Trump Vows to Finish Job in Iran; Brent Hovers Near $100 | Horizons Middle East & Africa 3/12/2026
Speakers
Summary
- Oil prices are hovering near $100 per barrel as the US/Israel conflict with Iran enters its 13th day, resulting in the closure of the Strait of Hormuz and a daily global oil shortfall of 13 to 15 million barrels.
- The IEA announced a record 400 million barrel emergency oil release, but analysts warn the maximum daily flow rate of 2 million barrels is vastly insufficient to cover the physical market deficit.
- Sticky US CPI data has caused markets to price in only one Federal Reserve rate cut for the year, strengthening the US Dollar and pushing the Japanese Yen to 159.45.
- Middle East airspace is facing severe disruptions, with drone attacks halting operations at Dubai International Airport and regional airlines grounding fleets or rerouting flights.
- Wealth managers are advising clients to avoid cash and illiquid private debt due to rising inflation risks, suggesting a rotation into cheaper, liquid Emerging Market equities like South Korea.
Trade Ideas
On Wednesday we got US CPI which sent some more traders the conviction that we will only see one Fed rate cut for the year. That is being reflected on the US dollar. Sticky domestic inflation forces the Federal Reserve to keep interest rates higher for longer than previously expected. This widens the yield differential between the US and other nations, attracting global capital to the dollar, which is receiving an additional boost from its safe-haven status during the Middle East conflict. LONG. High interest rates and geopolitical fear create a perfect macroeconomic storm for sustained dollar strength. A sudden, unexpected drop in future US inflation data or a dovish pivot by the Federal Reserve to support domestic growth.
We are looking at the Japanese Yen trading at the 159 level against the dollar. It is making the Bank of Japan's position for next week even more difficult trying to balance out the weak currency and also these uncertainties when it comes to the impact from Iran the war. Japan is highly dependent on imported energy. With oil prices spiking to $100 and the US dollar strengthening due to sticky inflation, Japan faces a severe terms-of-trade shock. The Bank of Japan is trapped between defending the currency and managing the economic fallout of high energy costs, leading to further Yen depreciation. SHORT. The structural disadvantage of being an energy importer during an oil shock, combined with US rate divergence, will continue to crush the Yen. The Bank of Japan aggressively hikes interest rates or directly intervenes in the FX market with massive dollar sales.
We were underweight US market. Korea has been the best one. We would emphasize for emerging markets which have been cheaper before now, there are price differentials between volume and growth. US equities are currently expensive and highly vulnerable to inflation shocks and delayed rate cuts. Emerging markets like South Korea offer significantly cheaper valuations and have already absorbed much of the global manufacturing pessimism, providing a better relative risk/reward for investors who need to deploy capital but want to avoid US concentration risk. LONG. Capital will rotate from overvalued US large caps into cheaper, liquid emerging market equities as a relative value play. A severe global recession that crushes export-driven economies, or a massive spike in the US dollar that triggers an emerging market currency crisis.
Private debt is something we have been warning about in December last year for us. We are very, very focused on liquid assets and being widely diversified. In an environment characterized by rising inflation, higher-for-longer interest rates, and sudden geopolitical shocks, illiquid assets like private credit are highly vulnerable. Borrowers face higher debt servicing costs leading to defaults, and investors lack the liquidity needed to exit positions during market downturns. AVOID. The yield premium offered by illiquid credit is not worth the structural risk during a major geopolitical and inflationary shock. Central banks inject massive liquidity into the financial system, effectively bailing out overleveraged private borrowers and compressing credit spreads.
We look for a shortfall of 13 million to 15 million. If IEA countries can only bring two million barrels a day back into the market out of that huge 400 barrel release, that is clearly not going to go far enough to address the shortfall. The headline number of a 400 million barrel release sounds massive, but physical oil markets trade on daily flow rates. Because the daily strategic release cannot mathematically cover the daily deficit caused by the Strait of Hormuz closure, physical oil supplies will remain extremely tight, driving crude prices higher and benefiting energy producers. LONG. The structural supply deficit cannot be solved by strategic reserves alone, keeping a high floor under oil prices. A sudden diplomatic breakthrough or ceasefire that reopens the Strait of Hormuz and floods the market with delayed inventory.
The airspace remains largely closed and quite risky. And some airlines are not taking the risk while others have been able to create what they call a safe air corridor. Commercial airlines are facing a devastating dual threat. First, jet fuel prices are surging due to crude oil nearing $100 a barrel. Second, operational costs are spiking due to the need to cancel flights entirely or fly longer, less efficient routes to avoid Middle Eastern airspace. SHORT. Rising input costs and disrupted global routing will severely compress airline profit margins. Oil prices collapse rapidly or airspace restrictions are lifted, allowing airlines to resume normal, efficient routing.
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This Bloomberg Markets video, published March 12, 2026, features Jennifer Zabasajja, Winnie Hsu, Martin, Anthony DiPaola discussing UUP, FXY, EWY, EEM, BIZD, USO, XLE, JETS. 6 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Jennifer Zabasajja, Winnie Hsu, Martin, Anthony DiPaola · Tickers: UUP, FXY, EWY, EEM, BIZD, USO, XLE, JETS