Trump and Iran Hurl War Threats; Stocks, Bonds Fall | Horizons Middle East & Africa 3/23/2026
Speakers
Summary
- The US-Iran conflict escalates: President Trump issues a 48-hour ultimatum for Iran to reopen the Strait of Hormuz or face strikes on its power plants. Iran threatens to completely close the strait and target US/Israeli-linked energy, IT, and desalination infrastructure if attacked.
- Global markets are in a deep risk-off selloff: Asia-Pacific equities are down ~3.5%, approaching correction territory. Bond markets see a severe rout, with the US 10-year yield at 4.40% and significant selloffs in Europe and the UK.
- Oil prices (Brent ~$113) are near mid-2022 highs, but physical delivery premiums in Asia are much higher (~$150-160). The IEA states current disruptions are equivalent to two major oil crises, representing a ~11 million barrel per day loss.
- Central banks' narrative shifts dramatically towards hawkishness, with markets pricing in rate hikes to combat inflation spurred by the energy shock. Stagflation is increasingly seen as a base case rather than a tail risk.
- Gold is falling (~2.5%) despite the conflict, under pressure from a stronger US dollar and expectations of rising interest rates, breaking its traditional role as a geopolitical safe haven in this scenario.
- The closure of the Strait of Hormuz is causing a global fuel crunch, particularly in diesel and jet fuel, with risks of energy nationalism, export controls, and a short-term shift back to coal and other less clean energy sources.
- A prolonged war scenario could cause severe GDP contractions in GCC countries: Qatar and Kuwait could see declines up to ~14%, Saudi Arabia ~3%, and the UAE ~5%, due to combined hits to oil production and non-oil economies.
- GCC economies are seen as relatively resilient due to deep state pockets, patient capital, and large external asset buffers (~200% of GDP), which can absorb financial losses and support recovery.
- The Trump administration has reorganized and drastically reduced U.S. foreign aid, consolidating it under the State Department with a budget of ~$5.4B (down from ~$43B under USAID), raising concerns over humanitarian impacts.
Trade Ideas
Steven Major states stagflation is becoming the "base case," leading central banks to prepare for rate hikes, with the initial move being a "bear flattening" of the yield curve. Central banks, scarred from 2022, are likely to prioritize fighting inflation over supporting growth, leading to higher policy rates and bond yields. The shift to a hawkish central bank narrative in a stagflationary environment is bearish for bond prices. The conflict resolves swiftly, causing inflation fears to recede and growth concerns to dominate.
Rachel Ziemba states if the Strait of Hormuz "stays as effectively closed, we will see oil prices continuing to grind out." The physical supply disruption is immense (~11 mbd per IEA), and Asian refiners are already paying premiums of $150-160 for deliverable crude. The scale of the effective outage outweighs strategic reserve releases and sanctions exemptions, pointing to higher prices. The Strait reopens quickly, or a coordinated global release of reserves overwhelms the supply gap.
Ziemba states, "in the short-term, we will see that shift" to less clean energy like coal, especially in Asia and Europe, and expects emissions standards may be relaxed. High oil and gas prices, supply disruptions, and the need for readily available local energy sources will incentivize a shift back to coal. Increased demand for coal as a substitute fuel makes the asset attractive. A rapid de-escalation collapses energy prices, or environmental policy remains rigid despite the crisis.
Mark explicitly says, "Gold I think still has more downside from here," and expects it to fall toward the ~$3600 breakout level from last year. In this crisis, the US dollar is the ultimate haven, and higher yields due to inflation shocks are "the big marginal drivers of gold." The geopolitical risk premium is already maximized. The combination of a strong dollar and higher real yields creates a negative environment for gold. An unexpected, severe escalation in the conflict that triggers a flight from the dollar.
Up Next
This Bloomberg Markets video, published March 23, 2026, features Stephen Major, Rachel Ziemba, Mark Cudmore discussing TLT, WTI, KOL, GOLD. 4 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Stephen Major, Rachel Ziemba, Mark Cudmore · Tickers: TLT, WTI, KOL, GOLD