MacroSpectrum

What we see ahead: Below is our weekly report on major economic data points in G-7 this week & our expectations: macro-spectrum.com/opinion/the-we… 1. In addition to Iran war developments, this week’s economic calendar will focus on the inflation side of the Fed’s dual mandate following a solid March employment report. 2. Averaging through the Q1 employment reports, headline (68k) and private (79k) payroll gains are tracking up from their six-month averages of +15k and 52k, respectively. In addition, the Q1 unemployment rate averaged 4.34%, a slight improvement from the six-month average of 4.395%. Hence the employment mandate of Fed looks well balanced for now. 3. On the middle east conflict, the current environment as shifting from a “flow shock” to a “stock depletion problem.” US retail gasoline prices have already increased to close to $4/gallon, but we see a risk of that exceeding $5 if the Strait remains effectively closed by mid-April. 4. In February, the BEA estimated that households spent about $420bn on energy goods at an annualized pace, mostly gasoline, and since then prices are a little less than 30% above their 2025 average. That equates to around $115bn in additional annualized outlays on energy, over half of market’s estimate of the full-year reduction in personal taxes from OBBBA in 2026. In other words, the cost shock will be substantial if prices stay at least this high for an extended period. 5. In US macro data this week we have March CPI, March Fed minutes, ISM Services & durable good orders. 6. We expect the March headline CPI to come at 1% MoM and the core CPI to come at .29% MoM. Strong consumer demand and supply shortages of key materials appear to have boosted consumer goods prices. We forecast a 0.29% m-o-m advance in core goods prices, up from 0.08% in February. For the detailed preview note on US CPI please see below: macro-spectrum.com/opinion/us-cpi… 7. With employment holding up and inflation rearing it’s head again in goods inflation, Fed might be on a long pause till Q3CY26. We still expect an insurance cut of 25 bps in Q4CY26 under Kevin Warsh as Fed chair. 8. In UST dated supply this week we have 3yr UST auction on Tuesday for $58 BN, 10yr UST auction on Wednesday for $39 BN & 30yr UST auction on Thursday for $22BN. 9. In RoW macro data this week, we have German industrial production & German factory orders.

Green Light Red Light for DXY: We have released a detailed report on why we believe DXY is headed higher in short term but then H2CY26 might see correction in DXY: macro-spectrum.com/opinion/green-… 1. While the middle east conflict continues for it's 36th day, financial markets are currently focused on the near term inflation impact of higher crude prices. But medium term growth might suffer more than inflation. Stagflation risks continue to rise sharply, presenting a dilemma for the world’s central banks. 2. USD continues to recover, but the gains have been muted, and FX volatility has been relatively contained compared to commodities and rates. We expect the USD to be supported on risk aversion and higher energy prices, but we also see considerable performance dispersion under the surface. 3. The Asia FX outlook remains broadly bearish given the region’s vulnerability to the oil shock. Headwinds include a sustained rise in energy costs, elevated short-term US interest rates, the compression of growth differentials versus the US, and an unfavourable capital flows picture. 4. Even if the US leaves the war without any further escalation in the coming weeks, a sustained positive reaction in risk markets (and a softening of the USD) is questionable, barring a further decline in oil prices (e.g., the Strait of Hormuz begins to re-open). Without this, the elevated oil price backdrop would continue to adversely affect global growth, drive inflation higher and likely pressure BoP dynamics (i.e., trade account deterioration; portfolio outflows on the negative growth outlook) across most of the world. 5. On a de-escalation narrative, there will initially be risk premium repricing followed by more fundamental considerations such as lost growth, lost trade & lost capital flows. 6. But will de-escalation lead to the resuming of pre war dedollarisation theme. It might but for different reasons. 7. Central bank divergence risks in H2CY26 might halt the current DXY bull run. If this divergence is meaningful which we believe might be a strong possibility, (our view: ECB & BOE hiking by 50 bps total in H2CY26 while Fed cuts by 25 bps) then DXY might see another meaningful correction in H2CY26. Hence our short-term view target for DXY is 102 with stop around 98 (CMP 100). But we don’t expect DXY to sustain above 102 in medium term.

RED LIGHT GREEN LIGHT AT STRAIT OF HORMUZ: We have released a detailed report on how much time it might take for crude & refined product's supply chains to normalise if SoH opens any time soon: macro-spectrum.com/opinion/red-li… 1. It has been 35 days since SoH (Strait of Hormuz) has been closed. In the last 24 hours, only 5% of 60 day normal i.e. 7 ships were able to cross SoH. 2. We decided to look at countries who are likely to face maximum pain in terms of crude & crude products. As inventories near critical thresholds, prices—not stocks—become the primary balancing mechanism. The effective loss of 14 mbd from the closure of Hormuz is so large that the market’s immediate adjustment mechanisms narrow to just two: inventory draws and demand destruction. For e.g. by May OECD inventory drawdown of 233mb might force it to reach levels of operational minimum after which demand destruction is inevitable. 3. We also looked at various scenarios in which SoH can open up and how soon can the crude supplies be normalised. No easy answer but assuming a full opening of SoH, it might take 4 months minimum for OPEC supply to recover to 31mbpd still lower than pre war level of 33 mbpd. There are various factors at play such as shipping companies testing water initially, insurance firms lowering insurance charges & above all safe passage. 4. But in the above case we are assuming: (a) all diversions away from the Strait are used and (b) Iran lets ships of “friendly importers” to pass the Strait, as reported in various media outlets. We are assuming that except US & Israel, Iran might let all other nation ships pass through SoH. 5. But what if Iran also decides to stop ships affiliated to middle east countries from where US is currently attacking Iran. In such a snecario even after 4 months, there will be a permanent loss of 4-5 mbpd of crude & crude products. So while financial paper prices might react in a kneejerk manner and bring Brent to $85 levels, it might not sustain there as OECD inventories get refilled & Asian countries increase their emergency reserves. Hence, we see the new normal for Brent as $90-100 for REMCY26.

US CPI MAR’26 PREVIEW: We have released a detailed report on the March CPI data due on 10th April as below: macro-spectrum.com/opinion/us-cpi… 1. In US March CPI data due for release on 10th April, we expect Core CPI inflation accelerated to 0.29% m-o-m in March from 0.22% in February, due to a rebound in core goods and rent inflation. 2. Strong consumer demand and supply shortages of key materials appear to have boosted consumer goods prices. We forecast a 0.29% m-o-m advance in core goods prices, up from 0.08% in February. We expect super core CPI inflation decelerated only slightly to 0.34% m-o-m in March from 0.350% in February. 3. A sharp increase in gasoline prices likely led to double-digit m-o-m inflation in CPI energy prices. Our forecast for headline CPI is 1% m-o-m, the highest since June 2022. 4. Our forecasts for CPI and PPI translate into a 0.26% m-o-m increase in core PCE inflation for March, which corresponds to y-o-y inflation of 3.1%. We now expect core PCE inflation to drift above 3.0% y-o-y throughout the year, although the 3m change rate will likely decelerate in H2 2026. 5. From Fed's policy perspective, March CPI report might demonstrate some signs of newly emerging sources of price pressures, which is unlikely to help alleviate inflation risks among policymakers. Hence, we now expect the Fed to delay its lone 25 bps cut to Q4CY26 this year (our prior forecast was for June and September). 6. US markets are currently pricing in only 20% probability of a rate cut in REMCY26 which looks under whelming to us. Hence, we like to receive 1yr-1yr US SOFR around 3.75 levels (currently 3.61) for a profit target of 3.50 with a stop loss at 3.90. We also like 2*10 US steepeners at current levels of 22. We have a profit target of 40 in this trade with stop loss at 15.

What we see ahead: Below is our weekly report on major economic data points in G-7 this week & our expectations: macro-spectrum.com/opinion/the-we… 1. In addition to geopolitical headlines, market participants will have to process speeches from a number of Fed officials, most notably Chair Powell's moderated discussion and NY Fed President Williams’ speech, both on Monday, as well as a smattering of data before they are able to leave for the Easter weekend (bond markets have an early close while equity markets are closed for the Good Friday holiday). 2. Tensions and uncertainty remain elevated between the US and Iran with media reporting both signs of escalation and negotiations. Our own view is that Iran is winning this war. Though there is a high probability of a US ground operating around Kharg island around 6th April, unless US holds any territory, it has no advantage. 3. Iran still has almost 70% of it's missile stock as reported in media last week. Houthis remain in reserve & are another unspent force for Iran. We dont believe Iran will end war on US terms as Iran sees it's current state as an equal to US-Israel front. We also believe Strait of Hormuz might soon see a Iran controlled tolled traffic post war on lines similar to Suez Canal authority. 4. On macro front, we have the March NFP as well as JOLTS, ISM manufacturing, trade balance data this week. We expect March NFP at 45k and unemployment rate at 4.4%. For the detailed preview note on March NFP, please see below: macro-spectrum.com/opinion/us-nfp… 5. We now expect the Fed to delay its lone 25 bps cut to Q4CY26 this year (our prior forecast was for June and September). Diminishing near-term political pressures, specifically a delayed confirmation for Chair nominee Warsh, and inflationary pressures from the Iran War led us to push back the timing of cuts. 6. US markets are currently pricing in 24% probability of a rate hike in REMCY26 which looks stretched to us. Hence, we like to receive 1yr-1yr US SOFR around 3.75 levels (currently 3.67) for a profit target of 3.50 with a stop loss at 3.90. We also like 2*10 US steepeners at current levels of 22. We have a profit target of 40 in this trade with stop loss at 15. 7. On RoW front, Europe has German, French & Eurozone March inflation data this week which will show the impact of elevated energy prices post the middle east conflict started from 28th Feb. We believe if the spot price of Brent were to remain in the $95-100/bbl range by the ECB’s June meeting, then the ECB would raise rates by 25bp in June and then again in September. This is against current market expectations of 75 bps of hike being priced in REMCY26. 8. In China, we have PMI datas this week which we expect to be on the softer side due to the middle east energy shocks.

THE GLOBAL FERTILSER SHOCK & RESULTANT FOOD INFLATION: We have released a detailed report below on the current fertiliser price shock due to current Iran war & resultant expected food inflation: macro-spectrum.com/opinion/the-gl… 1. While markets and governments have largely focused on blocked supplies of oil and natural gas, the restriction of fertilizer threatens farming and food security around the world. Nitrogen and phosphate two major fertilizer nutrients are under immediate threat from the blockade. 2. About half of Gulf fertiliser exports are destined for Asia, and ~33% of world fertilizer passes through the SoH (Strait of Hormuz). Key nitrogen and phosphate fertilizer prices have soared by up to 50%, threatening to lower crop yields and trigger higher food prices for consumers globally. 3. Various measures of international food prices have historically shown strong correlation with crude oil prices; co-movements in both measures are largely synchronised, suggesting fast transmission from rising oil prices to food inflation. This is largely due to an equally strong-and-synchronised historical association between food and fertiliser prices, as fertiliser production is highly energy intensive. 4. IMF estimates that a 10% increase in oil prices over the course of a year could raise global inflation by around 40bps. Crude oil prices are currently up c.40-45% since the war started, but this was only 17 days ago. But even assuming Brent settles at $85-90 levels, i.e. a 30% rise in energy prices implies a 120 bps rise in global inflation. 5. Fertiliser affordability has already been deteriorating in recent months and quarters amid heightened protectionism from major trading economies. China’s nitrogen and phosphate exports remain much lower than the historical trend due to supply-chain security measures (e.g., for electric vehicle production). The ongoing tightening of sanctions and tariffs imposed by the EU on Russia and Belarus has also sustained high fertiliser prices from trade diversion. 6. Then there is the risk of El Nino later this year which could negatively impact snowpack development (this has already caused crop shortages in south-central Asia in recent weeks, and the US in recent months). The US-based Climate Prediction Centre expect El Niño conditions with c.60% probability between August and October. 7. To summarise, though fertilizer prices are currently below the peaks seen after Russia’s invasion of Ukraine, but grain prices were higher then, helping farmers absorb the costs. Grain prices are lower now meaning margins are tighter and farmers may have to switch to less fertilizer-intensive crops such as soybeans in the U.S. or apply less fertilizer, reducing yields. Lower yields lead to higher consumer prices via higher food inflation.

THE LONG & SHORT OF DM RATES: We have released a detailed report on our expectations on long end & short end of DM rates as below: macro-spectrum.com/opinion/the-lo… 1. Post the Iran event, DM rates have dramtically repriced. In the four weeks since the bombing began in Iran, 10-year US treasury yields have climbed 48bp, from 3.94% to 4.42%. The 10yr UK gilts have climbed up by 75 bps and the 10yr German Bund yields have climbed up by 45 bps. In UK pre-Iran event rate cut pricing of 50 bps in REMCY26 has now changed to almost 3 hikes of 25 bps each in REMCY26. Similarly in EU, status quo for REMCY26 pre-Iran event has changed now to 3 hikes of 25 bps each in REMCY26. 2. The current violent repricing seems to be a result of concentrated received positioning in a market priced for cuts and the scars of underestimating the 2022 inflation shock. 3. Compared to other asset classes such as equities/fx, rates IVs have shot through the roof. The big question in those assets is whether we see a deeper and broader drawdown because the energy disruption from the Strait of Hormuz is longer-lasting and the market moves to worrying about severe growth downside. That would put more outright pressure on equities and EM, may provide some relief to the rates complex, and boost the Dollar further as it cuts against the prevailing trend of more globally diversified allocations. 4. For 10yr UST yield fair value, we use the “golden rule” of French Nobel laureate Maurice Allais. The basic idea is that over the medium to long term, nominal GDP growth is a decent proxy for return on invested capital. Therefore, in any economy bond yields should tend to converge with the structural growth rate of nominal GDP. 5. For US the 7 year moving average of annual nominal GDP growth is 5.9% against current 10yr UST level of 4.45%. But does that mean the 10 yr UST yields are too low? 6. It depends upon how inflation actually shapes up in next 1-2 years. If inflation cools back to Fed's 2% target, then the fair value of 4.4% is justified. But if inflation were not to cool and remain elevated then an upward march in long end yields is assured. The last time these two scenarios—diverged as much as today was in the early 1970s. For several years, the bond market couldn’t make up its mind which scenario was right. But following the Yom Kippur War and the Arab oil embargo of October 1973, the bond market concluded the first scenario—higher inflation—was correct. 7. But the story flips on the short end. Market pricing of many front ends now looks quite asymmetric across several scenarios—we think the hike risk priced in the US, and multiple hikes priced in Europe will prove too hawkish. From a fundamental standpoint, this repricing may be reflecting some scar tissue from the inflationary episode of 2022. And G10 central bankers’ focus on indirect and second-round effects and the risk of un-anchoring inflation expectations have clear echoes of that period. And if it were a growth shock as we expect it to be soon, the rates hikes currently being priced in might need to moderate. 8. To summarise, while the long end rates have higher probability to remain elevated due to inflation expectations as well as probable fiscal measures needed to support growth, the short end rates in DM look attractive at current levels to receive for fading out the current rate hikes being priced. Hence, 2*10 curve steepeners as well as 1yr1yr DM rates look attractive to receive at these levels.

@iwritefibs Yes. Apologies for the typo.

US NFP MAR’26 PREVIEW: We have released a detailed preview note on US Nonfarm payroll data for March scheduled for release on 3rd April: macro-spectrum.com/opinion/us-nfp… 1. We expect nonfarm payrolls (NFP) growth rebounded to 45k in March. The unemployment rate is likely to remain steady, just rounding down to 4.4%. We expect average hourly earnings growth of 0.3% m-o-m after two months of 0.4% increases. Underlying wage growth appears to have stabilized around 4%. 2. March NFP growth will likely be boosted around 30k by the end of a nurse’s strike. This was a drag on February NFP, but concluded shortly after last month’s reference week, so a full reversal is likely in this report. Initial and continuing jobless claims both improved through the March NFP survey reference week. We expect headline job gains to stabilize in March after two exceptionally noisy reports. 3. Rate cuts remain likely later this year under new Fed leadership, but, for now, we expect officials to remain patient. We now see only one rate cut of 25 bps in Q4CY26 in US. 4. Markets have completely removed cuts from REMCY26 and are now pricing in a 24% probability of a 25-bps rate hike in REMCY26. We believe it is a trading opportunity and recommended putting on 2*10 US SOFR steepeners around 25 levels last to last week. Although we did see our stop loss 15 levels intermittently last week, now the trade has recovered to 22 levels, and we continue to target 40 levels. 5. We also like receiving the 1yr-1yr SOFR around 3.75 levels (CMP 3.66) for an eventual profit target of 3.5 with stop at 3.90. Even if there is no cut till Powell remains as Fed chair but as Warsh comes in and settles, rate cuts might still happen in a backend manner i.e. Sep’26/Dec’26 or Dec’26/Mar’26. 2/3rd of 2026 voters still expect to ease this year.

Great minds think alike. We posted on Wednesday that TACO put impact is waning. Today Barclays has come out with a similar theme report.

When TACO stops putting a floor on equities, time to SELL US assets: Last week on 19th March, we released an opinion piece expecting a TACO soon. macro-spectrum.com/opinion/higher… But the TACO we saw yesterday was not at all convincing and looked more like a capitulation. Also the way some large size trades were reported in S&P & crude futures implies the tweet info was leaked in the Trump administration. This brings us to the said "Pakistan based negotiations" between US & Iran. We do not see any semblance of commonality between what the US expects (i.e. free SoH passage above all) & what the IRGC expects (repatration, CNH toll charges in SoH & security guarentee). Hence it is very likely that once Trump's 5 day period ends on Friday night EST, Trump might send boots on the ground to take over Kharg island. The U.S. is deploying three amphibious assault ships and roughly 2,500 additional Marines to the Middle East beyond the already on way another set of amphibious assualt ships from Japan to middle East carrying another set of 2500 marines. Both these groups might be ready for operations on Friday night EST. Hence risk assets should be ready for more uncertainty over the weekend. We expect US equities to fall further by 4-5% & 10yr UST yields to test the 4.55-4.60 range which was were the bond vigilantes stopped Trump from his liberation day tariff drama. In this final melt down, precious metals might fall significantly by 10-20%. US assets dont believe in the TACO put any more.

What we see ahead: Below is our weekly report on major economic data points in G-7 this week & our expectations: macro-spectrum.com/opinion/the-we… 1. Iran war headlines are likely to continue to dominate investor sentiment as this week’s economic calendar will be relatively light. 2. Last week crude price action has shifted global rate expectations across US, EU & UK. US markets are now pricing in a 28% probability of a rate hike by end CY26. EU markets are now pricing in 3 hikes of 25 bps each by end CY26. UK markets has eliminiated 2 cuts totally and are now expecting more than 3 hikes in REMCY26. This does not augur well for risk assets as well as well as precious metals. 3. In FOMC meeting last week, as expected Powell tone was hawkish during the press con. Powell was explicit about his plans to potentially remain on the board after his term as chair ends in May. He suggested he would serve as Chair Pro Tem if his successor is not confirmed and added that he would stay on the board until the DOJ investigation is resolved. 4. We also see a delay in Warsh taking over as Fed Chair as President Trump signaled his support for the Department of Justice’s investigation against the Fed, meaning Senator Thom Tillis (R-NC) will likely continue to block the nomination of Kevin Warsh as the next Fed Chair. Also Warsh has not submitted necessary paperwork to the Senate Banking Committee. A delay of his confirmation poses a risk of the next rate cut being pushed back beyond June. We now see only one rate cut of 25 bps in Q4CY26 in US. 5. In US macro data this week, we have initial jobless claims, Univ of Michigan, import price index & non farm productivity. 6. In UST dated supply, we have $69 BN of 2 year auction on Tuesday, $70 BN of 5 year auction on Wednesday & $44 BN of 7 year auction on Thursday. 7. In EU, we now see 2 hikes of 25 bps each in June & Sep as we expect inflation to print above target in H1 2026, due to the Iran War. 8. In UK we now expect no cuts but no hikes as well as UK economy remains weak. 9. In RoW macro data this week, we have German IFO survey, UK Feb CPI & European PMIs this week.

PRECIOUS METALS BULL RUN IS OVER: We have released a detailed note on why we feel the precious metals bull run is over: macro-spectrum.com/opinion/precio… 1. On 31st Jan we have released an opinion piece “Silver the pattern 1980-2011-2026 repeats again”. We had written that Silver has seen it's best days & was headed eventually towards $50 levels. macro-spectrum.com/opinion/silver… Silver was then trading around $85 levels. Friday’s close was around $67. 2. Last week’s ferocious fall in both gold (10% WoW) and silver (15% WoW) has convinced us that we are headed lower for longer in precious metals. 3. Gold’s pullback reflects a combination of profit-taking and liquidation amid concerns about less monetary easing. Slower central bank buying and outflows from exchange-traded funds have further weighed on sentiment. Bullion-backed ETFs are set for a third week of outflows, with holdings falling more than 60 tons in that period. 4. With markets pricing in rate hikes across DMs, non interest bearing assets such as precious metals might fall further. Hence Gold might see more selling, and we expect a test of $4000 levels sooner than later. It is now a sell on rise market rather than a buy on dip kind of market. 5. Silver might fare worse than Gold in the current downturn because Silver is heavily used in industrial applications. Upwards of 60% of silver demand is industrial: electronics, AI chip packaging, solar panels, electric vehicle wiring, semiconductor conductivity, data centre contacts. When global growth slows down, silver demand also goes down. 6. Also with the global paucity of Helium which is used in chip fabrication (wafer cooling, vacuum environments, lithography stability, leak detection) due to Qatar's Ras Laffan complex being hit (it supplied 30% of global helium supply), it is a matter of weeks before current stock of Helium runs out and chip production also starts falling leading to further lower demand for Silver. 7. Hence we expect the current sell off to continue in both Gold & Silver with Gold eventually testing $4000 levels & Silver $50 levels. With central banks staying away from Gold & Silver being battered due to global growth slowdown, it is the retail crowd which might now be stuck for years with their purchases bought at far higher levels. This has been the story of precious metals since many decades as seen in 1980, 2011 and now 2026.

WHO PAYS THE PRICE OF IRAN CONFLICT: We have released a detailed report on which countries are the worst & least affected in the current Iran conflict: macro-spectrum.com/opinion/who-pa… 1. The current middle east conflict has impacted Asia ex China the most. 2. The Mideast Conflict disproportionately affects Asia due to its reliance on imports of Mideast crude oil, petroleum products and LNG. Asia's relatively large net energy importing reliance, its large exposure to Middle East energy/fertilizer imports/remittances, and the region’s overall trade reliance exposes it to weaker external demand. 3. In Asia itself, worse affected might be countries such as Japan, South Korea & India. China because of it's 1.4 BN barrel emergency reserves looks least affected. 4. Eurozone too has been impacted severely as 60% of it's energy demand is met through imports. Amongst Eurozone, UK is the worst affected in Eurozone due to current Iran conflict. The current elevated inflation & fiscal constraints limit policy response to energy shock. 5. US on the other hand is relatively insulated amidst the current middle east conflict. Linear models of the US economy suggest that even very large oil price shocks may have muted effects on the US economy. This muted impact was rationalized by the shifting nature of the US economy, namely the advent of shale energy production, which has made the US a major energy producer and exporter. 6. For the Asian & Eurozone importers, the cost is not only being borne in crude and distillates. It is across chemicals, plastics, pharma & fertilisers supply chains. 7. Brent prices are not even showcasing the real price shock to Asia as spot Dubai & spot Oman crude are priced $40-$50 above brent. Even if TACO happens, the spread might reduce to at best $10-20, yet assuming an avrg brent post TACO at 85, including shipping & insurance cost, landed cost of crude basket is $100 in best case compared to pre conflict levels of $65-70 levels. 8. Asia & Eurozone are the two regions which will born the cost of the current conflict. The disconnect between futures which are underpinned by hundreds of billions of dollars of daily transactions and physical oil is partly due to aggressive US attempts to keep a lid on prices, including through releasing emergency supplies. The reality is that the global economy is suffering from a bigger inflationary hit than Brent futures suggest.

HIGHER CRUDE PRICES ARE NEARING TACO LEVELS: We have released a detailed report today on how current crude shock is nearing TACO levels: macro-spectrum.com/opinion/higher… 1. Since the onset of Iran war on 28th Feb, Brent has moved from $80 levels to currently $115 levels. It tested $120 levels twice in the last two weeks but any breach above this crucial level might bring severe demand destruction as well as the onset of TACO (Trump Always Chickens Out) trade. 2. In this report we look how supply is looking across SoH (Strait of Hormuz) currently, increase in prices for various crude products, how demand destruction has already started happening & how a $120+ level on Brent can force Trump to call an end to US & Israeli attacks on Iran. 3. It is another moot point how Iran might react to this development. Whether they continue keeping SoH on hold till their security guarantee demands are met or they allow SoH to open up as there economic threat value has no further justification. 4. Currently the polymarket odds for the event ending by 31st March is only 6% compared to 24% last week. We see these odds as attractive for our view that the event might end by 31st March. 5. Techincally SoH is seeing 16mbpd daily hit to flows which is almost 97% of normal traffic. The increase in spread between WTI & Brent could reflect that the market is upgrading its probability of US export restrictions. Dubai cash prices closed $54 above Dubai nearby futures prices yesterday, reflecting a large premium for “prompt” delivery of Middle Eastern crude. In contrast, Brent cash prices are similar to Brent nearby futures prices, confirming the extreme physical tightness in (Middle) Eastern crude markets hasn’t fully spread yet to the West. 6. We are seeing sharp fall in refined product flows. 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 Asia’s importing nation’s immediate choke point, with surging prices slowing both travel and freight. In many crude importing regions, demand isn’t being reduced by choice but by the physical absence of inputs. 7. We believe 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. That is a global growth shock coming after the initial inflation shock.

TACO trade starts now. How a small boat can sink a ship. Vietnam V2.0. Iran has shown how to win the war even after losing the battle. Trump might soon offramp by saying he has won. But history might show how the Middle East changed after the last 3 week events. No fool proof security for US allied gulf countries. A larger impact might be on the crude supply chain. From a market perspective, equities recover, Brent falls back to $90 levels but precious metals might fall off the cliff. Rates might be the ultimate loser due to stagflation.

What we see ahead: Below is our weekly report on major economic data points in G-7 this week & our expectations: macro-spectrum.com/opinion/the-we… 1. In addition to potential developments in the Middle East, market participants will focus closely on Wednesday’s March FOMC meeting. 2. Regarding Iran events, as we wrote on 22nd Feb 7th March & 12th March, the geopolitical risk premium in crude prices is here to stay. We now see a range of 85-150 for the next 1 month on Brent. Even in a best-case basis, the geopolitical risk premium of $15-20 might always remain embedded to the fair value of $65 for Brent. Following are our opinion pieces written on 22nd Feb, 7th March and 12th March on the Iran war: macro-spectrum.com/opinion/risk-a… macro-spectrum.com/opinion/brent-… macro-spectrum.com/opinion/iea-oi… 3. On Fed event, we expect the FOMC to leave rates unchanged at their March meeting. Communications are likely to emphasize optionality, with risks increasing to both the inflation and employment mandates. Inflation data have surprised on the upside, and forward-looking signs of price pressures are emerging. Growth and labor data have been more mixed, but sharp weakness in the most recent employment report and some weakness in credit markets will likely keep officials focused on downside risks. 4. Although market is currently pricing in only 23 bps of cut for REMCY26, we still see possibility of 2 cuts of 25 bps each in June & Sep when Kevin Warsh takes over as Fed Chair. This gives us an opportunity to put on steepeners around 25 levels in 2*10 US SOFR for an eventual target of 40 with stop loss at 15 levels. 5. In US macro data, we have PPI, initial jobless claims, industrial production, pending home sales. 6. In dated UST supply, we have $13 BN of 20year auction on Tuesday & $19 BN of 10year TIPS auction on Thursday. 7. In RoW events this week we have ECB, BOE & BOJ meeting on 19th March & BOC meeting on 18th March. 8. ECB is likely to be on hold. Financial markets are currently pricing around 47 bps of hike by Dec’26. But we maintain our view that the ECB will keep rates on hold in CY26 though this view is based on an inherent assumption that events will unfold in a way that pushes Brent crude oil and Dutch TTF natural gas futures curves down to levels similar to prior to the conflict, and therefore the impact on the real economy will be limited. 9. On BOJ front, we expect policy rate to be left unchanged and rate hike policy to be maintained, while keeping a close eye on situation in Middle East. BOJ looks set to hike by 25 bps by June and possibly another 25 bps by Dec provided Takaichi’s reflationary thoughts do not stop Ueda from rate hikes. JPY looks set to test their June’24 lows against USD around 161.7. We can expect verbal interventions at current levels too, but actual intervention might not happen before 162. 10. On BOE front, BOE os likely to remain on hold in the 18th March meeting. We maintain the view that the MPC will want to cut further towards the middle of its view of neutral territory (around 2-4%), and view cuts as most likely to occur in April and July 2026. But markets currently have priced out the two cuts and are now pricing in a 25-bps hike by end CY26 which looks stretched to us. 11. On BOC front, we expect the Bank of Canada to hold the overnight rate target steady at 2.25% when the Governing Council meets March 18. We think the BoC will mostly read through near-term energy-induced inflation and remain focused on slack in the economy.