The State of Play

My Thoughts on the Market - Today.

We are sitting in one of the most complex, multi-layered market environments since 2022, and arguably since the 1970s depending on how long this plays out. Every single macro variable is in tension with every other one right now. Let me walk through it all.

The War & The Strait

The Strait of Hormuz crisis kicked off on February 28 when the U.S. and Israel launched joint strikes on Iran, including the killing of Iran’s supreme leader Ali Khamenei. By March 2, an IRGC official confirmed the strait was closed, threatening to set ablaze any ship attempting to pass through. We’re now on day 17 of this conflict, and the disruption to global energy flows is unlike anything the modern market has dealt with.

The numbers are staggering. Roughly 27% of the world’s maritime trade in crude oil and petroleum products normally goes through the Strait. Daily transit has collapsed from a historical average of 138 ships per day to no more than five since the war began. The IEA has called it the worst oil disruption in history, estimating the war will cut global supply by about 8 million barrels a day in March. Iran’s IRGC has been defiant, declaring that any vessel linked to the U.S., Israel, or their allies will be considered a legitimate target, and warning the world to expect oil at $200 per barrel.

Saudi Arabia has been diverting oil to its Red Sea port of Yanbu via the East-West pipeline, while the UAE is routing through Fujairah, but combined bypass capacity is only 3.5 to 5.5 million barrels per day versus the 20 million that normally transits the strait. That math doesn’t work no matter how you slice it.

Oil Prices

Crude has been on a rollercoaster. Prices have surged roughly 40% since the war began, with Brent closing above $100 for the first time in four years last week. Brent topped $106 on Sunday before pulling back Monday when the IEA reserve release news hit. WTI settled at $93.50 on Monday after the 32-country IEA coalition agreed to release 400 million barrels from strategic reserves, the largest coordinated release in IEA history. But today (Tuesday), oil advanced again with Brent back above $100 as traders cast doubt on a U.S.-backed plan to escort tankers through the strait.

Here’s the thing. 400 million barrels sounds massive, but at 105 million barrels per day of global consumption, that covers roughly four days. Compared to the 20 million barrels per day that normally flows through Hormuz, it’s about 20 days of typical strait traffic. It’s a Band-Aid. Wood Mackenzie has warned that with 15 million barrels per day of Gulf supply gone, oil would need to hit $150 for demand destruction to rebalance the market. That $200 Iran threat isn’t as unthinkable as it sounds if this drags on.

U.S. gasoline prices are now up nearly 80 cents from a month ago, and diesel has shot up $1.34 to just under $5 a gallon. This hits the consumer directly and immediately.

The Macro Picture

Here’s where the narrative gets tricky. A lot of people are screaming “stagflation” right now, and the headline data supports that framing on the surface. Q4 2025 GDP was revised sharply down to just 0.7% annualized, a massive step down from the previous estimate of 1.4% and the 4.4% pace in Q3. Core PCE inflation rose to 3.1% year-over-year in January, still a full point above the Fed’s target.

But context matters. That GDP print was significantly distorted by a record-breaking 43-day government shutdown that disrupted data collection and economic activity. It does not reflect the actual trajectory of the economy heading into this crisis.

The reality is the economy was re-accelerating before February 28. February CPI came in at 2.4% headline with core at 2.5%, the lowest core reading since March 2021. Consumer sentiment had risen to its highest level in six months. The Dow broke above 50,000 for the first time. Industrial production rose 0.2% in February with manufacturing and mining both contributing. The AI capex cycle was firing on all cylinders. International markets were outperforming the U.S. for the first time in years. Credit spreads were tight. Goldman had full-year GDP growth penciled at 2.8%. The vibe heading into late February was closer to “soft landing achieved, now re-accelerating” than anything resembling stagflation.

The University of Michigan consumer sentiment reading tells the story perfectly. The March headline came in at 55.5, but interviews completed before the Iran strikes showed improvement from February. All of those gains were completely erased in the nine days after the military action began. The economy didn’t break on its own. It got hit.