06.03.26 - Oil shock and weak data

The war involving Iran has now entered its first week with no visible signs of de-escalation. Military operations continue and geopolitical tensions across the region remain elevated.

At the same time, the closure of the Strait of Hormuz is disrupting global energy flows, pushing oil prices sharply higher.
Brent crude has surged above USD 91 per barrel (+25% WoW) while WTI crude trades above USD 88 (+33% WoW).

This represents one of the fastest weekly oil price increases in recent years and significantly raises the risk of renewed inflationary pressure globally.

Today’s US economic data added another layer of concern:

• Labour market: The US economy shed 92k jobs in February, the largest decline in four months. January payrolls were revised lower to +126k, and the figure came far below expectations of a +59k increase. At the same time unemployment rose to 4.4% (est. 4.3%).

• Retail sales: US retail sales fell 0.2% in January, marking the first monthly decline since October and signalling weakening consumer momentum.

Markets: broad risk off move

• Equities: Global equities moved lower, with losses led by European markets and US technology stocks.

• Bonds: Yields rose as higher oil prices increased inflation concerns - US 10-year Treasury to 4.17%

• Currencies: USD broadly unchanged while CHF strengthened

• Commodities: Broad gains across the complex, led by oil (+8% intraday) and precious metals.

• Cryptos: fell sharply, with Bitcoin falling toward USD 68k (-5%)

• Volatility: The VIX jumped above 27, levels last seen in November

My View: As highlighted already last weekend in my “Weekly Market Snapshot”, this is not the moment to add additional risk exposure.

Until mid-week, markets clearly underestimated the potential duration and economic impact of the conflict. The assumption that the situation would stabilize quickly now appears overly optimistic.

At the same time, the surge in oil prices represents one of the fastest weekly increases in recent years, significantly raising the risk of renewed global inflationary pressure.

If the closure of the Strait of Hormuz persists, the economic implications could become substantial:

• structurally higher energy prices

• renewed inflationary pressure

• higher bond yields

• weaker consumer demand

• a drag on economic activity

• a broader economic slowdown

At the same time, recently weaker US labour market data is already hinting at a potential shift in monetary policy expectations. Historically, the Federal Reserve has tended to place greater weight on labour market deterioration than on inflation risks when both forces move in opposite directions.

This creates a challenging policy environment: rising energy-driven inflation combined with a weakening labour market could force the Fed to consider rate cuts even as inflation pressures rise.

Such a mix increases macro uncertainty and in combination with geopolitical tensions, this historically tends to trigger a repricing across risk assets, particularly equities and cryptos.

At this stage, there are no clear signs that the conflict or the disruption of energy flows will end anytime soon.

For now, maintaining a cautious positioning remains the prudent approach.

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