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The fog of war thickens as we’ve entered the US’s initial 4-to-6 weeks timeline to achieve its military goals in Iran. Only yesterday, US President Trump indicated that the US is in serious discussions with the (new) regime in Iran, but that it can still destroy Iranian energy infrastructure if the Strait of Hormuz isn’t immediately open for business. This morning, the WSJ reports that Trump told aides he’s willing to end the war without reopening the Strait of Hormuz as such operation could extend the total war timeline easily by another 4-to-6 weeks. Recall that the same WSJ yesterday headlined that a ground invasion to extract Iran’s uranium was under consideration. The FT focused on the possibility of seizing the strategic Khargh island (oil export hub). Add into the mix this weekend arrival of the USS Tripoli and the 31st Marine Expeditionary Unit, Houthi involvement (Red Sea is key trade choke point), continuous US/Israeli bombing and targeted Iranian retaliation (eg Kuwaiti oil tanker off Dubai overnight) and it remains anyone’s guess whether the Gulf War is about to escalate or de-escalate.

Brent crude trading at $113.5/b this morning is indicative to lack of confidence in an off-ramp. Key US equity indices (S&P & Nasdaq) eventually closed at new sell-off lows despite a slightly better start. Volatility on fixed income markets remains elevated with core bonds coming off the lows. Hawkish repositioning went far enough for now to navigate through the current fog. US Fed Chair Powell yesterday laid out the case for patience in case of the Federal Reserve. By pushing against the “emergency” rate hike case, he helped US Treasuries during their intraday rally. The US yield curve eventually bull steepened with yields ending 5.3 bps (30-yr) to 8.3 bps (2 to 7-yr) lower. Powell did warn for the impact on inflation expectations: “You can have a series of these supply shocks and that can lead the public generally—businesses, price setters, households—to start expecting higher inflation over time. Why wouldn’t they?” In FX space, the dollar gained for a fifty consecutive session. The trade-weighted greenback is bumping heavily against the 100.25/50 resistance area which is the neckline of a multiple bottom formation. A weekly close above this zone would be technically very relevant and strengthen the case for further USD-gains. EUR/USD keeps drifting lower, closing below 1.15 yesterday for only the third time this year and the sixth time since the start of H2 2025. Today’s eco calendar contains EMU CPI inflation, US Chicago PMI, consumer confidence and JOLTS job openings. Our in-house nowcast model sees headline inflation rising from 1.9% Y/Y to 2.5% Y/Y, slightly less than the consensus estimate (2.6%). We expect today’s numbers to be of limited importance as the market still navigates from the one Iran-related headline to the other.

News & Views

Inflation in Japan’s capital cooled to the slowest pace in almost two years in March. Consumer prices in Tokyo rose 1.4%, decelerating from an downwardly revised 1.5%. The gauge excluding fresh food ticked lower to 1.7% from 1.8%. Energy subsidies explained much of the easing with overall prices falling 7.5%. Gas prices, however, only dropped 1% compared to a whopping 14.7% decline in February in what are most likely spillover effects from the Iran war. The inflation measure excluding fresh food & energy costs still came in at an elevated 2.6% (from 2.7%). The currently higher oil and gas prices are expected to add further upward inflation pressure in coming months. Additional yen weakness adds fuel to the fire. USD/JPY in recent days soared to the 160 mark compared with 156 at the beginning of March. It prompted again strong verbal warnings from the Ministry of Finance yesterday. The Japanese currency today barely trades stronger around USD/JPY 159.6.

The British Retail Consortium warned UK consumers that price increases are inbound. Goods prices sold in the UK rose by just 1.2% in March, slightly higher than the 1.1% seen in February. But that relatively benign price evolution is to be upended in the short-term as energy costs surge and the broader supply chain disruption triggered by the conflict in the Middle East are working their way through. BRC said it will take at least three months before the effect passes through to consumer prices with retailers first working with suppliers to try to mitigate the impact on prices as far as possible. The BRC data were collected between March 1 and March 7. Brent oil since the cut-off date has risen another 20%+.

Daily Pivots: (S1) 0.6833; (P) 0.6854; (R1) 0.6875; More...

Intraday bias in AUD/USD remains on the downside at this point. Current fall from 0.7187 should target retracement of 0.5913 to 0.7187 at 0.6700. On the upside, above 0.6911 minor resistance will turn intraday bias neutral first. But risk will stay on the downside as long as 0.7187 resistance holds, in case of recovery.

In the bigger picture, as long as 0.6706 cluster support holds, rise from 0.5913 (2024 low) should still be in progress. Decisive break of 61.8% retracement of 0.8006 to 0.5913 at 0.7206 will solidify the case that it's already reversing the down trend from 0.8006 (2021 high). However, firm break of 0.6706 will dampen this bullish case, and bring deeper fall back to 0.6420 support, and possibly below.

Daily Pivots: (S1) 1.3890; (P) 1.3918; (R1) 1.3955; More...

Intraday bias in USD/CAD stays on the upside at this point. Current rally from 1.3480 is in progress for 38.2% retracement of 1.4791 to 1.3480 at 1.3981. Decisive break there will argue that it's already reversing the whole down trend from 1.4791, and target 61.8% retracement at 1.4290. On the downside, below 1.3879 minor support will turn intraday bias neutral first. But risk will stay on the upside as long as 1.3751 resistance turned support holds, in case of retreat.

In the bigger picture, price actions from 1.4791 are seen as a corrective pattern to the whole up trend from 1.2005 (2021 low). Deeper fall could be seen, as the pattern extends, to 61.8% retracement of 1.2005 to 1.4791 at 1.3069. However, break of 1.3927 resistance will argue that the correction has completed with three waves down to 1.3480 already. Further break of 1.4139 will confirm and bring retest of 1.4791 high.

Daily Pivots: (S1) 159.17; (P) 159.82; (R1) 160.39; More...

Intraday bias in USD/JPY remains neutral for some more consolidations, and further rally is still in favor. Above 160.45 will bring retest of 161.94 high. Nevertheless, considering bearish divergence condition in 4H MACD, sustained break of 55 4H EMA (now at 159.27) will indicate short term topping, and turn bias to the downside for 157.94 support instead.

In the bigger picture, outlook is unchanged that corrective pattern from 161.94 (2024 high) should have completed with three waves at 139.87. Larger up trend from 102.58 (2021 low) could be ready to resume through 161.94. This will remain the favored case as long as 55 W EMA (now at 152.97) holds. Firm break of 161.94 will pave the way to 61.8% projection of 102.58 to 161.94 from 139.87 at 176.75.

Daily Pivots: (S1) 0.7969; (P) 0.7991; (R1) 0.8019; More….

Intraday bias in USD/CHF remains on the upside at this point. Current rally from 0.7603 should target 38.2% retracement of 0.9200 to 0.7603 at 0.8213. On the downside, below 0.7951 minor support will turn intraday bias neutral first. But further rally is expected as long as 0.7833 support holds, in case of retreat.

In the bigger picture, a medium term bottom should be in place at 0.7603 on bullish convergence condition in D MACD. Rebound from there is seen as correcting the fall from 0.9200 only. However, decisive break of 55 W EMA (now at 0.8088) will suggest that it's probably correcting the larger scale down trend from 1.0146 (2022 high). On the other hand, rejection by the 55 W EMA will setup down trend resumption to 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382 at a later stage.

Daily Pivots: (S1) 1.1429; (P) 1.1476; (R1) 1.1509; More….

Intraday bias in EUR/USD remains neutral and more consolidations could still be seen above 1.1408. Further decline is expected with 1.1666 cluster resistance (38.2% retracement of 1.2081 to 1.1408 at 1.1665) intact. On the downside, firm break of 1.1408 will resume the fall from 1.2081 to 38.2% retracement of 1.0176 to 1.2081 at 1.1353. However, decisive break of 1.1666 will argue that the fall from 1.2081 has completed, and turn bias back to the upside for 61.8% retracement of 1.2081 to 1.1408 at 1.1824.

In the bigger picture, prior break of 55 W EMA (now at 1.1497) should confirm rejection by 1.2 key cluster resistance level. The whole up trend from 0.9534 (2022 low) might have completed as a three wave corrective rise too. Deeper fall is expected to long term channel support (now at 1.0535). Meanwhile, risk will stay on the downside as long as 1.2081 holds, even in case of strong rebound.

After surging to $119.7 on March 9, crude oil experienced a sharp decline, reaching $76.73 by March 11. This retreat unfolded in the form of a five-wave impulsive Elliott Wave structure, marking a decisive corrective phase. From the March 9 peak, wave (1) concluded at $96.25, followed by a rebound in wave (2) that terminated at $104.57. The subsequent decline in wave (3) reached $81.19, while wave (4) produced a modest recovery to $91.48. The final leg, wave (5), extended lower to $76.73, thereby completing wave ((A)) at a higher degree.

Currently, a corrective rally in wave ((B)) is underway, developing internally as a zigzag formation. From the termination of wave ((A)), the initial advance in wave (A) ended at $102.44. A subsequent pullback in wave (B) found support at $84.37. The ongoing rise in wave (C) carries potential to extend further, targeting the 100% to 123.6% Fibonacci extension of wave (A). This critical zone lies between $110.3 and $116.5, where renewed selling pressure may emerge. Should sellers reassert control in this region, oil prices could resume their decline in wave ((C)), provided the pivot at the $119.7 high remains intact.

Oil (CL) 60-Minute Elliott Wave Chart

CL Elliott Wave Video

https://www.youtube.com/watch?v=gjcZlPwIGvc

In focus today

In the euro area, we receive the flash March inflation print. We expect HICP inflation will rise to 2.6% y/y (from 1.9%) while core inflation should fall slightly to 2.3% y/y (from 2.4%). The headline rise is driven by energy inflation, adding an estimated 0.9 p.p., with petrol prices up 15% m/m and diesel 28% m/m. Core inflation is expected to decline as the spike in Italian services inflation from the Winter Olympics reverses. The data is a key input for the ECB's April meeting, but we note that it only captures part of the first-round effects of the war and no second-round effects. Hence, the April inflation print on April 30 will likely be more important for the ECB's decision.

EU energy ministers will hold an informal video conference to coordinate their response to oil and gas market disruptions from the Iran war, amid heightened market uncertainty and national measures like Poland's petrol price cap and Spain's EUR5bn energy package.

In the central bank space, we have a string of ECB speeches as well as Federal Reserve speeches. There are four from ECB officials and three from Federal Reserve Officials. The market will as always be looking for comments on inflation, but also the negative impact on growth from the rise in oil prices.

In the US, the February JOLTS job openings report is due, offering the first labour market figure of the week. The stronger-than-expected January report reflected improved labour demand and fewer layoffs, supported by positive signals from online job postings.

In Sweden, Riksbank speeches are scheduled from Erik Thedéen at 8.00am and Per Jansson at 12.00pm, with the latter hosted by Danske Bank. Thedéen and Seim leaned hawkish at the last meeting, while Jansson, Hjelm, and Bunge remained dovish. Although it may be early for clear signals on the May meeting, with markets pricing a 50% chance of a May hike, we look forward to insights on their reaction function to supply shocks.

Overnight, China releases the private PMI manufacturing report from Rating Dog. Unlike the official NBS PMI, February's Rating Dog PMI was strong at 52.1. The Yicai high-frequency indicator suggests further strength in March, though the Iran war adds uncertainty.

In Japan, the Q1 Tankan business survey, due overnight, will provide key insights for the Bank of Japan ahead of its policy meeting. Rising energy prices and a weaker yen threaten to erode consumers' purchasing power, jeopardising a recovery.

Economic and market news

What happened overnight

In Japan, Tokyo's March core CPI rose to 1.7% y/y, below expected, as fuel subsidies offset rising costs. An index excl. fresh food and fuel rose 2.3% after a 2.5% gain in February. Analysts expect inflation to pick up due to surging oil prices and a weak yen, with markets pricing a 70% chance of an April rate hike. BOJ Governor Ueda hinted at potential action. Separate February data, including a 2.1% m/m drop in factory output and a 0.2% y/y decline in retail sales, offers largely outdated insights

In China, the official March manufacturing PMI rose to 50.4, the highest in a year, up from February's 49.0, signalling improved demand. Non-manufacturing PMI also increased to 50.1. While the stronger reading eases pressure on policymakers, analysts warn that surging energy prices from the Middle East war and global supply chain disruptions pose risks to sustained growth.

What happened yesterday

In the Middle East, Iran's parliamentary Security Commission has approved a plan to impose tolls on ships passing through the critical Strait of Hormuz (SOH). The plan includes measures to enhance security, regulate maritime navigation, and charge rial-denominated tolls, with a prohibition on vessels from the US and Israel. This development adds to tensions in the ongoing conflict, which has already disrupted oil shipments and intensified global market volatility. Amid these rising tensions, President Trump warned that the US would obliterate Iran's energy plants and oil wells if the SOH is not reopened to international shipping.

In the US, Fed Chair Powell signalled that higher energy prices resulting from the Iran war have not yet required immediate policy action, as the Fed can afford to wait and assess the war's economic and inflationary impacts. While inflation remains above the 2% target, longer-term inflation expectations remaining anchored. Markets reacted by removing rate hike bets for this year. Fed's Williams echoed Powell, noting the current rate setting allows flexibility to monitor inflation pressures before acting.

In the euro area, the EU Commission's business sentiment survey indicates a sharp rise in selling price expectations for the next months in the industry for March, while services remained unchanged. The increase in industry expectations mirrors trends from 2021-2022 but remains below peak levels. Services, which typically lag industry, offer some reassurance for the ECB. Overall, the data aligns with PMI price trends and does not strongly point toward an April rate hike.

German CPI inflation rose in March, as expected, to 2.7% from 1.9% in February. The HICP measure rose marginally less than expected to 2.8% y/y (cons: 2.9%). German inflation rose to the highest level since January 2024, driven entirely by a 7.6% m/m surge in energy prices due to the Iran war. This increase is half the size of the March 2022 spike during Russia's invasion of Ukraine. Core inflation remained stable at 2.5% y/y, with no impact beyond energy.

In Sweden, retail sales declined by 0.6% m/m in February 2026 compared with January. On a year-on-year basis, the calendar-adjusted retail trade volume grew by 2.4% in February. Sales of durables fell by 0.9%, while sales of consumables (excluding Systembolaget, the state-owned liquor store chain) remained flat.

Equities: Global equities had a steady run in European hours with "everything" in green. Upon US hours that sentiment shifted, leaving the MSCI world down 0.4%. S&P500 declined 0.4%, Nasdaq 0.7%, Russell2000 -1.5%. Stoxx600 was up 0.9%. Overnight, Asian equities are down, amid higher US futures, which up about 0.9%.

FI and FX: With no imminent signs of deescalation in the Middle East, asset vols remain at or close to year highs. That said, we have seen a notable change in price action this week with yields - both nominal and real yields - coming lower. This marks an important difference to recent weeks amid markets increasingly becoming concerned about the negative impact on growth from the war and the rising likelihood of central banks hiking into slowing economies. In FX markets, it has been a relatively calm start to the week albeit SEK has been a prominent underperformer amid renewed USD strength which has returned EUR/USD down below the 1.15 support level.

Yesterday was marked by a rebound in sovereign bonds on expectation that rising oil prices—which will send inflation soaring in the coming months—would also hit economic growth and, in turn, limit central banks’ ability to raise rates to the extent currently priced by markets. In other words, higher energy prices—and possible energy scarcity—could slow global economies enough to prevent central banks from tightening as aggressively.

A benchmark European 10-year yield moved lower after rising to its highest levels since 2011, the British 10-year gilt yield fell back below the 5% psychological mark, while the US 2-year yield—which best captures Federal Reserve (Fed) rate expectations—retreated to 3.80%, as Fed Chair Jerome Powell also said that longer-term US inflation expectations remained ‘in check’ despite the energy-led inflation wave already hitting the economy. ‘By the time the effects of a tightening monetary policy take effect, the oil price shock is probably long gone, and you’re weighing on the economy at a time when it’s not appropriate’, he said.

In summary, bond investors—including large institutional players—considered that yields had risen enough to become attractive.

And that’s fair: slowing growth will likely be the consequence of this energy shock, alongside tighter monetary policy to address the resulting inflation spike. But first, central banks – at least some of them - will adjust their rates to fight inflation. Depending on the impact on growth, they may later have to ease policy again. However, jumping directly to the conclusion that central banks will soon loosen policy—and that lower yields are good news for equities—is far-fetched.

The Stoxx 600 rebounded nearly 1% yesterday, while the FTSE 100 gained 1.61%. In the case of the FTSE 100, the rally in energy and mining stocks made sense, but for European companies facing another energy shock and higher rates, I found yesterday’s optimism weakly supported as a basis for a sustainable rebound.

In fact, early CPI figures for March confirm that inflation in Germany jumped from 1.9% to 2.7% y-o-y, and 1.2% over the month. Unsurprisingly, rising oil prices were the main driver.

A separate survey from the European Commission suggested a notable increase in selling price expectations, undoubtedly linked to soaring energy costs.

Other euro area countries will release their CPI updates in the coming hours and will likely confirm energy-driven price pressures.

For those still in doubt, European Central Bank (ECB) officials have been insisting that they will act to rein in inflation—and they are not necessarily looking past the short-term spike (like Powell does). This means rate hikes could be on the table this year for the euro area.

So I can’t help but think that there could be more pain ahead for global businesses—pain from higher energy prices and tighter financial conditions—before any relief.

In the US, falling yields failed to help the S&P 500 consolidate earlier gains, and the index quickly came under selling pressure, and closed the session 0.39% down.

US and European are better bid and oil is coming down from an early-session peak at the time of writing on news that Trump told his aids that he wants to end the war even if the Strait of Hormuz remains closed. But just before, mood was ugly on an Iranian struck on a Kuwaiti oil carrier near Dubai...

What’s interesting is that periods of economic slowdown don’t necessarily lead to a one-way market meltdown. Typically, market selloffs deepen into a recession and during its early months, after which looser central bank policies help markets recover. However, I feel that today’s uncertainty and negative developments have not yet been fully priced in to justify that conclusion. The Nasdaq 100 entered correction territory on Friday, while the S&P 500 is near 10% lower, hovering near correction levels. Rising energy prices are supportive for energy companies, but most other industries are facing higher operating costs and margin pressure—something that is not yet fully reflected in prices.

A FactSet chart shows that forward EPS continues to rise, driven by AI-related upgrades, resilient margins and strength in the energy sector—suggesting that markets are still pricing current earnings momentum while pushing the potential profit squeeze from higher costs further into the future.

The risk, therefore, is that markets are still buying today’s earnings story while choosing to worry about the oil shock tomorrow.

Meanwhile, oil prices continue to surge. WTI is trading near $104 per barrel, while Brent crude flirts with $110pb. US gasoline prices have rebounded to $3.38 per gallon yesterday – the highest since the Iran war began. Donald Trump may have told his aids that he wants to stop the war, but a few hours before he had threatened to destroy Iran’s energy infrastructure, and Houthi forces are now targeting alternative routes used to export oil from the Gulf amid disruptions in the Strait of Hormuz.

Higher oil prices continue to support a stronger US dollar. Major currencies remained under pressure yesterday despite relatively dovish comments from Jerome Powell—confirming that divergence between the Fed and other, relatively more hawkish, central banks does not necessarily drive short-term FX moves. The EURUSD slipped below 1.15 despite the rebound in German CPI and Powell’s balanced remarks on long-term US inflation expectations. Softer oil prices could eventually reverse the dollar’s strength, but as long as oil prices remain elevated, the dollar is likely to benefit.

Gold rebounds on the back of falling sovereign yields after testing technical support last week—the 38.2% Fibonacci retracement of the 2023 to January rally, which typically separates a continuation of the uptrend from a medium-term consolidation phase. Lower yields reduce the opportunity cost of holding non-interest-bearing gold.

The question now is whether gold can regain its safe-haven status and inflation-hedging appeal if equity market losses accelerate.

This will likely depend on a combination of factors, including oil prices, the US dollar and bond yields. For now, selling pressure appears to be easing, but the risk of further downside remains.

Markets will therefore continue to be driven by headlines and oil price dynamics, and until there is meaningful progress toward peace, any rebound in equities, bonds or gold is likely to remain fragile.

Daily Pivots: (S1) 1.3144; (P) 1.3213; (R1) 1.3253; More...

GBP/USD's fall from 1.3867 resumed by breaking through 1.3216 support. Intraday bias is back on the downside for 61.8% projection of 1.3867 to 1.3216 from 1.3479 at 1.3077 first. Decisive break there could prompt downward acceleration through 1.3008 support to 100% projection at 1.2828. On the upside, above 1.3282 minor resistance will turn intraday bias neutral. But outlook will remain bearish as long as 1.3479 resistance holds, in case of recovery.

In the bigger picture, considering bearish divergence condition in both D and W MACD, a medium term top should be in place at 1.3867. Firm break of 1.3008 support will argue that fall from 1.3867 is at least correcting the rise from 1.0351 (2022 low) with risk of bearish reversal. That would open up further decline to 38.2% retracement of 1.0351 to 1.3867 at 1.2524. For now, medium term outlook will be neutral at best as long as 1.3867 resistance holds, or until further development.