Iran War: Europe Signals Little Interest in Aiding US with Hormuz | The Opening Trade 3/17/2026
Speakers
Summary
- Geopolitical Stalemate & Oil Prices: Iran has expanded attacks to upstream energy infrastructure (e.g., UAE gas field, Iraqi oil field) while controlling Strait of Hormuz transit. The conflict is seen as more protracted, with Brent crude above $103/bbl. A key market focus is the inability of the US to build a coalition to reopen the strait, with Europe and Japan showing "no appetite" for military involvement.
- Central Bank Dilemma: Surging energy prices create an inflation shock, particularly for energy-importing regions like Europe and Japan, complicating the policy outlook. The RBA hiked rates, and markets have priced out cuts/priced in hikes for the ECB. However, speakers debate if central banks will actually hike, given the growth-dampening effect and the fact this isn't a repeat of 2022 (higher starting rates, looser labor markets).
- Dollar Strength Dynamics: The USD is bid due to risk aversion, short-covering, and its status as a net energy exporter—a terms-of-trade shock for EUR and JPY. Peter Kinsella notes the structural bear case remains, but cyclical drivers are dollar-positive. Mark Cudmore adds the beta of dollar gains may decline as the conflict persists.
- European Bank M&A Tussle: UniCredit's €35bn takeover bid for Commerzbank is described as a surprise "low-ball" offer. CEO Bettina Allsop states no detailed proposal has been shared and emphasizes implementing Commerzbank's standalone strategy, while the German government opposes the deal.
- Nvidia's Trillion-Dollar Forecast: At its GTC event, CEO Jensen Huang projected $1 trillion in sales for its AI processors by end of 2027, aligning with street consensus. The event featured new product announcements (e.g., Blackwell GPU) and partnerships (Uber, Samsung), but the sales target itself wasn't a major upside surprise.
- Market Sentiment & Complacency: Global equities (ex-US) are falling at an annualized pace >60% this month, but perceived resilience in the Nasdaq (due to short-covering in software) breeds complacency. Mark Cudmore argues this masks significant negative wealth effects and further downside risk.
- Refined Products & Regional Exposure: Disruption is hitting refined product markets hardest (e.g., US diesel >$5/gallon). Emily Ashford notes China is relatively insulated due to strategic reserves, while India is more exposed. Russia is seen as the primary beneficiary of the conflict.
- Private Credit Warning: Morgan Stanley warns private credit default rates could hit 8%, driven by AI disruption and maturity walls in the highly leveraged software sector, potentially reaching pandemic-era peaks.
Trade Ideas
"The dollar is the cleanest way to play that risk aversion story at the moment." The rise in oil price is a terms-of-trade shock to energy importers (EUR, JPY), and investors are washing out short dollar positions. Cyclical drivers (risk aversion, portfolio rebalancing, terms-of-trade shock) are overriding the structural bear case for the dollar in the near term. The conflict's duration provides scope for further short-covering. Dollar constructive outlook persists while the conflict remains unresolved and risk aversion is high. A swift resolution to the conflict and reopening of the Strait of Hormuz, coupled with a more hawkish repricing of other central bank paths.
Strategist stated, "the Swiss franc is going to be the best performing currency in Europe. Full stop." In a risk-averse environment with a major energy-induced terms-of-trade shock, the CHF benefits as a traditional safe-haven. The SNB may have a higher tolerance for franc strength now as it helps limit imported inflation from higher energy prices. The combination of safe-haven flows and a potentially less interventionist SNB supports further CHF appreciation against European peers. The SNB surprises markets with aggressive intervention to weaken the franc, or a rapid resolution to the geopolitical crisis triggers a broad risk-on rally.
Analyst raised oil price forecasts due to a "prolonged disruption to the energy complex with a longer tail than previously expected." Iran is escalating by targeting upstream energy infrastructure (UAE gas field, Iraqi oil field) and controlling the Strait of Hormuz. The conflict is protracting, with the US lacking a coalition to reopen the strait. Iran's actions are deliberately squeezing supply to exert leverage, while US mitigation efforts (IEA releases, rhetoric) are only softening the price rise, not reversing it. Expect prices elevated ~$10/bbl above pre-conflict forecasts for years. Current price (~$103) does not fully reflect the extended disruption and fragility of supply choke points. A rapid, negotiated de-escalation and reopening of the Strait of Hormuz, or a larger-than-expected demand destruction response.
Up Next
This Bloomberg Markets video, published March 17, 2026, features Peter Kinsella, Geoffrey Yu, Emily Ashford discussing USD, CHF, BRN. 3 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Peter Kinsella, Geoffrey Yu, Emily Ashford · Tickers: USD, CHF, BRN