’re concerned — we don’t have enough,’ said one senior Gulf official. ‘All of us in the Gulf don’t have enough. We have asked for more interceptors, but our friends are not yet giving [them to] us’.”
March 5 – Reuters (Laila Bassam): “Hezbollah has deployed elite fighters to confront Israeli forces in southern Lebanon, sending them back into the border region from which they withdrew after a war in 2024, three Lebanese sources familiar… said, as the Iran-backed group wades deeper into the conflict in the Middle East. Members of Hezbollah’s Radwan force had received orders to join the battle and block advances by Israeli tanks…”
March 4 – Bloomberg (Magdalena Del Valle and David Gura): “Real change in Iran will require a sustained US military focus in the Middle East that could wear down US weapons stockpiles and leave it vulnerable to attacks from other adversaries such as Russia and China, former Secretary of State Antony Blinken said. The top diplomat in Joe Biden’s administration told Bloomberg… he worries about a scenario where ‘we so deplete our arsenal, and it takes a long time to rebuild it, that that puts us in a disadvantageous position when it comes to, say, a China or a Russia.’ His remarks come on the fifth day of combat operations… as concerns grow that this conflict could end up becoming a war of attrition. ‘They want to try to inflict so much pain that we can’t sustain the effort,’ Blinken said of the Iranians. But ultimately, whether the US can continue will depend on ‘markets and munitions,’ he said.”
March 4 – Axios (Barak Ravid and Marc Caputo): “Militants from several Kurdish Iranian factions are preparing for a possible ground offensive against Iran’s regime in the northwestern part of the country, according to U.S. and Israeli officials and a senior official in one of the factions. A Kurdish ground offensive coordinated with the U.S.-Israeli bombing campaign against Tehran could increase pressure on the regime and encourage an internal rebellion that could spread to other parts of Iran… These Kurdish factions have thousands of soldiers along the Iran-Iraq border and control strategic areas.”
Iran War Ramifications Watch:
March 5 – Bloomberg (Olivia Solon, Loni Prinsloo, Marissa Newman, and Omar El Chmouri): “For millennia, wartime combatants have sought to hobble the infrastructure of their adversaries by poisoning wells, burning bridges or, more recently, attacking railways, refineries and airports. In the war now unfolding across the Middle East, another kind of target has been added to the list: data centers. Drone strikes have damaged three facilities operated by Amazon.com Inc. in the United Arab Emirates and Bahrain. And Israel and the US have hit at least two data centers in Tehran… according to Holistic Resilience, a nonprofit mapping airstrikes. Attacking such facilities can ‘paralyze banks, paralyze government offices’ and key industries, says Daniel Efrati, chief executive officer of NED Data Centers…”
March 4 – Financial Times (Lee Harris, Jamie John and Malcolm Moore): “The cost of insuring a ship sailing through the Strait of Hormuz has soared 12-fold, even after Donald Trump vowed to backstop trade through the key oil chokepoint. Shipowners have been quoted millions of dollars for cover to cross the Strait or sail in nearby high-risk waters, brokers said, as premiums jumped as high as 3% of the cost of a ship…, up from about 0.25% before the war. The US president said… the US Development Finance Corporation would provide insurance and guarantees ‘at a very reasonable price… for the Financial Security of ALL Maritime Trade, especially energy, travelling through the Gulf’.”
March 4 – Financial Times (Malcolm Moore): “The Gulf’s biggest oil producers are facing a race against time to resume exports before their storage tanks fill up, with Saudi Arabia estimated to have as little as two weeks before it would have to cut production. Iraq on Tuesday became the first major exporter to begin reducing output, announcing it was winding down production at three of its largest oilfields. Further oilfields across the region are poised to shut down over the coming days, taking millions of barrels of crude off the market, unless energy shipments through the Strait of Hormuz are able to resume.”
March 3 – Reuters (Pablo Sinha): “Crude oil supplies from Iraq and Kuwait could start shutting in within days if the Strait of Hormuz remains closed, potentially cutting 3.3 million barrels per day (bpd) by day eight of the Middle East conflict, J.P. Morgan analysts said... Iraq and Kuwait have roughly three and 14 days… before they would be forced to halt crude exports that pass through the strait… In a prolonged closure, losses could escalate to 3.8 million bpd around day 15 and 4.7 million bpd by day 18… Iraq will be forced to cut its oil production by more than 3 million bpd in a few days if oil tankers cannot move freely through the Strait of Hormuz…”
March 4 – Financial Times (Ian Johnston, Verity Ratcliffe, Sarah White and Sebastien Ash): “The war in the Middle East pushed up European gas prices to their highest level since 2023 earlier this week, leaving the continent facing another energy crunch four years after Russia’s full-scale invasion of Ukraine. With shipping through the pivotal Strait of Hormuz in effect at a standstill and Iranian strikes on Qatar forcing the world’s second biggest liquefied natural gas supplier to stop production, European gas prices have gained 70% since Friday. ‘It’s a double punch. Europe is only coming out of an industrial energy crunch and now we’ve got the next one,’ said Henning Gloystein, an energy expert at Eurasia Group.”
March 5 – Bloomberg (Nicholas Lua, Weilun Soon, and Serene Cheong): “A deepening energy crunch across Asia is impacting all corners of the oil market, with suppliers of everything from shipping fuel to cooking gas beginning to cut back on sales in order to manage shrinking stockpiles. A widening conflict in the Persian Gulf… has upended the energy trade by all but halting traffic through the Strait of Hormuz… The impact has been swift, even for wealthy markets with extensive storage.”
March 5 – Financial Times (Alice Hancock and Kana Inagaki): “Shipping companies are struggling to reroute and land cargoes of fresh food and live animals stuck as the Middle East conflict disrupts trade and starts to cause congestion at ports outside the Gulf. About 90 container ships are stuck in the Gulf out of a total of 425 that were due to cross the Strait of Hormuz when the vital trade artery was in effect shut by the conflict. Most have been left stranded or seeking other ports… Many contain refrigerated food for Middle Eastern consumers. Four hold shipments of live animals destined for halal consumption…”
March 2 – Reuters (Lisa Baertlein): “Container ships account for roughly 100 of the 750 ships ensnared in the Strait of Hormuz backups following U.S. and Israeli attacks on Iran, Jeremy Nixon, CEO of container carrier Ocean Network Express (ONE), said… ‘About 10% of the container ship global fleet is caught up in this,’ Nixon said at S&P Global Market Intelligence’s TPM26 container shipping conference in Long Beach.”
March 3 – Bloomberg (Alex Longley): “The cost of booking the world’s biggest oil tankers on the industry’s benchmark route hit a fresh record as shipping traffic through the Strait of Hormuz remains all-but halted. Earnings for hauling crude from the Middle East to China exceeded $481,000 a day on Tuesday… Shipping costs were already soaring before the war due to rising global oil supplies and a South Korean shipowner snapping up vessels.”
March 4 – Bloomberg (Leen Al-Rashdan and Danny Lee): “The financial and logistical troubles the Iran war is causing for the global aviation industry are compounding by the day, with the number of canceled flights to Middle East hubs surpassing 20,000 since fighting began. Emirates, the world’s largest international airline, extended its suspension of flights to Dubai through the end of Saturday, a full week since the US and Israel launched their joint attack. Qatar Airways extended its service halts into Friday. Of the 36,000 scheduled flights to or from the Middle East since Feb. 28, more than half have been canceled… That equates to about 4.4 million seats. Thousands of passengers have been stranded in the Gulf region…”
March 4 – Financial Times (Leslie Hook, Camilla Hodgson and Rachel Millard): “The war in Iran has caused smelter closures and ‘force majeure’ declarations across the aluminium industry in the Middle East, threatening a supply crunch in the key industrial metal with global stocks already close to historic lows. Several big producers have declared they are no longer able to honour their contracts… The Qatalum smelter started a controlled shutdown this week after its gas supplier Qatar Energy said it could no longer provide gas to the plant. Norsk Hydro said a full restart could take six to 12 months.”
March 5 – Bloomberg (David Fickling): “A world where we can cook up AI videos in seconds from the apps on our phones might seem remote from the physical realities of warfare in the seaways of the Persian Gulf. In fact, they’re closely intertwined. That’s because the building blocks of the technology industry are deeply dependent on petroleum flowing through the Strait of Hormuz… More than half of the DRAM and NAND chips that provide electronic devices with their short- and long-term memory are manufactured in South Korea. About 70% of the advanced processing chips found in smartphones, PCs and data centers are made in Taiwan. Those two countries, in turn, are among the most dependent on liquefied natural gas exports from Qatar.”
March 4 – Financial Times (Susannah Savage): “The conflict in Iran is disrupting fertiliser production and exports in the Middle East, tightening global supplies and raising fears of higher food prices… The Middle East is one of the world’s largest fertiliser producers, while the Strait of Hormuz is a crucial shipping route for exports. About 35% of global urea exports pass through the waterway… Urea is the most widely used nitrogen fertiliser, which in turn underpins around half of global food production. The route also handles 45% of global sulphur exports, a key ingredient used to produce phosphate fertilisers, as well as significant volumes of ammonia, a key ingredient for nitrogen fertilisers.”
March 3 – Associated Press (Kelvin Chan): “Damage to three Amazon Web Services facilities in the Middle East from Iranian drone strikes highlights the rapid growth of data centers in the region, as well as the industry’s vulnerability to conflict. The company’s cloud computing division, Amazon Web Services, said… two data centers in the United Arab Emirates were ‘directly struck’ and another facility in Bahrain was also damaged after a drone landed nearby. ‘These strikes have caused structural damage, disrupted power delivery to our infrastructure, and in some cases required fire suppression activities that resulted in additional water damage,’ AWS said…”
March 5 – Bloomberg (Alfred Cang): “China’s government has told the country’s top oil refiners to suspend exports of diesel and gasoline as an escalating conflict in the Persian Gulf disrupts the arrival of crude from one of the world’s largest producing regions. While the country is only the third-largest supplier of oil products into the region — its vast refining sector primarily serves domestic demand — China’s curbs just six days into a war reflect a scramble across Asia to prioritize domestic needs as the crisis in the Middle East deepens.”
Trump Administration Watch:
March 1 – Reuters (Jason Lange): “Only one in four Americans approves of U.S. strikes on Iran that have plunged the Middle East into chaos, while about half — including one in four Republicans — believe President Donald Trump is too willing to use military force, according to a Reuters/Ipsos poll. Some 27% of respondents said they approved of the strikes…, while 43% disapproved and 29% were not sure.”
March 1 – Reuters (Gram Slattery and Erin Banco): “Following the killing of Iran’s Supreme Leader Ayatollah Ali Khamenei on Saturday, many senior U.S. officials remain skeptical that the U.S. and Israeli military operation against the Islamic Republic will lead to a regime change in the near term. Before and after the start of the attack, U.S. officials, including U.S. President Donald Trump, had suggested that toppling the nation’s repressive governing system was one of several U.S. goals, in addition to crippling Iran’s ballistic missile and nuclear programs. ‘I call upon all Iranian patriots who yearn for freedom to seize this moment ... and take back your country,’ Trump said…”
March 3 – Axios (Ben Geman): “President Trump said the U.S. will ‘immediately’ offer ‘political risk insurance and guarantees’ for energy tankers and other ships in the Gulf region, and that the Navy will escort tankers through the Strait of Hormuz if needed. The White House is trying to ease oil price spikes that are starting to boost U.S. gasoline prices… Trump said the financial assurances would be offered through the U.S. Development Finance Corp. at a ‘very reasonable price.’ ‘If necessary, the United States Navy will begin escorting tankers through the Strait of Hormuz, as soon as possible,’ he wrote. ‘No matter what, the United States will ensure the FREE FLOW of ENERGY to the WORLD’.”
March 4 – Wall Street Journal (Lydia Wheeler, James Fanelli and Louise Radnofsky): “A federal trade-court judge… ordered the Trump administration to start refunding the more than $130 billion it collected in the global tariffs invalidated by the Supreme Court last month. Following a hearing involving a filtration company’s fight for a refund, Judge Richard Eaton at the Manhattan-based Court of International Trade issued a written order directing the administration to begin the process of refunding importers… More than 2,000 lawsuits have been filed by companies—including big names such as Costco Wholesale, FedEx and Pandora Jewelry—seeking to recoup their money.”
March 5 – CNBC (Kevin Breuninger): “President Donald Trump… suggested his administration will turn its sights to Cuba after U.S. military operations in Iran are finished. ‘What’s happening with Cuba is amazing,’ Trump… ‘We think that we want to fix — finish this one first, but that will be just a question of time before you and a lot of unbelievable people are going to be going back to Cuba, hopefully not to stay,’ Trump said…”
Constitution Watch:
March 2 – Financial Times (Stefania Palma and Kaye Wiggins): “The US government has dropped its legal effort to enforce punitive executive orders targeting top law firms, abandoning a fight that rocked Big Law after Donald Trump’s return to the presidency. The White House… terminated its appeal efforts in four cases involving Jenner & Block, Perkins Coie, WilmerHale and Susman Godfrey… All four firms successfully challenged Trump after he issued what could have been damaging executive orders against them. Abandoning the cases marks a dramatic U-turn by the government in a tussle that raised existential questions in the legal community.”
Trade War Watch:
March 3 – Bloomberg (Tyler Kendall and Courtney Subramanian): “The US plans to complete several trade investigations that will allow President Donald Trump to impose new tariffs within five months to replace the levies struck down by the Supreme Court, US Trade Representative Jamieson Greer said. Greer’s comments… offered the most concrete timeline yet for how long the White House will need to rebuild Trump’s tariff regime. After the Feb. 20 court ruling, the president applied a global baseline tariff, which he can maintain for as many as 150 days without congressional approval. ‘By the time the five-month period has elapsed, we’ll have completed investigations,’ Greer said… ‘We know there are countries out there with deals who are very interested in keeping the deals’.”
March 3 – Bloomberg (Tyler Kendall and Daniel Basteiro): “Donald Trump said he will ‘cut off all trade with Spain’ after the country denied access to its military bases for his bombing campaign against Iran, spurring a sharp rebuke from Madrid that the US president must respect international trade agreements. ‘I told Scott to cut off all dealings with Spain,’ Trump said…, referring to US Treasury Secretary Scott Bessent.”
New World Order Watch:
March 5 – Bloomberg (Janice Huang): “Yuan financing has never been as popular as it is now, with more countries and foreign companies tapping the market… Bonds, either sold within China by overseas entities or issued elsewhere, raised a record 218 billion yuan ($31.6bn) already this year, as the Indonesian government and Wall Street’s Morgan Stanley joined the binge. That adds to the equivalent of $167 billion borrowed via notes and loans in 2025, a tripling in just five years.”
Ukraine Watch:
March 4 – Wall Street Journal (Bojan Pancevski and Drew Hinshaw): “Russia is one of the biggest winners in the early days of the largest U.S. military confrontation in decades, as Iranian missiles deplete stocks of Patriot interceptors that Ukraine needs for its defense. Even before the Iran campaign, production bottlenecks in the U.S.-made Patriot system had drained Ukraine’s reserves and left European allies on yearslong waiting lists. Those shortfalls have allowed Russia to punch through gaps in Ukraine’s air defenses, devastating its power infrastructure and casting Ukrainian cities into blackouts. U.S. and Gulf states have fired hundreds of interceptors in the opening days of the war to repel Iranian missile and drone barrages. Gulf states possess only days of interceptors under sustained attack, analysts estimate…”
March 3 – Politico (Tim Ross, Veronika Melkozerova, Esther Webber and Zoya Sheftalovich): “Europeans struggling to cope with Donald Trump’s inflammatory interventions may be about to discover there’s one thing worse: Not being the object of his attention anymore. As Trump’s ongoing operation against Iran takes priority with Pentagon planners and the White House, European officials fear he will lose interest in ending Russia’s full-scale war in Ukraine... The practical impact if the U.S. becomes embroiled in a drawn-out conflict in the Middle East could be even more severe than the political effect: Ukraine may be starved of the American-made weapons it needs to resist daily Russian missile attacks… ‘Everyone understands that for us, this is our life — the appropriate weapons,’ Ukrainian President Volodymyr Zelenskyy told reporters... ‘If there are long-term hostilities in the Middle East, this will certainly affect the supply. I am sure of this’.”
U.S./Russia/China/Europe/Iran Watch:
March 2 – Associated Press: “Russia… condemned the U.S.-Israeli strikes on Iran as ‘a preplanned and unprovoked act of armed aggression against a sovereign and independent U.N. member state,’ demanding an immediate halt to the military campaign and a return to diplomacy… Foreign Ministry accused ‘Washington and Tel Aviv’ of ‘hiding behind’ concerns about Iran’s nuclear program while actually pursuing regime change. It warned the attacks risked triggering a ‘humanitarian, economic and possibly radiological catastrophe’ in the region and accused the U.S. and Israel of ‘plunging the Middle East into an abyss of uncontrolled escalation’.”
March 1 – Politico (Phelim Kine): “Beijing denounced the killing of Iran’s Supreme Leader Ayatollah Ali Khamenei in U.S.-Israeli airstrikes and called for an end of military operations in the Middle East. ‘The attack and killing of Iran’s supreme leader is a grave violation of Iran’s sovereignty and security,’ the Chinese government said… ‘China firmly opposes and strongly condemns it,’ it said. ‘We urge for an immediate stop to the military operations, no further escalation of the tense situation and joint effort to maintain peace and stability in the Middle East and the world at large,’ the statement said.”
March 4 – Telegraph (Chris Price): “Vladimir Putin has threatened to cut off gas supplies to Europe as the war in Iran sends energy prices soaring. The Russian president said… he will instruct the Kremlin to consider shifting Russia’s gas exports away from Europe and to more profitable markets in Asia following the outbreak of war in the Middle East. Putin said…: ‘Other markets are opening now. Maybe it’s better for us to end supplies to the European market right now? To go to those markets that are opening now and get a foothold there’.”
March 4 – Financial Times (Barney Jopson and Amy Mackinnon): “As he warned that the US risked triggering a spiral of war with its ‘illegal’ attack on Iran, Spain’s Prime Minister Pedro Sánchez also delivered a pointed rebuke to Donald Trump that no other European leader would dare to make. Arguing that politicians should make people’s lives better, Sánchez said: ‘It is absolutely unacceptable that those leaders who are incapable of fulfilling that duty use the smoke of war to hide their failures and, in the process, line the pockets of a few — the only ones who win when the world stops building hospitals to start making missiles.’ It was the kind of jibe — an allusion to plutocracy and inequality — rarely heard so explicitly from an EU leader.”
March 2 – Financial Times (George Parker, Jim Pickard and Lucy Fisher): “Sir Keir Starmer has hit back at attacks by Donald Trump over Britain’s failure to support the US offensive in Iran, declaring: ‘This government does not believe in regime change from the skies’… Starmer told the House of Commons that the UK would only take part in military action if there was ‘a lawful basis and a viable, thought-through plan’.”
March 4 – Politico (Camille Gijs and Aitor Hernandez-Morales): “President Donald Trump’s threat to impose a trade embargo on Spain has delivered yet another jolt to the European Union, forcing European leaders to rally around Madrid. Trump launched his broadside on Tuesday after Madrid declined to allow U.S. warplanes to use its air bases to attack Iran. Prime Minister Pedro Sánchez stood firm on Wednesday, describing the five-day-old war launched by the U.S. and Israel on Iran as illegal. French President Emmanuel Macron rushed to Sánchez’s side, expressing solidarity against ‘recent threats of economic coercion’ made against Spain. European Council President António Costa doubled down and stressed that ‘the EU will always ensure that the interests of its Member States are fully protected’.”
March 4 – Wall Street Journal (David Luhnow, Max Colchester and Bertrand Benoit): “For the past year, most European leaders took pains not to offend President Trump. The Iran conflict has brought a swift end to that honeymoon—for at least two leaders. The leaders of Britain and Spain ratcheted up their war of words with the president…, spelling out why they didn’t back the U.S. attack on Iran, calling it both illegal and unwise. ‘We can’t play Russian roulette with the destiny of millions of people,’ Spanish Prime Minister Pedro Sánchez said. ‘The powers involved in this conflict should immediately stop the hostilities’.”
AI Bubble/Arms Race Watch:
March 1 – Axios (Madison Mills): “Anthropic’s Claude hit No. 1 in U.S. app downloads Saturday, overtaking ChatGPT, after the Pentagon blacklisted the company for refusing to loosen safeguards for military use of its AI model… Anthropic lost its Pentagon contract Friday over a dispute about military use of Claude, shortly after President Trump blasted it as a ‘Radical Left AI company.’ Anthropic drew red lines against using its AI for mass surveillance and autonomous lethal weapons. Hours later, OpenAI — maker of ChatGPT — announced its own Pentagon deal after the Defense Department agreed to red lines similar to Anthropic’s.”
Bubble and Mania Watch:
March 2 – Bloomberg (Anna J Kaiser and Kurt Wagner): “Meta Platforms Inc. founder Mark Zuckerberg… purchased a $170 million mansion on Miami’s ‘billionaire bunker,’ a private island in Biscayne Bay… The sale at 7 Indian Creek Island Road sets a record for most expensive home sale in Miami-Dade County. Developer Vlad Doronin’s $120 million sale of his Star Island mansion in 2025 previously held the record.”
Federal Reserve Watch:
March 3 – Bloomberg (Amara Omeokwe and Enda Curran): “Kevin Warsh is still months away from taking the helm at the Federal Reserve, but his ability to deliver the interest-rate cuts President Donald Trump expects is facing hurdles as the US economy, and his future colleagues, tilt in the opposite direction. Most Fed officials see no compelling reason to rush additional rate cuts, given inflation is still elevated and the labor market seems to be stabilizing. The biggest surge in oil prices in four years… might only add to their reluctance. Several policymakers have also voiced skepticism over the ideas underpinning Warsh’s vision for lower rates, which centers on the promise that a technology revolution is about to deliver a low-inflation economic boom, and on his pledge to downsize the Fed’s balance sheet.”
March 5 – Reuters (Matt Ott): “Richmond Fed president Tom Barkin said still high inflation and stronger recent jobs numbers may shift the Fed’s risk outlook at a time when the U.S. conflict with Iran could further push up key consumer prices… ‘With the PCE numbers that we’re expecting next week, you’ve got a couple months of relatively high inflation. That certainly puts pause to any conclusion that we’re done fighting this,’ Barkin said…”
March 3 – Bloomberg (Catarina Saraiva): “Federal Reserve Bank of Kansas City Jeff Schmid reiterated that inflation is too high, adding that the latest numbers suggest it’s nearly a percentage point above the US central bank’s target. ‘Inflation has been above the Fed’s objective for nearly five years now,’ Schmid said… ‘I don’t think we have room to be complacent’… Schmid said inflationary pressures are apparent both in tariff-impacted goods and in services.”
March 3 – Reuters (Michael S. Derby): “Federal Reserve Bank of Minneapolis President Neel Kashkari said… the Iran conflict has increased uncertainty about the U.S. economic outlook and made it harder to know what lies ahead for central bank interest rate policy. In terms of the outlook, ‘I had a lot of confidence up until a couple of days ago,’ before the joint U.S.-Israel attack on Iran started, Kashkari said… ‘The question I think that we are wrestling with, and markets are wrestling with, is, how long is this going to last? How bad is it going to get? Is it going to look more like Russia-Ukraine, or is it going to look more like Hamas attacking Israel, and that's going to have effects on monetary policy,’ Kashkari said.”
U.S. Economic Bubble Watch:
March 4 – Bloomberg (Jarrell Dillard): “The US service economy expanded in February at the fastest pace since mid-2022, powered by robust orders growth and business activity. The Institute for Supply Management’s services index rose 2.3 points to 56.1… The survey highlighted a broad strengthening in the largest part of the economy prior to the US-Israeli attacks on Iran.”
March 5 – Associated Press (Matt Ott): “The number of Americans applying for unemployment benefits last week was unchanged from the week before, a sign that layoffs remain at historically low levels. U.S. filings for jobless aid for the week ending Feb. 28 matched the previous week’s 213,000… Analysts… forecast 215,000… The total number of Americans filing for jobless benefits for the previous week… jumped by 46,000 to 1.87 million…”
March 2 – Bloomberg (Vince Golle): “US manufacturing expanded in February but input prices soared at the fastest pace since 2022, stoking fears of an inflation resurgence even before this weekend’s attacks on Iran. The Institute for Supply Management’s gauge of prices paid for manufacturing inputs jumped 11.5 points to 70.5, the highest level since overall inflation peaked nearly four years ago… Twelve manufacturing industries reported growth in February, led by printing, textile mills and primary metals. Five industries contracted, including apparel and furniture.”
China Watch:
March 5 – Associated Press (Ken Moritsugu and Chan Ho-Him): “China has signaled continuity rather than change for its economy, setting a slightly lower target for growth this year in the midst of a property slump and other headwinds at home and growing uncertainty abroad. Premier Li Qiang announced a target of 4.5% to 5% annual growth in his report presented to the… the National People’s Congress. That compares to actual 5% growth last year and a target of about 5% in the three years before. It’s the lowest growth target since 1991. ‘While recognizing our achievements, we are also clear-eyed about the difficulties and challenges we face,’ Li said…”
March 5 – Reuters (Laurie Chen and Eduardo Baptista): “China’s new five-year policy blueprint laid out its ambitions to aggressively adopt artificial intelligence throughout the world’s second-biggest economy and dominate emerging technologies such as quantum computing and humanoid robots. The country will ‘seize the commanding heights of science and technological development’ and seek ‘decisive breakthroughs in key core technologies’, according to the plan released on Thursday… A separate report... ‘China now leads the world in research and development and application in fields such as AI, biomedicine, robotics and quantum technology, and new breakthroughs were made in the independent R&D of chips,’ it said.”
March 5 – Bloomberg: “China signaled it’s modestly dialing down fiscal stimulus this year… The broad budget deficit projected by the Ministry of Finance will decline to around 9.5% of gross domestic product this year from the 9.9% in its 2025 plan…”
February 28 – Reuters (Liangping Gao and Ryan Woo): “China’s new home prices fell at the fastest pace in more than three years in February…, underscoring the property sector's struggle to find a floor despite a stream of policy support. New home prices in 100 cities slipped 0.04% month-on-month, reversing a 0.18% gain in January and marking the steepest decline since December 2022…”
February 27 – Bloomberg: “China’s capital markets rebounded last year, fueled by a surge in equity refinancing and bond issuance… Companies raised 1.26 trillion yuan ($183bn) through A‑share markets in Shanghai and Shenzhen, an increase of 833 billion yuan from a year earlier…”
March 2 – Financial Times (Joe Leahy): “China is set to enact a landmark law requiring ethnic minorities to use Mandarin Chinese as their main language of instruction, overturning decades-old policies that date back to the era of Mao Zedong… The sweeping law marks the latest effort in a ‘Sinicisation’ campaign under Chinese leader Xi Jinping, which critics say aims to force the country’s dozens of ethnic minorities to assimilate into Han-dominated society in the name of promoting inter-ethnic harmony.”
Central Banker Watch:
March 4 – Wall Street Journal (Paul Vieira): “Global authorities must step up their surveillance of lending by nonbank players such as hedge funds and institutional investors to minimize risks to financial stability, Bank of Canada Gov. Tiff Macklem said. Stronger banking regulations introduced following the 2008-09 financial crisis have shifted riskier activities to nonbank participants such as hedge funds, pension funds and asset managers, diversifying risk and improving access to financing, he said. ‘But risks have not disappeared—they’ve migrated,’ Macklem said, adding that ‘our global surveillance and regulatory frameworks haven’t kept pace with the change.’ ‘Risks may be growing faster than our ability to understand and mitigate them,’ the central-bank chief said. ‘Economic uncertainty is already high—we cannot afford to add financial instability to the mix,’ he said.”
March 5 – Bloomberg (Mark Schroers, Jana Randow, and Lizzy Burden): “Inflation is a bigger concern than economic growth as the European Central Bank assesses the implications of the war in Iran, according to Governing Council member Joachim Nagel. The extent to which the 21-nation bloc will be hurt by higher energy prices and trade disruption will depend on how long the war continues… ‘At the moment, I would say, there’s more impact coming on the inflation front’ compared with ‘what I see on the economy side,’ Nagel said, adding that ‘we have to wait’ to pass judgment.”
Europe Watch:
March 3 – Wall Street Journal (Don Nico Forbes): “Eurozone inflation picked up unexpectedly in February, and could accelerate further if the rise in energy prices that followed U.S. and Israeli attacks on Iran is sustained. Consumer prices in the 21-member currency area were 1.9% higher than a year earlier compared with a 1.7% rise in January… That was above a consensus of economists…”
EM Watch:
March 3 – Bloomberg (Heng Xie and Nicolle Yapur): “Emerging market currencies fell by the most since 2023, extending a broad selloff, as escalating tensions in the Middle East fueled fears of global inflation, jeopardizing interest-rate cuts in several economies.”
Leveraged Speculation Watch:
March 3 – Bloomberg (Amanda Cantrell): “Soros Fund Management Chief Investment Officer Dawn Fitzpatrick said investors are in for a ‘painful’ 18 to 24 months as markets grapple with geopolitical risks and the threat of AI disruption. ‘Market participants are dealing with an enormous amount of uncertainty,’ Fitzpatrick said…, referring to falling stocks of software companies perceived to be at risk from AI and the conflict in the Middle East, among other factors. ‘Under the surface, there’s a lot of fatigue from all of that.’
March 2 – Financial Times (Euan Healy and Robert Smith): “US hedge fund Elliott Management has a roughly £200mn exposure to a UK-based mortgage provider that collapsed last week amid fraud allegations, reigniting fears of poor underwriting standards in the booming asset-backed lending market.”
Social, Political, Environmental, Cybersecurity Instability Watch:
March 3 – Reuters (Pete Schroeder and Michelle Price): “The U.S. financial services industry is on heightened alert for potential cyberattacks amid the unfolding U.S. war in Iran, with firms stepping up monitoring for threats that often rise during periods of geopolitical conflict, said executives and analysts… Cybersecurity has long been a top priority for the financial services industry, which operates critical U.S. infrastructure, including payments, clearing and settlement systems, as well as trading platforms and Treasury markets, making it a top target of cyberattacks, according to industry data.”
March 4 – Financial Times (Clive Cookson): “Sea levels across the world are already ‘much higher’ than most scientific assessments have assumed, according to new research, making coasts even more vulnerable to rising oceans as a result of global warming. The study at Wageningen University in the Netherlands found that actual sea levels are on average about 30cm higher globally than estimates produced by the usual scientific models.”
Geopolitical Watch:
March 3 – Bloomberg (Mihir Sharma): “Since Pakistan declared ‘open war’ on the Taliban regime in Kabul last week, it has sent waves of jets over its disputed border with Afghanistan. It continued to do so even as Iran, which neighbors both countries, was attacked by the US and Israel and Israel and retaliated with drone and missile strikes across the region. It takes a particular kind of self-assuredness to push an already unstable situation to the brink. But when it comes to its neighbors, Pakistan’s military has never run short of confidence.”
