The views expressed are Ed le Feuvre's personal market observations and do not constitute investment advice, a financial promotion or a recommendation to buy or sell any security. Read the full disclaimer.

Dear Quay Financials,

Sunday morning on the Rock, and the Strait below is doing its usual impression of calm inevitability. Ferries nose across the bay, container ships track their patient lines past Europa Point, and the water looks almost too still to be real. It is the kind of deceptive stillness that markets specialise in.

Because a few thousand miles east, the other strait … Hormuz … is anything but calm. What started in Week 10 as bombs over Tehran, and in Week 11 as oil’s violent round-trip, has now hardened into something more serious: a blockade that looks less like a scare and more like a regime. WTI is back pressing the 100-dollar line, the president is issuing ultimatums on live television, and every macro model with an inflation assumption is being quietly edited.

So, espresso in hand, chair angled toward our Strait, let’s walk through a week where three narratives did the heavy lifting.

Recap: Where We Left Off (Week 11)

Week 11 closed with markets still vibrating from the first Hormuz shock. Oil had staged a 35-dollar intraday round-trip, spiking toward 120 on fears of a prolonged closure, only to round-trip back below 90 when President Trump floated the idea of taking “operational control” of the Strait. The S&P 500 finished at 6,640, down 1.5%; the Russell 2000 at 2,495, down 1.2%; and the VIX up more than 30% on the week: unsettled, not yet broken.

US CPI printed 2.4% year-on-year for February, the softest since mid-2025 but stubborn enough, thanks to tariffs and services, to keep the Fed wedged in its stagflation corner. Beijing confirmed its lowest growth target in three decades, weighing on the Hang Seng and quietly reshaping the long-term commodity story.

We ended that dispatch with a clear watchlist for Week 12: the evolution of the Iran conflict, the March FOMC meeting, and the Bank of Japan’s latest step (or non-step) away from monetary exceptionalism. All three delivered.

This Week: Ultimatums in Hormuz, Powell’s Patience, and Ueda’s Tightrope

Weekly Market Table

Market levels, weekly moves, year-to-date figures and commentary reproduce the Week 12 market table supplied with the original dispatch. Treasury percentage moves are changes in yield, not bond-price returns.

US & Global Equities

• US large caps finally priced the war premium. The S&P 500 fell about 2.0% to roughly 6,506, giving back more of February’s gains as higher oil and a slower Fed cut path pushed risk budgets tighter; the index is now clearly below its late-month highs, but the tape still reads as controlled de-risking rather than forced liquidation.
• The Nasdaq Composite slid 2.3% to around 21,650. Growth and long-duration tech underperformed as higher real yields and Powell’s refusal to pre-commit to cuts made investors more selective in AI and software exposure.
• The Russell 2000 fell 2.3% to about 2,438. Small caps remain the index most exposed to tighter financial conditions and an energy tax on the real economy, with higher front-end yields and higher input costs both biting at once.
• Europe flipped from relative winner to stagflation casualty. The FTSE 100 dropped nearly 5% to just under 9,920 and the STOXX Europe 600 lost about 5% to the low-570s, as the same oil shock that once flattered energy majors started to look more like demand destruction and an inflation problem for the ECB.
• Japan’s Nikkei 225 gave back part of its outperformance. The index fell roughly 4.6% to the low-53,000s, as a cautious BoJ, higher global yields, and war-driven uncertainty combined to trigger profit-taking in export cyclicals.
• The Hang Seng inched lower. Hong Kong equities slipped just over 1% to around 25,280, with China still off the front page but higher energy costs and unresolved property drag keeping enthusiasm capped.

Gold, Digital Assets and Other Assets

• WTI crude retook centre stage – this time without the round-trip. Front-month WTI rose almost 10% on the week to about 98 dollars a barrel, as a still-blocked Hormuz and Trump’s 48-hour ultimatum pushed traders from pricing a scare to trading a regime shift in supply risk.
• Gold finally met profit-taking. After weeks as the cleanest geopolitical hedge, bullion dropped roughly 12–13% to the high-4,400s per ounce, as some “insurance” capital rotated into energy and shorter-duration cash-flow assets rather than abandoning hedges altogether.
• Bitcoin behaved like beta, not ballast. The token rose about 6% to roughly 70,500, more in line with a relief rally in high-volatility risk assets than any renewed belief in “digital gold” as a war hedge.

Macro & Policy

• US Treasury yields pushed to new year-to-date highs. The 10-year moved to around 4.4% while the 2-year approached the high-3% range, as the March dot plot and Powell’s language confirmed a “later and shallower” easing path in the face of an oil shock.
• The US Dollar Index firmed to just under 100. Wartime demand for the world’s reserve asset and higher US yields more than offset any growth worries, adding an extra headwind for non-dollar assets and commodities.
• Volatility stayed honest, not hysterical. Index moves were orderly, but the combination of a live war over the world’s key oil chokepoint, stickier inflation projections, and a patient Fed kept hedging demand elevated and discouraged aggressive dip-buying.
• Wednesday’s FOMC meeting: As fully priced, the Fed left the policy rate unchanged at 3.50–3.75%, but the substance was in the dots and Powell’s language.
• The March Summary of Economic Projections nudged inflation forecasts higher relative to December while also marking up growth, a pairing that implicitly acknowledges the oil shock and tariff floor without panicking about recession. Powell’s repeated line that “inflation isn’t coming down as quickly as we had hoped” was not an accident; nor was his refusal to pre-commit to cuts on any timetable. The dots still imply roughly one cut in 2026, the “later and shallower” path that markets had been grudgingly pricing since January is now the Committee’s own baseline.
• Rates reacted in textbook fashion. Two-year yields pushed toward 3.9%; ten-year yields climbed to around 4.4%, their highest since mid-2025, as investors accepted that the combination of an oil shock and still-solid growth has knocked out the case for early, aggressive easing. The yield curve steepened at the margin, not because recession risk vanished, but because the policy anchor at the front end moved further into the future.
• For equities, this was a classic “no disaster, but no rescue” outcome. There was relief that the Fed did not hike into an active shooting conflict with direct inflation implications. But the absence of a dovish surprise, combined with the very real WTI print on the screen, meant that risk-on narratives had nowhere to hide. Rate-sensitive segments – small caps, housing, speculative tech – lagged the broader indices, while quality balance sheets and energy continued to take share in both flows and narratives.
• Put simply: Week 12 is the moment the stagflation frame moved from clever note title to house view. The Fed is telling you, politely but firmly, that it will tolerate slower progress back to 2% rather than chase every oil-linked uptick with hikes. Markets, in turn, are telling you they no longer expect 2026 to be the year of the great cutting cycle.
• A little further from the headlines but matters for anyone thinking about duration and FX over the next 12–24 months. The Bank of Japan’s March meeting ended with an 8–1 vote to keep the uncollateralised overnight call rate around 0.75%, rejecting a hawkish proposal to hike to 1.0%.
• Governor Ueda’s press conference could be read as a treatise on central banking in a hostile world. On the one hand, he reaffirmed the BoJ’s commitment to exiting the ultra-loose regime of the past decade; on the other, he stressed that imported energy volatility and a still-fragile domestic wage–price dynamic argue against aggressive tightening. At one point, he explicitly referenced the 1970s oil shocks and the Ukraine war, warning that mechanically applying rule-of-thumb prescriptions would generate “extremely high” policy rates that would crush real activity.
• Markets heard caution, not complacency. The yen remained soft; the Nikkei gave back part of its impressive year-to-date rally as export cyclicals met a world of higher global yields and war-driven uncertainty. For the global curve, the message rhymed with Powell’s: there will be no rush to slash rates in the face of an energy shock, and any normalisation will proceed in small, credibility-preserving steps rather than in dramatic regime flips.
• The practical takeaway: the era when the BoJ functioned as an unambiguous global liquidity pump is over, but it will not become an aggressive liquidity vacuum either. Instead, we are likely to live with a long, slightly wobbly tightrope walk – one that adds a gentle upward pressure to global term premia without providing the cathartic break many macro tourists keep betting on.

Geopolitical Analysis

• The overwhelming story was the deepening Iran war and the evolution of Hormuz from a threat to a functional blockade. Nearly three weeks after the initial strikes, shipping through the Strait remains severely curtailed as Iran combines missile attacks, drone harassment, and credible mine threats, effectively exerting operational control over the world’s most important oil chokepoint.
• Early in the week, markets were still trading the “Trump takes control, Strait reopens” narrative that drove last week’s round-trip. By Saturday, that had hardened into something more brittle. Reuters reported that President Trump threatened to “obliterate” Iranian power plants unless Hormuz was fully reopened within 48 hours: a rhetorical escalation from policing a waterway to targeting the energy grid itself. That is not the language of a quick de-escalation.
• Oil responded exactly as you would expect in a market running lean. Front-month WTI settled just under 100 dollars on Friday, up almost 10% on the week and more than two-thirds above its year-end level, while Brent traded through the triple-digit mark at several points as traders priced not just disrupted flows but the risk of deliberate damage to upstream infrastructure. European gas contracts spiked as LNG routes were re-drawn around a chokepoint that no longer feels temporary.
• The transmission to broader markets was as simple as it was unforgiving: higher oil → higher breakevens → higher nominal yields → lower equity risk appetite. The S&P 500, Nasdaq, and Russell 2000 all shed a bit more than 2%; Europe and Japan underperformed as import-heavy economies adjusted to the prospect of a more durable energy tax; and the VIX stayed elevated even as index moves remained orderly.
• The instructive split was in the hedging behaviour. Gold finally blinked, selling off double-digits on the week as some of the “insurance” capital rotated into energy and shorter-duration cash flows. The safe haven of choice this week was not a metal or a coin; it was a barrel of crude and a US Treasury with a yield that actually pays you.

What's Pertinent This Week (Week 12)?

What Will Week 13 Bring?

Other catalysts:

First, duration of disruption. Trump’s 48-hour ultimatum on Hormuz is now in the market. If it produces credible movement, a monitored shipping corridor, verifiable mine-clearing, even a messy ceasefire, the relief rally in risk could be sharp. If it does not, the narrative hardens into something more structural: not “oil spike” but “energy tax,” not “round-trip” but “new range.”

Second, policy patience versus political pressure. The Fed has now attached public language to a private reality: the bar for cuts is higher than the market hoped three months ago. Any sign that rising energy prices, political noise, or market volatility begin to erode that patience – in speeches, in the minutes, in dissent – will matter more than the next decimal point on a data print.

Strategic positioning:

Third, leadership and liquidity. The tape is quietly rotating toward balance sheets, cash flow, and shorter duration. Energy, high-quality value, and parts of financials look like accidental beneficiaries of a world where both war and policy are doing the tightening. High-beta growth, levered small caps, and concept-heavy AI names are being re-rated from “must own” to “must prove.”

For allocators, the practical instruction is simple, if uncomfortable: respect the war-linked energy bid; keep some duration optionality rather than reflexively shorting bonds into a spike; and treat central bank meetings as risk-management checkpoints, not as guaranteed sources of relief.

Ed's Closing Bell

From the garden on the Rock, our Strait looks as it always does on a calm Sunday: busy but unremarkable. Tankers slip past the lighthouse, ferries shuttle tourists who will never think of shipping lanes as a macro variable, and the only visible volatility is a gust of Levanter tugging at a flag over the hill.

The other strait, the one every energy trader on the planet now watches in real time, tells a different story. In three weeks, it has gone from background to headline, from risk factor to regime variable. It has sent oil toward 100, nudged the Fed into explicit patience, and reminded the BoJ that exit plans drafted in seminar rooms still have to survive contact with history.

Markets, like waterways, depend on passage of goods, of capital, of confidence. Close one chokepoint, even partially, and the entire system reroutes, reprices, and reveals where the stress was hiding. Week 12 did not break the system. It did something more valuable: it stripped away a little more of the comfortable fiction that 2026 would be a straight-line glide back to cheap energy, easy money, and effortless AI-fuelled growth.

Final Words

As ever, these reflections are solely my own and neither those of Quay Financials (Gibraltar) Limited nor anyone else wise enough to keep their sharpest insights confined to the breakfast table. Do your own homework, consult someone you trust, and remember: the most dangerous assumption in a world of ultimatums and tightropes is that price has already done the hard thinking for you.

Please conduct your own research and seek appropriate professional advice before making investment decisions.

From Gibraltar

When two straits shape the week, remember this: ships can reroute around closed waters, but portfolios cannot reroute around risks you chose not to see.

Further Reading

• Trump, Iran threaten power, energy targets as war escalates – Reuters
• Could Trump “take over” the Strait of Hormuz as oil prices rise? – Al Jazeera
• Iran War: Hormuz Reopening Looks Unlikely Without a Ceasefire – Bloomberg
• Transcript of Chair Powell’s Press Conference, March 18, 2026 – Federal Reserve
• Fed meeting recap: Powell says inflation isn’t coming down quickly – CNBC
• Bank of Japan March 2026 Monetary Policy Meeting – Fintech Observer