A renewed rise in the price of oil fueled fears that the war in Iran will further reduce energy supplies and fuel inflation, causing a drop in stocks, which were also hit by signs of trouble in the $1.8 trillion private credit market.
Brent remained near $100 due to shipping disruptions, and Iran’s supreme leader, Ayatollah Mokhtaba Khamenei, did not signal any intention to end the closure of the Strait of Hormuz. The S&P 500 lost 1%. Banks plunged as redemption requests from private credit funds forced Morgan Stanley and Cliffwater LLC to limit withdrawals. Deutsche Bank AG warned of $30 billion in exposure to the sector.
Short-term Treasury yields rose as traders no longer fully priced in a Federal Reserve rate cut in 2026. More broadly, global bonds lost their 2026 gains. The dollar approached a two-month high. Gold fell.
There are few signs that the war in the Middle East is close to de-escalation in its 13th day. Russia is providing Iran with various types of intelligence, including satellite imagery and drone strike tactics, in an effort to help Tehran counterattack US forces, according to US and Western intelligence sources.
“The biggest issue facing the markets right now is obviously war,” stated Matt Maley of Miller Tabak. “The conflict in the Middle East does not subside. This caused a sudden increase in the price of crude oil. We also have the problem of increasing pressure on credit markets.”
The Trump administration plans to suspend a century-old maritime law that requires the use of American ships to transport goods between American ports, in order to stop the rise in oil prices, as reported by Bloomberg News. The US Navy could begin escorting oil tankers through the Strait of Hormuz at the end of March, Energy Secretary Chris Wright told CNBC.
Goldman Sachs Group Inc. warned that oil prices could surpass the 2008 peak if flows through Hormuz remain depressed through March. Brent recovered to a high of $147.50 that year. The war with Iran is causing unprecedented turbulence in oil markets, affecting 7.5% of global supply and to an even larger share of exports, according to the International Energy Agency.
Oil prices fell from their intraday highs after AFP reported that Iran claimed to have allowed some ships to pass through the Strait of Hormuz. Tehran also told the news agency that it is not laying mines in this important waterway. However, the United Kingdom claimed that the Iranians may have started mining in the strait.
“As long as the bottlenecks around the Strait persist, oil prices will remain high, which increases the risk that the conflict leaves its mark on the economy,” said strategists at Bespoke Investment Group.
“We will continue to try to analyze the headlines in the short term, as we continue to believe that the conflict or closure will last weeks or months and will not significantly change future prospects,” said Sameer Samana of the Wells Fargo Investment Institute.
If history is any guide, withdrawing from markets during periods of increased volatility is unlikely to be the best long-term strategy, according to Ulrike Hoffmann-Burchardi of UBS Global Wealth Management.
“But we believe that maintaining sufficient liquidity to cover foreseeable expenses can help investors avoid forced selling in the event of a market decline,” he said.
Despite all the concerns about the impact of the war, the latest economic reports have not been enough to divert attention from geopolitical problems. Still, traders are bracing for Friday’s inflation data – the Federal Reserve’s preferred pricing indicator.
“The risks to data could be asymmetric,” said Kyle Rodda of Capital.com. “A positive data will remain at the same usual level. A positive data will increase the fear of an increase in inflation due to the inflationary impacts of an energy crisis.”
With the Federal Reserve expected to hold rates steady next week, Investors will focus on any eventual changes in its outlook.
“The most aggressive outcome would be if the Fed removed its easing bias from the statement, while the median projection changed from a cut this year to no change,” said Stephen Brown of Capital Economics.
