Oil Spirals Higher After Iran Strikes Energy Infrastructure 

Qatar said early Thursday that Iranian ballistic missiles caused extensive damage at its Ras Laffan industrial area, which houses a major hub for liquefied-natural gas. Those strikes came in response to an Israeli attack on a large Iranian gas field, South Pars, which prompted Iran’s president to warn of “uncontrollable consequences, the scope of which could engulf the entire world.”

President Trump said Israel won’t launch further attacks against South Pars, but he threatened that the U.S. will “blow up the entirety” of the gas field if Qatari gas is attacked again.

Abu Dhabi authorities intercepted missiles targeting Habshan gas facilities and the Bab oil field. (…)

The sequence of events as they happened:

• Last Friday March 13, the US Air Force conducted a large bombing raid on Kharg Island, a key oil export hub off the Persian Gulf coast of Iran. The strikes targeted more than 90 Iranian military sites but deliberately spared oil and gas infrastructure. Kharg Island handles roughly 90% of Iran’s crude oil exports, making it a critical economic hub.
• Trump stated he chose not to destroy the oil infrastructure “for reasons of decency” but warned it would be “next” if Iran continued to block the Strait of Hormuz.
• Iran’s Foreign Minister, Abbas Araghchi, vowed to retaliate if energy infrastructure was targeted, specifically threatening American companies and their shareholders in the region. Tehran claimed the attack was launched from the United Arab Emirates (UAE), specifically alleging the use of HIMARS from Ras Al Khaimah. Iran urged residents and workers to evacuate several major ports in the UAE, declaring them “legitimate targets”.
• David Sacks, Trump’s White House AI and crypto czar, urged the U.S. to end the conflict during a podcast released on Friday, March 13. This was the first time a senior administration official publicly broke with the Trump’s stance on the war. Sacks argued that because the US and Israel had already “massively degraded” Iran’s military and air defenses since the start of the conflict on February 28, the US should claim success and exit. He noted that global financial markets were desperate for an “off-ramp” and that ending the war would stabilize the economy. He warned that a prolonged war could lead to “horrifying” scenarios. He speculated that if Israel’s air defenses were depleted and the country faced destruction, it might contemplate using nuclear weapons. He described Iran as holding a “dead man’s switch” over the economic fate of Gulf states through potential strikes on energy infrastructure.
• Despite Trump’s calls for a “team effort” to secure the Strait of Hormuz, key allies rebuffed Trump’s requests to send warships for tanker escorts, fearing further escalation.
• EU Foreign Policy Chief Kaja Kallas discussed a potential “wartime arrangement” with the UN, modeled after the Black Sea grain deal, to reopen energy transport without further military strikes.
• Congressional Democrats and some non-partisan groups denounced the strikes as unconstitutional, arguing that Trump bypassed the required Congressional approval to initiate war.
• Leading figures within the MAGA media sphere have been some of the sharpest critics of the escalation, arguing that the U.S. is being drawn into another “endless war.”
• Joe Kent, the director of the National Counterterrorism Center and a handpicked Trump loyalist, resigned in protest on March 17, 2026. In his resignation letter, he stated he could not support a war that he felt was launched despite no imminent threat to the U.S. Kent claimed the U.S. started the war due to intense pressure from Israel and its “powerful American lobby“. He alleged that high-ranking Israeli officials led a “misinformation campaign” to trick Trump into believing Iran was an imminent threat. He argued this was the same tactic used by Israel to draw the U.S. into the “disastrous” Iraq War. In an interview with Tucker Carlson, he stated that “the Israelis drove the decision” to strike, knowing it would trigger Iranian retaliation and force U.S. involvement.
• On March 17, Israel killed Ali Larijani, the Secretary of Iran’s Supreme National Security Council. Larijani was seen as a strategist willing to engage in “strategic compromises” with the West to ensure the regime’s survival. He was a key architect of the 2015 Nuclear Deal (JCPOA) and had been engaged in indirect talks with the US just weeks before the current war began.
• On March 18, Trump said the war could end “soon,” though he simultaneously claimed the U.S. was “not ready to leave yet”.
• On the same day, the Israel Defense Forces (IDF) hit production facilities, gas tanks, and parts of a refinery at Iran’s South Pars field which accounts for roughly 70% of Iran’s gas production and provides fuel for 80% of its power generation. Initial assessments suggest the strikes affected about 12% of Iran’s total output, threatening widespread domestic electricity and heating shortages. This marked the first time during the conflict that core Iranian energy production infrastructure was directly targeted.
• Iran retaliated by launching missile and drone strikes against major energy hubs of its neighbours, including QatarEnergy’s Ras Laffan LNG facility and the Habshan and Bab oil and gas fields in the United Arab Emirates.
• The Wall Street Journal reported that Trump was not only aware of the plan but had approved it. Two Israeli officials told CNN that the strike was carried out in direct coordination with the U.S..
• In a Truth Social post, Trump said Israel had “violently lashed out” at the South Pars gas field “out of anger”, but hit only a small portion of the area. “The United States knew nothing about this particular attack, and the country of Qatar was in no way, shape, or form, involved with it, nor did it have any idea that it was going to happen,” Trump wrote. He then said that “NO MORE ATTACKS WILL BE MADE BY ISRAEL” on the South Pars Field “unless Iran unwisely decides to attack . . . Qatar”.

The comments reveal an emerging split between Trump and Israel over targeting Iran’s energy infrastructure and, increasingly, over that war.

Trump asserted that the Iranian Navy and Air Force have been “essentially wiped out“ or “decimated” in just two weeks of conflict.

Trump suggested that “certain very important sites” related to Iran’s nuclear program had been hit and “will not be coming back for a long, long time.”

He claimed that “all of their missile factories“ and underground storage bunkers had been targeted to ensure Iran could not replenish its stockpile.

In a call with Axios, Trump suggested the war would end soon because there is “practically nothing left to target“.

Then Israel bombed South Pars, knowing that would escalate the conflict and potentially anger other Gulf states.

Saudi Arabia’s foreign minister Prince Faisal bin Farhan said what little trust existed with Iran before the war had been “shattered” and was now “broken”.

My sense is that Trump is starting to feel it in his bones… and so is Israel …

• Trump Calls for De-escalation as Oil Rises Beyond $116

Ed Yardeni:

The Bull/Bear Ratio we monitor fell to 1.94 this past week. That’s increasingly bullish from a contrarian perspective. However, it has worked best in the past when it fell below 1.00 because such bearish sentiment typically triggered a Fed Put. This time around, the Fed may be trapped between Iran and a hard place. BBR readings around here or lower could signal a compelling buying opportunity if foreign policy succeeds in lifting the fog of war sooner rather than later.

The S&P 500 Index yesterday closed on its 200dma (6615). Today’s preopening is at 6596.

***

Prices Paid to US Producers Increase by More Than Forecast

The producer price index rose 0.7% after a 0.5% gain in the prior month, according to Bureau of Labor Statistics data out Wednesday. An underlying gauge of wholesale inflation that excludes food and energy increased 0.5%.

“The large upside surprise to the PPI in February confirms that stronger inflationary pressures were already making their way through supply chains even prior to the surge in oil prices,” Thomas Ryan, North America economist at Capital Economics, said in a note.

More than half of the increase in the PPI last month was due to a 0.5% advance in services costs, according to the BLS. That includes rising costs for traveler accommodation, food wholesaling and investment services. (…)

A less-volatile PPI measure that excludes food, energy and trade services rose 0.5%, the most in four months. (…)

Wolfstreet.com has the meaty stuff:

The Producer Price Index final demand for services jumped by 0.54% (+6.7% annualized) in February from January, seasonally adjusted, after spiking by 0.82% (+10.3% annualized) in January, and by 0.59% (+7.3% annualized) in December, which pushed the six-month average to +5.8% annualized, the worst since August 2022.

Year-over-year, the services PPI accelerated to 3.8%, the fourth month in a row of acceleration.

Year-over-year, the core goods PPI jumped by 4.2%, same increase as in January,

Core PPI Final Demand, which includes all goods and services except food and energy, jumped by 0.49% in February from January (6.1% annualized) seasonally adjusted, after spiking by 0.81% (+10.2% annualized) in January, and by 0.53% (+6.6% annualized) in December.

The six-month average accelerated to +5.6% annualized, the worst since August 2022.

Prepare for bad surprises as Ed Yardeni illustrates. Note that nothing from the war with Iran is in these numbers.

BTW, the FOMC’s SEP sees core inflation slowing from 2.9% in 2025 to 2.7% in 2026. It was 3.1% in January.

From yesterday’s FOMC:

• Economic activity is still seen as expanding at a “solid pace” and inflation remains “somewhat elevated”.
• Risks continued to be skewed to higher unemployment, and more participants deemed uncertainty around these forecasts to be higher.
• Both headline and core PCE projections were revised up in this SEP. 2026 headline inflation was seen three ticks hotter (2.7%), while 2027 was revised up by one tick (2.2%). Core PCE inflation was revised up by two ticks in 2026 (2.7%) and one tick in 2027 (2.2%).
• 17 of 19 participants saw risks to these projections as weighted to the upside, while uncertainty was deemed to be higher still.
• Powell sees a big chunk of current inflation (0.5%-pts to 0.75%-pts) stemming from tariffs so if this fades as expected, they’ll be able to make progress toward 2%.
• Fed is looking for progress on inflation in mid-2026, and that “if we don’t see that progress, then you won’t see that rate cut.”
• Powell expressed greater confidence about higher productivity.

‘Epic Fury’ has already canceled out Big Beautiful Bill’s tax refunds — even if the Iran war ended today

(…) The Internal Revenue Service has data on tax refunds through Feb. 27. They’re up, on average, by 11%, which is a benefit of $360 per filer compared with the same period of 2025. Outside estimates expect the average tax refund when all is said and done to be even higher. Morgan Stanley says $534 higher and the Tax Foundation says $748.

Neale Mahoney, Jared Bernstein, Caleb Brobst and Ryan Cummings use the highest number, $748, to compare with what is likely to happen at the pump over the course of the year. Bernstein was the chair of the Council of Economic Advisers in the Biden administration, and Cummings was an economist at the White House between 2021 and 2023.

They use two estimates from Goldman Sachs on the direction of Brent oil futures, one taken before the war and one taken after. The key thing here is that even the new Goldman Sachs estimate forecasts a three-week Strait of Hormuz closure. Given that Thursday marks the 20th day of the conflict, that means the war basically needs to end right now for even the newer Goldman forecast to  hold true. The rest of the Goldman forecast is for prices to retreat halfway to the prewar baseline by April and 85% of the way back by June.

Using a simple model of the pass-through of crude oil to retail gasoline prices, the Stanford economists conclude that households will pay an extra $740 in gas costs this year. (…)

The Battle for the Strait of Hormuz (WSJ)

It’s no mystery what Iran intends to achieve by blocking the Strait of Hormuz. It seeks to pressure President Trump to end the war prematurely, establishing an Iranian veto on energy flows and winning impunity in the future. But what if Mr. Trump won’t play along? The result is the emerging Battle of Hormuz. (…)

Asked Sunday about the political cost of rising oil and gas prices—Iran’s remaining means of coercion—Mr. Trump replied, “I have to do what’s right. I can’t say that, ‘You know, gee, I don’t want to have any impact on oil prices for three or four weeks, or two months, and we’re going to let Iran have a nuclear weapon.’” (…)

Mr. Trump is rallying a coalition, and allies can help reopen the Strait with anti-mine vessels and more. “Numerous countries have told me they’re on the way,” he said Monday. (…)

This is no easy mission, and “militarily manageable risk” won’t be comforting to Americans or energy markets if this goes sideways. But Iran doesn’t hold all the cards. Its action in Hormuz could force Mr. Trump to see the war through, which is bad news for the regime. (…)

Tehran has given the U.S. a challenge that could add up to a strategic defeat if Mr. Trump stops early. (…)

Armed with missiles and drones, Iran’s regime has closed international waters and attacked neighbors’ energy facilities. This is while Iran is relatively weak. Imagine how the regime would blackmail the world—and get away with it—if it were left to amass twice or three times the missiles, or nuclear weapons.

The Battle for Hormuz underscores the U.S. interest in degrading the ayatollah regime—and giving Iranians a chance to overthrow it.

• Who is winning the Middle East war? (FT)

(…) The man with access to the best intelligence available, Donald Trump, insists that the US and Israel are clearly winning, before bemoaning that the Islamic republic is not caving. (…)

Rushing a Marine Expeditionary Unit from Okinawa, moving air defence systems from the Korean peninsula and urging navies from ambivalent if not unfriendly countries to deploy in the Gulf region are not a sign of panic given Washington’s massive capabilities. But they are not indicators of sound forecasting and well-thought-through planning either.

For every gung-ho retired general on television, there is another quiet one shaking his head.  

Reactive defence requires resources and the sustainment burden will be significant and politically controversial. How many ships can be devoted to escorting tankers and will any other nations help? How many aircraft and drones can be kept in the air at all times?

Good strategy is the alignment of ends and means. By that standard, the Iranians haven’t done badly. Lacking the ability to defend itself, Tehran has chosen to impose a high cost all around and its focus has been deliberate.

(…) the nearby UAE has borne the brunt of Tehran’s retaliation, followed by Kuwait and Bahrain. High on the list has been energy infrastructure, from production and refining to loading and transport. Saudi Arabia has comparatively been spared, although one-third of the drones fired at the kingdom has targeted the crucial oil site of Shaybah.

Above all, Iran’s ability to paralyse maritime traffic in the Strait of Hormuz has defied expectations that the US had gamed this war out.

Graphs showing high interception rates and reduced incoming projectiles don’t say how many interceptors have been used up or whether Iranian targeting has improved. Modern interstate warfare is no longer primarily about the frontline, it is about what happens in the rear. Russia’s invasion of Ukraine and the latter’s valiant defence show how faulty assumptions can deny military victory to the force that is strongest on paper; how no single or specific range of weapons systems can be decisive; how adaptation and innovation give temporary advantage before being matched or overcome by the other side; how social resilience underpins military power.

What will phase two of the war look like?

For Israel, the focus will be on the continued destruction of Iran’s military infrastructure and greater targeting of its coercive apparatus to weaken the Revolutionary Guards and its associated militia, the Basij force.

For the US, the goal will be to restore maritime traffic, defend its Arab partners better than to date and adapt to Iran’s own adaptations.

For Iran, it could involve weapons we have not seen deployed much. One of the mysteries of the war is why it has not fired more of its cruise missiles. The optimistic answer is that they have been largely destroyed; the likelier one is that Iran has held many back as they are a particularly useful capability for close combat in the Strait of Hormuz.

After the beating it has taken, the Iranian regime is unlikely to back down because it retains several advantages: geography, time and asymmetry. Iran can target more countries and areas from more positions. The longer the war goes on, the greater the cost to everyone else — and the Iranian regime has superior pain tolerance. When survival is the goal, anything goes.

• The “Final Battle” (Ray Dalio)

(…) I hear from those who run governments, geopolitical experts, and people all over the world that if Iran is left with control over who can pass through the Strait of Hormuz, or is even left with the power to negotiate:

1. The United States will be judged to have lost the war, and Iran will be judged to have won. (…)
If Donald Trump and the U.S. don’t win this war—with victory being easily measured by whether they can ensure safe passage through the Strait of Hormuz—they also will be perceived to have caused a disastrous situation they could not fix. (…)

When the world’s dominant power that has the world’s reserve currency is overextended financially, and it reveals its weakness by losing both military and financial control, watch out for allies and creditors losing confidence, the loss of its reserve currency status, the selling of its debt assets, and the weakening of its currency, especially relative to gold.

(…) it will threaten American power in the world and the existing world order. (…)

If President Trump demonstrates his and the U.S.’s power to do what he said he would do, which is win this war by having free passage through the Strait of Hormuz and eliminating Iran as a threat to its neighbors and the world, it will greatly bolster confidence in his and the U.S.’s power.

2. If, on the other hand, the Strait of Hormuz is left in the hands of the Iranians to use as a weapon to threaten American allies in the Gulf and the world economy more broadly, everyone will be hostage to the Iranians, and Donald Trump will be perceived to have picked a fight and lost. (…)

President Trump is now calling on other countries to join the U.S. in ensuring the free passage through the Strait; his ability to get them to do so will be indicative of his ability to form alliances and muster power, so that would be a big win.

It will be very difficult for the United States and Israel alone to ensure the safe passage of ships without prying Hormuz loose from Iranian control, and it will likely require a great battle to do so.

The outcome is existential for the Iranian leaders and the largest and most powerful segment of Iran’s population. To the Iranians, this war is very much about revenge and commitment to what matters more than life. They are willing to die as a demonstrated willingness to die is essential for one’s self-respect and showing the devotion that brings about the greatest reward—while Americans are worrying about high gas prices and America’s leaders are worrying about midterm elections.

In war, one’s ability to withstand pain is even more important than one’s ability to inflict pain.

The Iranians’ plan is to try to drag the war out and steadily intensify it because it is widely known that the American public, and therefore American leaders, have very limited capacities for pain and wars that drag on. So, if this war is made painful enough and long enough, the Americans will abandon the fight and their Gulf “allies,” and other “allies” around the world, will see that the United States will not be there to protect them. This will undermine the relationships with aligned countries in analogous situations.

3.
While there is talk of ending this war with an agreement, everyone knows that no agreement will resolve this war because agreements are worthless. Whatever happens next—i.e., leaving Hormuz in Iranian hands or taking control away from them—is likely to be the worst phase of the conflict. This “final battle,” which will make crystal clear which side won and which side lost control, is likely to be a very big one. (…)

Both sides know that the final battle, which will make clear which side won and which side lost,still lies ahead. And they know that if President Trump and the United States don’t deliver on reopening the strait, it will be terrible for them. If,on the other hand, President Trump wins this final battle and eliminates the Iranian threat for at least the next several years, it will greatly impress everyone, empower President Trump, and demonstrate American power.

4.
The direct and indirect effects of this “final battle” will ripple around the world, affecting trade flows, capital flows, and geopolitical developments with China, Russia, North Korea, Cuba, Ukraine, Europe,India, Japan, etc. (…)

I want to emphasize that I am not political; I am just a practical person who has to bet on what will happen (…).

• Trump’s coalition of the unwilling (FT)

(…) America’s partners are suffering, too, from soaring oil prices since Iran in effect closed the crucial oil artery. Getting dragged into the Middle East conflict, however, could be worse. They have every right to remain outside a war they did not seek or endorse.

Trump has called for European allies including the UK and France, as well as China, Japan and South Korea, to join a coalition to open the strait. Despite America’s naval strength, officials say European countries possess specialised assets such as mine hunting ships and drones. For the US, having a multi-flagged fleet in the strait makes it harder for Iran to retaliate without risking escalation on multiple fronts. (…)

For those Trump is pressing to join in, doing so carries multiple dangers. Tehran has declared any ship from a coalition ally in the strait a “legitimate target”, raising the risk of attacks that could suck them into a wider conflict. Trump is signalling that not participating carries risks, too: he might reduce US commitments to European security. The president has said pointedly that he will remember who answered his call.

While Trump is asking Nato members to support a US-led coalition rather than launch a formal Nato mission, he is overtly using the alliance as a lever. Nato is, however, a defensive alliance designed to aid members that are attacked. It has demonstrated its readiness to come to America’s assistance — in Afghanistan, when the US triggered Nato’s collective defence clause after the 9/11 attacks for the only time in its history. It also undertook operations “out of area” in Libya in 2011, under a UN Security Council mandate to protect civilians.

Trump, disingenuously, portrays allied support in Iran as a form of payback for US help to Ukraine. Russia’s full-scale invasion posed a direct menace, however, to Nato’s core area. The US decision to join Israel in striking Iran is, by contrast, a war of choice, in which Trump has provided no evidence that the Islamic regime posed an imminent threat. Nato is not a vehicle for one member to launch a discretionary conflict then demand that others pitch in. (…)

US allies are justified in avoiding steps that could make them a party to the war. If the US and Israel call a halt to their strikes, partners can examine options to police the strait against any further Iranian attacks. They also have a role to play in negotiating with Iran. (…)

Naval escorts will not guarantee safe passage through Strait of Hormuz, says IMO chief

The head of the International Maritime Organization has said that naval escorts through the Strait of Hormuz will not “100 per cent guarantee” the safety of ships attempting to transit the critical waterway. (…)

Dominguez said that part of the problem was the geography of the strait. It is 33km wide at its narrowest point, but the combined width of the deep-water shipping lanes for traffic in each direction is just two nautical miles (about 4km).

The Strait of Hormuz is bounded on the Iranian side by mountains, which favour the aggressors who can strike ships from on high with little notice. “We are collateral damage of a conflict when the root causes have nothing to do with shipping,” Dominguez said. (…)

Access to ports is limited as well because port facilities are being targeted. At some point, supplies will start running low in relation to food, water and oil [fuel] for the ships to continue to operate.” (…)

U.S. Allies Rebuff Trump’s Demand for Help Opening Strait of Hormuz

Germany has rejected taking part, while Japan and Australia have indicated they are unlikely to send vessels to help. Britain and France said they are assessing possible action but haven’t committed to doing anything before fighting halts. All are close U.S. allies. (…)

“This is not our war. We did not start it,” German Defense Minister Boris Pistorius said.

European reluctance to get involved reflects in part strained relations with a U.S. administration that has derided its traditional allies and leveraged its economic and military heft to achieve its desired outcomes. (…)

None of Washington’s traditional partners can afford to entirely dismiss White House pressure. European countries are still trying to keep Trump engaged on Ukraine and prod him away from a U.S. realignment with Russia, out of fears it would undercut Kyiv’s sovereignty and help relieve economic pressure on the Kremlin.

Europe is highly exposed to near-closure of the strait after a surge in energy prices across most of the continent following Russia’s invasion of Ukraine in 2022. European countries are slashing Russian energy imports. They were angered by an administration decision last week to temporarily lift sanctions on Russian oil exports. (…)

French President Emmanuel Macron has sent eight frigates, two amphibious helicopter carriers and an aircraft carrier to the region and said some ships would be deployed near the Strait of Hormuz. Macron is seeking to put together his own coalition of European, Asian and Gulf countries for a mission, but French officials say any operation would take place after a halt in the fighting. (…)

The EU’s foreign-policy chief, Kaja Kallas, said after the meeting: “Nobody wants to go actively in this war.” (…)

***

Nvidia’s CEO Projects $1 Trillion in AI Chip Sales as New Computing Era Begins

Chief Executive Jensen Huang ushered in the Age of Inference at the company’s annual GTC conference Monday, outlining a huge array of new products, both in hardware and software, geared toward running AI models more quickly and efficiently. (…)

“The inference inflection has arrived,” Huang said in his keynote speech. “This is the secret sauce.”

Huang said Nvidia expected to sell $1 trillion worth of Blackwell and Rubin chips by the end of 2027, updating earlier guidance that had the company selling $500 billion worth by the end of 2026. (…)

The coalition’s work would put the development of enterprise software tools into hyperdrive, Huang said, helping speed the transformation of the world’s software-as-a-service industry into an agentic-AI-as-a-service industry. (…)

The FT adds: “Right now where I stand . . . I see through 2027 at least $1tn” in revenue, said Huang, adding he was “certain” demand would prove to be higher. (…) Analysts’ forecasts for its 2027 and 2028 fiscal years — running to the end of January 2028 — total about $835bn, according to Capital IQ.

• NVIDIA GTC Keynote 2026

Did you miss The AI Supercycle: A Deep Dive.

• AI Capex Ate the Economy in Q4 Revised Q4 figures turned AI capex into the only material growth line

[Last Friday] BEA second estimate revised Q4 2025 GDP growth down to 0.7% annualized, which is half the advance estimate. Buried in the detail: the BEA line that captures servers and GPUs and such contributed +0.66 percentage points to that growth. The rest of the U.S. economy contributed roughly +0.04 points — statistical noise.

That’s the direct figure. It almost certainly undercounts AI’s role. Data center structures investment is a net positive contributor masked inside a broader nonresidential structures line that declined overall. Power infrastructure buildout driven by data center demand adds more. Construction wages more yet.

A reasonable upper-bound estimate puts AI-related capex at around +0.80 percentage points — exceeding total Q4 GDP growth. The implication: Strip out the AI infrastructure buildout and the U.S. economy was flat in Q4, with government spending (-1.03pp) and weak exports doing the most damage. AI capex just ate the (weakening) U.S. economy.