Markets Squeezed by Energy Prices and Hawkish Central Banks
Bond yields rise globally as the U.S. steps up efforts to reopen the Strait of Hormuz.
Key Takeaways
U.S. Steps Up Efforts to Re-open the Strait: Oil is rising again after pulling back yesterday afternoon, with Brent futures up +1.6% overnight to around $110 per barrel. WTI crude was relatively flat overnight at around $96 per barrel. As the U.S. steps up military efforts to facilitate normalization of the Strait of Hormuz, expect events to keep oil-market volatility high today and into next week — it’s an open question as to how rapidly the U.S. can make progress in Strait-reopening operations against Iranian drone, mine, and missile assets.
Hawkish Holds Mean that April is the Next Central Bank Watchpoint: Markets are entering today still digesting the wave of central bank meetings. All five major central banks (the Fed, BoE, ECB, BoJ, and BoC) delivered hawkish holds of one type or another. The next watchpoint is now the April-May round of meetings — if the conflict hasn’t significantly de-escalated by then, central banks won’t be able to hide behind “uncertainty” and may need to give more specific forward guidance.
Gas Market Normalization Could Take Years: Aftershocks in the gas market are the other big story for European and Asian growth, as QatarEnergy said yesterday that full normalization of their gas facilities (damaged by Iranian attacks on Wednesday and Thursday) could take up to five years. Israel’s strikes on Iran’s giant South Pars gas field on Wednesday also sent shockwaves through global energy markets.
