CRACKING

From various media sources:

• As revealed by the Guardian this week, a similar assessment had been made by the UK’s national security adviser, Jonathan Powell, who attended the final stages of the nuclear talks. According to sources, he had been surprised at the significant progress towards a permanent, substantive nuclear deal and judged that it was enough to halt a war between the two sides.

The US negotiating team consisted of Trump’s special envoy, the real estate developer Steve Witkoff, and his son-in-law Jared Kushner. They reportedly brought no experts with them.

Sources said the Iranians had agreed to highly significant concessions including a reduction and pause on their enrichment of uranium and also offered the US the chance to participate in a future civil nuclear programme, in exchange for a lifting of sanctions and unfreezing of assets.

A final phase of negotiations had been planned for the following week in Vienna, but 48 hours after the talks finished, the US and Israel began their strikes on Iran.

Albusaidi blamed “Israel’s leadership” for persuading Trump to join the war on the false basis that Iran’s regime would offer an “unconditional surrender” after the assassination of its supreme leader Ali Khamenei.

“The American administration’s greatest miscalculation, of course, was allowing itself to be drawn into this war in the first place,” he wrote. “This is not America’s war, and there is no likely scenario in which both Israel and America will get what they want from it.” (…)

As the war in the Middle East has dragged on with no clear end in sight, Oman has stood out from other Gulf states in its increasing willingness to condemn and criticise the US, the closest and most important ally for the Gulf countries, accusing it of being a proxy for Israeli interests in the region.

In comments to reporters last Thursday, Albusaidi said the US was intent on causing irreversible damage to international law and helping Israel re-order the Middle East to its own benefit.

“Oman’s view is that the military attacks against Iran by the United States and Israel are illegal and that for as long as they continue to pursue hostilities, those states that launched this war are in breach of international law,” he said.

• Yesterday’s Netanyahu presser:

Question: President Trump said today he did not like the Israeli strike on the Iranian gas fields. My question to you: Was the president aware of Israel striking that gas field? Did he approve it?

Answer: Well, I’ll say two things. Fact number one, Israel acted alone against the Asaluyeh gas compound. Fact number two, President Trump asked us to hold off on future attacks, and we’re holding off.

The question was: Was Trump aware?

Answer: Israel acted alone.

A bit later: “Does anyone really think someone can tell President Trump what to do? Come on. President Trump always makes his decisions on what is good for America.”

Trump said he had admonished Netanyahu for the strike on South Pars. “I told him, ‘don’t do that’ — and he won’t do that,” he added. “We’re independent, but get along great. It’s co-ordinated, but on occasion he’ll do something and if I don’t like it — [I tell him] we’re not doing that and so we’re not doing that anymore.” .”

Hegseth backed claim that Trump “knew nothing” about gas field attack.

US-Israel strikes have destroyed Iran’s ability to enrich uranium, Benjamin Netanyahu says Israeli prime minister suggests war will end ‘a lot faster than people think’

Israeli Prime Minister Benjamin Netanyahu said joint US-Israel strikes had destroyed Iran’s ability to enrich uranium and to produce ballistic missiles, and that he saw “this war ending a lot faster than people think”.

Netanyahu rejected the notion of an open-ended military campaign against Iran, telling a press conference on Thursday evening that the objectives he had set were achievable. (…)

He said the war “will take as long as necessary” for Israel’s goals to be achieved: the decimation of Iran’s existing missile and nuclear stockpiles, and creating the conditions for the potential fall of the Islamic republic.

Saudi Arabia Sees a Spike to $180 Oil if Energy Shock Persists Past April Prices at such a level could trigger a recession or consumer changes that crush demand

The base case, several oil officials in the Gulf’s biggest producer said, is that prices could soar past $180 a barrel if the disruptions persist until late April.

While that would sound like a bonanza for a kingdom still heavily leveraged to oil revenue, it is deeply concerning. Prices that high could push consumers into habits that slash their oil use—potentially for the long term—or trigger a recession that also hurts demand. (…)

Saudi Arabian light crude is already being sold to Asian buyers via its Red Sea port for around $125 a barrel. As extra oil in storage—some of which was shipped out of the Gulf ahead of the war—is used up, physical shortages will bite more deeply next week, causing prices to close in on $138 to $140, the officials said.

By the second week of April, with no easing of the supply disruptions and the Strait of Hormuz remaining closed, the Saudi officials said they expected prices could hit $150 before stepping up to $165 and $180 in the weeks ahead. (…)

“The market isn’t acting like this is an end-of-March thing any more,” said Rebecca Babin, a senior energy trader for CIBC Private Wealth, referring to an ending for the war. “I don’t think $150 is out of the question in another month…You start talking about June, I’ll give you $180.” (…)

An adviser working with Saudi Aramco said the company is weighing a scenario in which the rapidly rising cost of oil imports in Europe, Japan and Korea puts downward pressure on their currencies, raising their effective cost of energy, driving inflation and interest rates up, and eventually slowing their economies and demand. (…)

• Record Diesel-Price Surge Hits U.S. Truckers, Retailers and Manufacturers Average on-highway price for diesel jumps 25% in a week, as Mideast disruptions also lift air and sea shipping rates

(…) Most large trucking companies will pass the added costs on to American stores and factories as fuel surcharges. “It is a contractually agreed-upon item and they know this is out of anyone’s immediate control,” said Bob Knowles, who oversees transportation for NFI Industries. (…)

By March 6, the cost of European jet fuel had risen 80%, according to Clarksons Research. Analysts at TD Cowen said in a recent note that they expect importers and exporters to bear the brunt of conflict-related shipping delays and cost increases in the form of fees and surcharges. (…)

Freight specialists say air and ocean transportation costs are rising fastest in the Gulf region, and are expected to be felt more broadly over the coming weeks. Niall van de Wouw, chief airfreight officer for Oslo-based transportation-data firm Xeneta, said short-term rates on air routes that rely on Middle East transit hubs could double or triple.

The conflict has partially closed airports in Doha, Dubai and Abu Dhabi that account for a quarter of China-to-Europe airfreight and almost all of India’s air exports, said Vishal Sharma, group chief commercial officer for Denmark-based DSV, the world’s largest freight forwarder. (…)

Carriers have also paused plans to return to ocean routes through the Suez Canal because of fears of attacks from Houthi militants in Yemen. They are instead sending containerships on voyages around Africa that take longer and burn more fuel. (…)

Strang said bunker fuel surcharges today average about $320 to $350 per 40-foot container, a roughly 10% to 17% addition to the average cost to ship a box from Asia to the U.S.

• Most crude shipments through the Strait of Hormuz are bound for Asia, with China, India, Japan, and South Korea as the principal buyers. In total, Asia takes about 11.2 mbd of crude and 1.4 mbd of refined products that transit the Strait.

As a result, the immediate physical shortfall is concentrated in Asian markets, where reliance on Gulf barrels is greatest. (…)

Timing effects further reinforce this divergence. A typical voyage from the GCC to Asia takes approximately 10-15 days, while shipments to Europe require closer to 25-30 days via the Suez Canal, or even 35-45 days if rerouted around the Cape of Good Hope.

As a result, the impact of disrupted Gulf flows will hit Asian markets earlier and more acutely, whereas Atlantic basin benchmarks such as Brent and WTI will remain cushioned for longer by inventory overhangs and slower supply adjustments.

• Demand destruction has begun 

By mid-March, multiple sectors in Asia had shifted into a defensive footing as energy prices spiked and supplies tightened. The retreat in refined product flows is already visible: shipments from the region’s major exporters are down about 30% over the past 10 days versus the five‑month baseline, with preliminary data for the last week pointing to an even steeper 35% drop.

The pullback is sharpest in jet fuel (down more than 40%), followed by gasoline (down more than 30%) and diesel (down more than 20%). Diesel has emerged as the region’s immediate choke point, with surging prices slowing both travel and freight.

Governments are responding with a mix of demand management and emergency measures. Bangladesh brought forward the Eid-al-Fitr holiday and allowed universities to close early to save fuel. The Philippines and Sri Lanka instituted four‑day workweeks to curb diesel use and stretch dwindling stocks. Pakistan closed schools and shifted universities online. Officials in Thailand and Vietnam have been urged to use stairs, work from home, and limit travel, while Myanmar introduced alternating driving days to reduce road fuel demand.

In parallel, authorities are intervening directly into fuel markets to stabilize fuel prices. As anyone who has looked at booking flights recently can attest to, the airline industry is particularly exposed. And if you’re flying anywhere in Asia you might be up the creek: As jet fuel approaches $200/bbl, carriers are shifting from cost management to outright service withdrawal, with many routes rendered uneconomic.

As of March 18, several Asian airlines, including Qantas, Air India, Cathay Pacific, and IndiGo, have introduced phased fuel surcharges. Long-haul Air India tickets from Asia to Europe or North America now carry a $125-200 surcharge per passenger, with an additional $4.30 on domestic flights — effectively pricing out many leisure travelers for the upcoming summer season. Scandinavian Airlines (SAS) and Air New Zealand were among the first carriers to cancel or reduce flights due to soaring jet fuel prices.

JPMorgan says that outright shortages are already beginning to bite, and in some cases forcing sizeable production cuts: In many regions, demand isn’t being reduced by choice but by the physical absence of inputs.

Asian and European steam crackers rely on naphtha and LPG from the Persian Gulf, and with those feedstocks constrained, shutdowns and curtailments are occurring immediately.

Asia is the most exposed, sourcing more than 50% of its naphtha from the Middle East. Japan offers a clear example. With over half of its naphtha imported — roughly two-thirds from the Middle East — petrochemical producers are trimming output: Mitsubishi Chemical and Mitsui Chemicals have reduced ethylene runs, while Sumitomo Chemical may delay restarting Keiyo Ethylene and expects reduced rates even after restart.

South Korea is also seeing pressure build across the sector. YNCC — one of the region’s largest ethylene producers — has declared force majeure and is running its cracker at significantly reduced rates. Both Lotte Chemical and LG Chem have warned customers that they may follow, and the government has temporarily designated naphtha an “economic security item” to manage dwindling stocks.

The strain extends across Greater China and Southeast Asia. In China, Sinopec has cut March refinery runs by about 10% to conserve crude stocks. A Shell — CNOOC joint venture has shut its Huizhou ethylene cracker and told customers that polyethylene shipments are suspended indefinitely effective March 5, while Wanhua Chemical has declared force majeure for Middle Eastern customers amid severe LPG feedstock disruptions.

In Indonesia, Chandra Asri is operating at reduced rates and has declared force majeure following a sudden halt in feedstock arrivals. Meanwhile, in Taiwan, Formosa Plastics Group’s Taiwan Petrochemical declared force majeure on March 10 and indicated that, if shortages worsen, volumes will be allocated based on actual availability.

India suspended shipments of LPG to commercial operators to prioritize supplies for households, leading to worries from hotels and restaurants that they may be forced to close.

So what does this mean for oil demand, and by extension economic growth? Nothing good. Oil demand is, on average, highly inelastic in the short run because most end uses have few immediate substitutes — factory boilers rely on fuel oil, aircraft require jet fuel, and most cars still run on gasoline. Our estimate of the short‑run price elasticity of global oil demand is −0.024, implying that a roughly 40% price increase above 12‑month highs is needed to reduce total consumption by 1%.

The response, however, varies materially by product. Naphtha is most sensitive because petrochemical plants can partially substitute ethane in cracking operations. Jet fuel is also relatively responsive, as airlines can cancel lightly loaded flights when fuel costs spike.

By contrast, fuel oil is least elastic given its role in essential services like home heating, marine transport, and power generation.

Taken together, these elasticities imply that if Brent averages $100 in March, the price effect alone would trim global demand by about 1 mbd in April — before accounting for additional losses from grounded flights in the Middle East and outright physical shortages.

Unfortunately, Alphaville suspects that unless the Straits are reopened soon then whatever happens in Asia probably won’t stay in Asia.

And even if peace somehow breaks out, this episode could have a long tail. As the FT reported earlier today: Iran’s most potent weapon has proved to be its ability to in effect close the Strait of Hormuz, through which about one-fifth of the world’s oil and gas normally passes. While Iran had previously threatened to close the strait, the western official said, “they never knew [they could] until they tried it”. “Now they know, and it’s pretty effective,” the official said.

“The risk is they will keep holding the world hostage.”

• China cracks down on fuel and fertiliser exports Beijing is trying to preserve its own stockpiles by limiting sales

China is throttling exports of jet fuel, diesel and fertilisers, adding to fears in some of Asia’s biggest resource, manufacturing and agricultural nations that supplies could run short because of the war in the Middle East.

The National Development and Reform Commission, China’s top economic planner, has in recent days told fertiliser exporters to halt overseas shipments of some product lines, according to industry insiders, diplomats and analysts.

This follows NDRC’s instructions earlier this month to large state-backed oil refiners to stop overseas shipments of jet fuel, diesel and kerosene.

China is the world’s second-largest exporter of fertiliser, after Russia, and the sixth-largest exporter of jet fuel, according to International Trade Centre data. It is trying to preserve energy and food reserves and protect the domestic market, analysts say.

• The International Energy Agency has advised households, businesses and governments to adopt measures such as working from home and carpooling to curb fuel demand and ease pressure from soaring oil prices.

The IEA’s recommendations also include slower highway speeds, greater use of public transport and car sharing, cutting nonessential air travel and encouraging electric cooking, among other measures.

Gulf countries have cut oil production by at least 10 million barrels a day, and without a rapid resumption of shipping flows, supply losses are set to increase, the IEA said. “The volume of fuel supply offline now is higher than the supply loss during the oil shock of 1973 that led to the IEA’s creation and any disruption since then.”

• Iranian strikes on liquefied-natural-gas facilities at Qatar’s Ras Laffan Industrial City reduced the country’s export capacity by 17% and will take three to five years to repair, the country’s energy minister said, as strikes and interceptions continued in the region.

• Reopening the strait:

  “I think it will take weeks to reach a point where there can be safe operations in the strait,” he said. “Even then, a lot of the Iranian assets will survive.”

  Houthi militants in Yemen, who are aligned with Iran, waged a two-month campaign last year with missiles, drones and unmanned boats against international shipping that parallels Iran’s closure of the strait. The U.S. struck more than 1,000 targets in Yemen, but never succeeded in halting Houthi attacks fully until the two sides declared a truce in May.

• Trump reportedly considering plans to occupy or blockade Iran’s Kharg Island

Such an operation would only be launched after the U.S. military further degrades Iran’s military capacity around the Strait of Hormuz. “We need about a month to weaken the Iranians more with strikes, take the island and then get them by the balls and use it for negotiations,” said a source with knowledge of White House thinking.

We had not heard from Scott Bessent for a while.

• Treasury Secretary Scott Bessent said the U.S. may lift sanctions from Iranian oil at sea and release more oil from its strategic reserves to ease pressure on prices. “In essence, we’d be using the Iranian barrels against the Iranians to keep the price down for the next 10 or 14 days, as we continue this campaign.”
• “To put it mildly, this is bananas,” Blackstone Compliance Services’ David Tannenbaum told the BBC. “Essentially, we’re allowing Iran to sell oil, which could then be used to fund the war effort.”

Bessent also said, perhaps desperately trying to keep oil prices (and inflation, and interest rates) down:

“The largest coordinated SPR release in history, 400 million barrels, was approved last week,” he said. “The U.S. could unilaterally do another SPR release to keep the price down.”

Hmmm…:

Unfortunately, there was only 155mn barrels of sweet oil and 261mn barrels of sour oil as of March 13, according to the SRP’s own website. That’s because president Joe Biden ordered the release of 180mn barrels in 2022 after Russia’s invasion of Ukraine caused energy markets to go haywire, and the US has since been slow to replenish it. The Trump administration has already said it will release 172mn barrels as part of a wider, record-breaking 400mn international release. But, once complete, this will bring the SPR’s holdings down to 244mn barrels — and the government is actually barred by law from drawing down inventories if there’s less than 252mn barrels in the salt caverns.

The US could of course declare an emergency — though that’s supposed to mean a real crisis of acute energy shortages, not pricier gas ahead of mid-term elections — or get Congress to change the law. But there’s another hard limit that is a lot harder to bully into submission: physics.

The SPR’s salt cavern system wasn’t designed to operate like an everlasting oil piggy-bank you can easily draw down and fill up whenever you want. As Bloomberg has previously reported: The Gulf Coast salt caverns that comprise the 70s-era reserve were built with a 25-year life span in mind. They were designed for just five drawdowns and refills, said William “Hoot” Gibson, the reserve’s former project manager. The more the system is used, the higher the risk the salt caverns will dissolve.

By Alphaville’s count, this is already the ninth drawdown (emergency or otherwise) since the SPR’s inception in 1977. There’s therefore apparently a minimum level of oil that must be kept in the salt caverns to prevent a catastrophic structural damage. We haven’t been able to find out definitively what this level is (even after scanning some of the recent SPR reports to Congress), but JPMorgan’s energy analysts said last week that it was about 150 million barrels, beyond which dangerous things could happen. . . .

The SPR has a practical operational floor near 150–160 mb that must remain in place to preserve cavern stability and maintain operational flexibility, including a small portion of “roof oil” that cannot be withdrawn. So sure, yes, maybe the US government can release more oil from the SPR, beyond the 172mn barrels it has already announced. But not as much as it has already promised, and heading towards the lower operational limit would probably spark fear more than anything else. Desperation tends to do that. (FT)

Economists Don’t See a Recession Unless Oil Hits $138—and Stays There for Weeks In survey, an average of economists projects the Iran war boosting inflation but probably not hurting growth

(…) Economists put the probability of a recession in the next 12 months at 32%, up modestly from 27% in January. Asked how high crude oil would need to climb to tip the recession probability above 50%, economists gave a range of responses: from $90 a barrel to $200, with an average of $138. Asked how long oil prices would need to be at an elevated level, they said from four weeks to 55 weeks, with an average duration of 14 weeks. (…)

***

In yesterday’s Daily Edge, I noted that Powell and the FOMC were rather sanguine about inflation, right after February’s PPI came out very bad. The FOMC’s SEP sees core inflation slowing from 2.9% in 2025 to 2.7% in 2026.

Matt Klein agrees with me:

This is a failure of analysis. According to Jerome Powell’s latest press conference, Fed officials believe that their policy has been “restrictive” (it has not), that inflation would already be at or close to 2% if not for tariffs (it would not), and that “the labor market is clearly not a source of inflationary pressures” (it is). The latest data, which run through February, make it clear that the inflation situation was continuing to get worse before the current conflict. (…)

Perhaps the most striking thing about Powell’s Wednesday press conference was the repeated—and wrong—insistence that excessive inflation was mostly about rising goods prices, which in turn were mostly about tariffs:

Inflation has eased significantly from its highs in mid-2022 but remains somewhat elevated relative to our 2 percent longer-run goal…These elevated readings largely reflect inflation in the goods sector, which has been boosted by the effects of tariffs.

To be fair, goods inflation was getting worse before the Iran conflict, and in some significant categories was worse than in the 2021H2-2022H1 price spike. In the years immediately preceding the pandemic, consumer goods prices regularly fell about 0.5%-1% each year. In 2024, those prices were flat. As of the eve of the war with Iran, consumer goods prices were rising by about 2% a year—and the pace was accelerating.

The picture looks worse when focusing on goods purchased by businesses, either as inputs or capital equipment.

Prices of “components for manufacturing” rose by 0.9% in January and by 1.1% in February on a seasonally-adjusted basis. The February increase was larger than in every month of the post-pandemic inflation except for January 2022. Capital equipment prices are rising about 5% annualized, up from about 3% in 2023-2024 and about 1% in the years before the pandemic. Prices of “supplies to manufacturing industries” have been accelerating rapidly, with the one-month increase in February the largest since April 2021.

Tariffs are not the only explanation for this. One of the biggest categories within “supplies to manufacturing industries” is “printed circuit assemblies, loaded boards, modules and consumer external modems”, which have mostly been excluded from tariffs because of their importance to the datacenter buildout. Those prices rose by 48% (!!) between January and February. Even if that were a typo, prices rose by 26% between January 2025 and January 2026, which is unprecedented in the history of the data going back to the early 1980s.

While all of this is both significant and unwelcome, it pales in importance to what has been happening with services prices.

Many of the forces affecting the prices of goods are relatively insensitve to changes in U.S. domestic monetary and financial conditions. The same cannot be said for services, which represent the bulk of economic activity, and which, by themselves, should be making Fed officials worry that their 2% inflation target is of reach.

Go back to Matt’s first chart and look at the red lines, Powell’s Supercore inflation.

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. (…)