John Authers today:

• Tuesday in New York started with news that Iran had struck a Kuwaiti tanker at dock in Dubai — scarcely the action of a leadership hoping to reduce the tension. But at 12:30 p.m. came reports that President Masoud Pezeshkian had told EU officials that the country was “willing to end the war” but would need guarantees. It’s not much, but it is the clearest official indication we’ve had that Iran might talk. The result was a WACO rally [Will the Ayatollahs Chicken Out?]. Only the days when Trump chickened out of reciprocal tariffs last April and out of tariffs on China in May have seen bigger rallies in the last three years:

• Uncertainty over how long this conflict could last is so extreme that any sign of an interlocutor prepared to discuss a negotiated settlement is like manna from heaven for the markets. Ahead of Pezeshkian’s remarks, Polymarket had been pricing roughly equal chances that the war ends in April, that it carries on into June, or lasts even longer. (…) the odds have shifted, with a 60% shot that the war ends in April and only 20% that it extends beyond June. Such a reduction in uncertainty would make markets happy. It doesn’t mean they should be. The long-term prospects are darkening. Jean Ergas of Tigress Financial Partners argues that Iran’s leadership now has what it wants, which is survival as a regime.
• Further, the guarantees that the regime requires before agreeing to a peace will likely entail a continuing ability to exert control over traffic passing through the Strait of Hormuz.
• Note that the administration’s official foreign policy strategy document, published four months ago, says:

America will always have core interests in ensuring that Gulf energy supplies do not fall into the hands of an outright enemy, that the Strait of Hormuz remains open, [and] that the Red Sea remains navigable.

• Trump may be right politically to pay the price of leaving the chokepoint under effective Iranian control rather than preside over significant US casualties. Safeguarding American lives should be a priority for any president. But it means accepting a far worse strategic position than the US had before the war. Which suggests that it was a mistake to launch this conflict in the first place.
• Oil traders have never been so confident that crude prices will fall. Crude oil is in the deepest contango (meaning that futures are trading at levels that imply prices will come down in the future) on record:

• The resilience of US markets compared to the rest of the world has far more to do with an ongoing rise in profit forecasts than with any great confidence in America as a jurisdiction. The premium that investors had to pay for US companies surged ahead of President Donald Trump’s return to the White House and is now right back where it was three years ago. The decline has continued through the conflict in Iran:

Note that the bond market shares the oil contango, beyond the next 5 years:

Gas Prices Continue to Put Inflationary Pressure on Consumers

As of today, gas prices have increased 30% over the past month, which is feeding directly into U.S. inflation data. The impact is visible from the beginning of March in real-time Truflation data. Our data team also expects this shift to show in the upcoming BLS CPI March release and to continue influencing inflation readings in the months ahead. (…)

Truflation CPI has been increasing rapidly in March 2026, after months of strong disinflation and even deflation across a few major categories.

Today (March 26), Truflation’s independent US inflation index (TruCPI) jumped up again from 1.68% to 1.77%.

MANUFACTURING PMIs

Eurozone: Manufacturing input prices rise at fastest rate since October 2022

The euro area manufacturing sector continued to grow in March, recording modest upticks in both production and new order inflows once again. There was a broad stabilisation of export demand, a positive development relative to the contraction trend seen in the prior eight months, while backlogs of work increased for the first time in almost four years.

The most notable developments were on the supply-side of the economy. March survey data signalled the greatest lengthening of input lead times in just over three-and-a-half years as the war in the Middle East disrupted global logistics markets.

Eurozone manufacturers raised their purchasing activity for the first time since June 2022, even though input price inflation soared to a 41-month high.

The price of goods leaving the factory gate were subsequently raised more aggressively, with the pace of increase at just over a three year high.

New export orders were virtually unchanged from February, although this did mark somewhat of an improvement after successive months of contraction between February 2026 and July 2025.

China: Manufacturing sector continues to expand despite rising price and supply pressures

The headline seasonally adjusted Purchasing Managers’ Index™ (PMI) posted above the 50.0 no-change mark for the fourth month running in March, signalling a sustained improvement in manufacturing sector conditions. The PMI fell from February’s recent peak of 52.1 to 50.8, indicating a slower overall expansion, albeit the second-strongest performance in the past six months. The latest reading was in line with the long-run average since the survey began in 2004. All five components of the PMI had positive impacts in March.

Goods producers in China reported higher inflows of new orders in March, attributed to greater market demand, customer acquisitions, business expansion, promotions and competitive pricing. The rate of expansion eased from February’s multi-year high, but was nevertheless the second-fastest in six months. New export business increased, albeit more slowly than in February.

Production increased for the fourth month running in March, though the rate of growth eased. By sector, expansions were reported at consumer and intermediate goods makers, while a broadly stable trend was indicated for investment goods.

Manufacturers’ backlogs of work increased at a faster rate in March, reflecting the slower increase in production. Higher levels of incomplete orders were attributed to greater customer demand, capacity constraints and personnel changes.

With backlogs and new orders continuing to rise, Chinese goods producers increased headcounts. Employment rose for the third month running, the longest period of job creation since mid-2021. Manufacturers also expanded their purchasing operations for the third consecutive month. In line with the trends for output and new orders, however, the rate of growth slowed from February’s strong pace.

March data indicated pressure on manufacturing supply chains, as lead times lengthened for the first time in five months. Moreover, the degree to which times increased was the greatest since December 2022. Firms linked longer times to supply chain disruptions, rising and volatile input prices and supplier capacity constraints.

Input stocks rose slightly in March, reflecting the slower increase in output. Inventories of finished goods contracted marginally as firms partly fulfilled orders from existing stock.

March data signalled a notable uptick in cost inflationary pressures in the Chinese manufacturing sector. The rate of input price inflation accelerated strongly to the highest since March 2022, and was above the long-run survey average. In line with the trend for input prices, the rate of output price inflation picked up to a four-year high and was above the series average.

The 12-month outlook for production in the Chinese manufacturing sector remained positive in March. Overall sentiment softened from February’s recent peak but remained stronger than in December and January. Confidence was linked to firmer customer demand, investment in production capacity and new products, efficiency improvements and supportive government policies.

Japan: Business conditions improve at slower rate in March

Manufacturing conditions across Japan continued to improve at the end of the first quarter, albeit at a slower pace. Growth in factory output and new orders eased from the solid rates seen in February, which in turn contributed to a softer rise in staff numbers.

Measured overall, new orders expanded for the third straight month in March. Companies that recorded higher sales cited greater demand across a number of product areas, notably semiconductors, AI technology and automotives.

That said, the rate of growth was the softest seen over this period and modest. New export business likewise expanded at a slower rate.

The survey also indicated that the war in the Middle East placed additional upward pressure on costs, which rose to the greatest extent in 19 months. At the same time, firms expressed reduced optimism around the year-ahead outlook
for output.

ASEAN manufacturing sector growth cools and price pressures surge in March

The ASEAN manufacturing sector recorded notable slowdowns in a number of demand indicators in March, as well as sharp upswings in input costs and output charges, translating into the sector’s weakest performance in six months.

Growth in output and new orders was solid and on par, but considerably softer than the sharp expansions recorded in February. This led to slower and only marginal upticks in both purchasing and employment. At the same time, price pressures surged in March, with the survey’s price gauges moving back above their long-run averages.

Solid uplifts in new orders and output were recorded in March, continuing the expansions seen since the middle part of last year. However, new orders rose to the weakest extent since last August, while production growth was the slowest in eight months. Weighing on total new sales was a fresh decline in new export orders.

 

Trump interview: I am strongly considering pulling out of Nato

Donald Trump has told The Telegraph he is strongly considering pulling the United States out of Nato after it failed to join his war on Iran.

The US president labelled the alliance a “paper tiger” and said removing America from the defence treaty was now “beyond reconsideration”.

It is the strongest sign yet that the White House no longer regards Europe as a reliable defence partner following the rejection of Mr Trump’s demand that allies send warships to reopen the Strait of Hormuz.

Mr Trump was asked if he would reconsider the US’s membership of Nato after the conflict.

He replied: “Oh yes, I would say [it’s] beyond reconsideration. I was never swayed by Nato. I always knew they were a paper tiger, and Putin knows that too, by the way.” (…)

The Prime Minister [Sir Keir Starmer] signalled that he would seek a closer relationship with Europe in response to the souring of relations with Washington and said that, “whatever the noise”, he would act in the British interest.

He said: “This is not our war, and we’re not going to get dragged into it.” (…)

Speaking on Fox News in the hours before the interview with Mr Trump, Mr Rubio said America would have to “re-examine” its Nato membership when the war in Iran came to an end.

“I think there’s no doubt, unfortunately, after this conflict is concluded we are going to have to re-examine that relationship.

“If Nato is just about us defending Europe if they’re attacked, but them denying us basing rights when we need them, that’s not a very good arrangement. That’s a hard one to stay engaged in.” (…)

Last week, The Telegraph revealed that Mr Trump was considering a shake-up of Nato designed to punish members who did not meet his funding demands.

Senior members of the administration have pushed for a “pay-to-play model” that could block allies from decision-making, including when the bloc goes to war.

Sources close to the president said he was also considering pulling US troops out of Germany – a move that he has considered since returning to office last year.

Mr Trump’s demand for Nato to help in his war with Iran has led to questions about Article 5, the “attack on one is an attack on all” mutual defence clause.

It has only ever been invoked once – after the 9/11 attacks on the US. More than 1,100 non-US troops were killed in the subsequent war in Afghanistan, including 457 British soldiers.

The clause relates only to when a Nato member is attacked and would therefore not apply to the war in Iran, which began with joint US-Israeli air strikes on Feb 28.

Without initially consulting or inviting other NATO countries.

Trump Tells Aides He’s Willing to End War Without Reopening Hormuz

President Trump told aides he’s willing to end the U.S. military campaign against Iran even if the Strait of Hormuz remains largely closed, administration officials said, likely extending Tehran’s firm grip on the waterway and leaving a complex operation to reopen it for a later date.

In recent days, Trump and his aides assessed that a mission to pry open the chokepoint would push the conflict beyond his timeline of four to six weeks. He decided that the U.S. should achieve its main goals of hobbling Iran’s navy and its missile stocks and wind down current hostilities while pressuring Tehran diplomatically to resume the free flow of trade. If that fails, Washington would press allies in Europe and the Gulf to take the lead on reopening the strait, the officials said.

There are also military options the president could decide on, but they aren’t his immediate priority, they said. (…)

Secretary of State Marco Rubio, speaking Monday to Al Jazeera, said the current campaign to complete U.S. military objectives will be finished within weeks.

“Then we’ll be confronted with this issue of the Straits of Hormuz, and it will be up to Iran to decide,” said Rubio, who is also Trump’s national-security adviser, “or a coalition of nations from around the world and the region, with the participation of the United States, we’ll make sure that it’s open, one way or the other.” (…)

Suzanne Maloney, an Iran expert and vice president at the Brookings Institution in Washington, called ending military operations before the strait is open “unbelievably irresponsible.”

The U.S. and Israel started the war together and can’t walk away from the fallout, Maloney said. “Energy markets are inherently global, and there is no possibility of insulating the U.S. from the economic damage that is already occurring and will become exponentially worse if the closure of the strait continues.” (…)

Trump and his team say the strait matters far more to countries in Europe, the Middle East and Asia than to the U.S., insisting it isn’t vital to America’s energy needs. (…)

Bloomberg suggests this catalyst:

• US Fuel Prices Soar as Trump Reportedly Weighs War Exit

US gasoline climbed above an average of $4 a gallon for the first time since August 2022, one of the most visible measures of consumer pain in the world’s largest economy resulting from the war in Iran.

The nationwide average retail price for regular unleaded gas rose to $4.018 a gallon on Monday, according to the American Automobile Association. Prices have surged by more than $1 since the start of the war, up from $2.98 on the day before the US and Israel launched attacks against Tehran.

The Guardian:

In a post on Truth Social, the US president, Donald Trump, has suggested that countries like the UK should build up the “courage” to go to the strait of Hormuz and “just take” fuel.

“You’ll have to start learning how to fight for yourself, the USA won’t be there to help you anymore, just like you weren’t there for us,” Trump said as he criticised countries who “refused to get involved in the decapitation of Iran”.

He said these countries could buy “jet fuel” from the US, where there is “plenty”, if they are running low on supplies.

“Iran has been, essentially, decimated. The hard part is done. Go get your own oil!” Trump concluded his social media post by saying. More details soon…

Did you miss yesterday’s Judgement Call?

Trump could ask Gulf states to contribute to war costs, says White House

The White House has raised the prospect that President Donald Trump could ask Gulf states to help pay to cover the costs of the US and Israel’s war with Iran.

White House press secretary Karoline Leavitt was asked by a reporter on Monday whether countries such as Kuwait, Saudi Arabia and the United Arab Emirates would “step up” to pay for “the vast majority of the cost of the war”, which the reporter claimed they did during the first Gulf war in 1990-91.

“Well, I think it’s something the president would be quite interested in calling them to do,” Leavitt said. “I won’t get ahead of him on that, but certainly, it’s an idea that I know that he has, and something that I think you’ll hear more from him on.” (…)

The US launched the current conflict with Iran against the urging of the Gulf states, whose leaders were concerned about bearing the brunt of the economic fallout.

Analysts estimate they have each sustained millions of dollars in lost revenues and structural damage from Tehran’s retaliatory strikes. (…)

Leavitt on Monday said the US has bombed more than 11,000 targets in Iran in the four weeks since the war started.

Eurozone Inflation Jumps as Iran War Cranks Energy Prices Higher Prices were 2.5% higher than a year earlier, the fastest increase since January 2025

The annual rate of inflation was 1.9% in February.

The rebound in inflation was expected, propelled by energy prices rising by 4.9%. That was the first annual increase since February 2025. (…)

Brent crude prices have climbed more than 50% to more than $100 a barrel since the first U.S. and Israeli strikes on Iran on Feb. 28. Oil prices fell a little overnight Monday on hopes the conflict would be short-lived. (…)

China PMIs Signal Resilience as Mideast War Raises Uncertainty Nonmanufacturing PMI, which covers both service and construction activity, also bounced back to growth territory

China’s official manufacturing purchasing managers index rose to 50.4 this month from February’s 49.0, ending two straight months of contraction, according to data released by the National Bureau of Statistics. (…)

Meanwhile, China’s nonmanufacturing PMI, which covers both service and construction activity, also bounced back to growth territory, rising to 50.1 from 49.5 in February.

The subindex tracking service activity edged up to 50.2 from 49.7, while the construction subindex improved to 49.3 from 48.2, but continued to signal stress in China’s beleaguered property sector. (…)

Chinese manufacturers are feeling the sting of rising production costs.

Huo Lihui, a senior statistician at the National Bureau of Statistics, noted on Tuesday that factors including the conflict in the Middle East have spurred a sharp uptick in the cost of crude oil, chemicals, and other industrial raw materials this month.

The commodity price surge, compounded by rising global freight rates, is pressuring the manufacturing sector. According to Huo, a growing share of enterprises reported higher raw material and logistics expenses compared to the previous month. (…)

Over the medium term, the recent energy shock and heightened geopolitical uncertainty are likely to push more countries to prioritize energy security—a pivot that plays to Beijing’s strengths.

Achieving that security will require building nuclear power plants, rolling out renewable energy and accelerating the adoption of electric vehicles, according to Goldman Sachs economists.

“As China dominates many of these sectors, it stands to gain from this global shift,” the GS economists noted.

• ‘Pump anxiety’ from soaring fuel prices prompts surge in EV interest

China’s Pivot to Vietnam Blows Hole in Trump’s Made-in-USA Plan A year on from “Liberation Day,” Trump’s tariffs have fueled a change in global supply chains — just not in the way he envisioned.

(…) A Bloomberg analysis of shipment-level customs data shows a shift in manufacturing toward Vietnam that begun under Trump’s first term has accelerated, with the country last year surpassing neighboring China as the leading supplier to the US of laptops and game consoles for the first time.

What’s more, the findings showed that the core production of those electronics is still happening in China. Faced with unpredictable tariffs, Chinese manufacturers found a cost-effective workaround: moving low-skilled, final assembly lines across the border to Vietnam, where they have faced lower levies. Vietnamese factories that screw together Chinese-made components and ship them onward added less than 8% of the export value in some cases, the Bloomberg analysis showed. (…)

The data also shows the US still bought $130 billion worth of seven big-ticket electronics from overseas last year, falling just over 1% compared with 2024. (…)

Bloomberg analysis of 2025 data found Fukang Technology Co., a subsidiary of Foxconn, exported $8.6 billion worth of MacBooks, iPads and motherboards for both products and servers, while importing $7.9 billion of various components from China, South Korea and Taiwan. That means at most 7.8% of the export value was created in Vietnam, if all final products at Fukang were exported.

BYD Co., although better known for its electric cars, also makes iPads for Apple Inc. and follows a similar strategy. From its factory in Phu Tho, 100 kilometers (62 miles) outside of Hanoi, it exported $5.1 billion worth of iPads and other products, and imported $4.9 billion of components, generating only 4.5% of the export value in Vietnam. Imports from China accounted for 61% of its inward shipments, almost the same share as Foxconn.

The hiring sprees in Vietnam deal a blow to the “Made in USA” agenda touted by Trump, who wants to bring back manufacturing and blue-collar jobs to America. (…)

“The optics of being the country with the largest trade surplus against the US means Vietnam is now a bigger target for the administration. It is a strong risk to Vietnam’s economy,” said Jian Xin Heng, senior Asia analyst at BMI. (…)

FYI:

Via Callum Thomas:

• Geopolitical Pathways: the typical pathway through geopolitical panics is to plunge and then eventually rebound… But is this a typical geopolitical issue? I’d say there are probably more parallels with 2022 than some of the other relative non-event geopolitical flare-ups over the years. Especially given the starting point of relative euphoria and overvaluation. Still it’s a useful map for how things might unfold.

Source:  @SamRo

• Tech or Treat: although this is using forward PE ratios (which rely on forward earnings, which themselves can be overinflated), we have seen a significant reset in Tech sector forward PE ratios down to the lower end of the range (albeit not quite to 2020 or 2018 levels as yet). Still, unless we’re going to go through a classic big bad bear, this is another thing saying we’re getting closer.

Source:  @TheShortBear

• Midterm Malaise & Magic: back on the “getting close” theme, this table is a good reminder that Midterm Malaise is a real thing (and p.s. there are plenty of examples where it got materially worse than our ~9% down so far) —— But also, don’t forget the magic that follows. Subsequent 1-year returns off the Midterm lows had a habit of rewarding those who managed to get in at the bottom.

Source:  @adamkhootrader

New book: Trump’s 10 leadership commandments

(…) Based on all those years of studying Trump, Sonnenfeld says the tactics include “divide and conquer, the sleeper effect of constantly repeating false information with unshakable confidence, starting negotiations by giving the other side a bloody nose rather than a handshake of trust, centralizing all power [in your own hands], personal grandiose branding on everything.”

“The key insight about how Donald Trump leads is that he is the sun around which all else must revolve in the Trump solar system,” Sonnenfeld concludes. “Power must not reside in institutions, collectives, or equals; all power must radiate from Trump himself. If he is not at the center of an event, then in his retelling, it is not important, or it did not happen.”

BTW: Trump library reveal

President Trump last night unveiled the first renderings of the presidential library he plans to build on prime Miami real estate after he leaves office.

A nearly two-minute video on Truth Social depicts it towering over the city’s existing skyscrapers, suggesting the shrine could become the tallest building in South Florida.

The mock-ups show space for an Air Force One 747 jet, a Marine One helicopter and several other aircraft.

Plans also include a large golden statue of Trump in an auditorium (pictured below) and a golden escalator reminiscent of the one the president famously descended in 2015 at Trump Tower in Manhattan.

Local officials will have little say over the project — including its height — after Florida barred cities and counties from regulating presidential libraries, Axios’ Marc Caputo notes.

The state handed over the 2.63-acre plot of land, formerly a parking lot for Miami Dade College, to Trump’s library foundation last year for $10.

Also yesterday, the pro-Trump state lawmakers who control Tallahassee gave Trump another gift when Gov. Ron DeSantis signed legislation officially renaming Palm Beach International Airport to “the President Donald J. Trump International Airport.”