Oil shoots up, risk falls off – Defense names boosted

EU mid-market update: War breaks out in Middle East as US/Israel strikes Iran, with wider collateral damage in neighboring Gulf nations; Oil shoots up, risk falls off. Defense names boosted; Bitcoin stable.

Notes/observations

- European indices opened decisively lower, with broad-based de-risking across equities following coordinated US-Israeli strikes on Iran targeting military and IRGC facilities and killing Supreme Leader Khamenei. Only Norway traded firmer on higher crude pricing and its oil driven economy. Market focus is on the scale of escalation (President Trump expects Iran war to last “four to five weeks”), Iran’s widening retaliation to Gulf states and airport closures, and the disruption risk to the Strait of Hormuz, though crude’s reaction has so far stayed within last year’s ranges despite gapping up 12% on Asia open. Polymarket bets imply just 50% chance the Iranian regime changes this year (matching high reached mid-Jan during countrywide protests). Pentagon chief set to give press conference after 08:00ET today.

- Statements from Trump, who struck an optimistic tone on “offramps” and possible talks with Iran’s interim leadership, partially tempered early-session stress. Reports that Iran’s security chief reached out for renewed nuclear negotiations briefly supported risk sentiment before being contradicted by Iranian officials later.

- Travel & Leisure absorbed the sharpest downside, reflecting multi-day shutdowns at Middle Eastern hubs such as Dubai International Airport and widespread flight cancellations. Shipping, defense, and energy names outperformed as attention shifted to supply-chain resilience and security-linked spending. Maersk updated its Middle East operations over the weekend, underscoring ongoing maritime uncertainty.

- Gilt yields firmed as the conflict lifted oil and inflation expectations, overshadowing the upcoming OBR forecasts and U.K. Spring Statement from Chancellor Reeves. Citi warned of a double-hit to Asia from both energy-supply constraints and weaker global demand, while ING highlighted the risk that any sustained LNG disruption would intensify Europe–Asia competition for cargoes, with ~20% of LNG flows exposed to Hormuz. Asian FX sensitivity to oil was again noted, with the Philippine peso and Korean won identified as most vulnerable to price spikes.

- Russia is reportedly considering a halt to peace talks unless Ukraine agrees to cede territory, making this week's negotiations a decisive factor in ending the war. These critical discussions could be further delayed due to the recent closure of the airports in the Middle East.

- Nvidia is set to release a specialized inference processor this month that integrates technology from startup Groq, specifically targeting the high-speed, energy-efficient requirements of "agentic AI" models that traditional GPUs struggle to handle cost-effectively. This hardware shift is underpinned by an expanded collaboration with OpenAI, which has committed to using 3GW of dedicated inference capacity on these new systems to scale frontier models more sustainably.

- Citi has issued a stark warning that rapid AI adoption could trigger a "white-collar recession," potentially pushing the U.S. unemployment rate to 10% by 2028, echoing Anthropic CEO predictions during last few years. The bank's research highlights a "vicious cycle" where corporate productivity gains are captured by a small "AI elite," leading to skewed income distribution and a subsequent collapse in consumer demand that fuels persistent deflation.

- Macro data contributed little to the broader narrative. German retail sales missed expectations, while the U.K. backdrop remained mixed: a bleak sentiment survey from the Institute of Directors contrasted with firmer Lloyds business confidence and a slightly better-than-expected Nationwide house-price print.

- Berkshire Hathaway in its first post-Buffett annual report is sticking to the script, explicitly committing to Warren Buffett’s strategy of radical decentralization and concentrated investments in "forever" holdings. By tethering capital returns strictly to the mast of intrinsic value and shunning the siren song of dividends, the conglomerate signals that while the pilot’s seat may eventually change, the ascetic map of value-investing remains firmly glued to the dashboard.

- Morgan Stanley Technology, Media & Telecom Conference starts this week with Nvidia, Alphabet and AMD set to present, among many others.

- Asia closed mixed with Hang Seng underperforming -2.1%. EU indices -0.8% to -2.4. US futures -1.1% to -1.5%. Gold +2.0%, DXY +0.7%; Commodity: Brent +7.5%, WTI +7.0%; Crypto: BTC -0.3%, ETH -1.6%.

Asia

- (AU) Australia Feb Final PMI Manufacturing: 51.0 v 51.5 prelim (confirms 4th month of expansion).

- (JP) Japan Feb Final PMI Manufacturing: 53.0 v 52.8 prelim (confirms 2nd straight expansion).

- BOJ Dep Gov Himino reiterated stance to raise rate if economic outlook was met. Policy remained somewhat accommodative. Hard to predict development over Middle East.

Global conflict/tensions

- US and Israel launch Iran strike over the weekend. Iran confirmed that Supreme Leader Khamenei died in an airstrike while working in his office.

- Iran launched counterattacks against multiple cities in the Middle East, including Jerusalem.

- President Trump stated that Iran regime was armed with long range missiles and nuclear weapons would be dire threat to every American; 48 leaders were killed in strikes on Iran and potential candidates to lead Iran govt were killed; US planned the Iran campaign to last 4-5 weeks; that won’t be difficult to maintain, have large ammo supplies globally; military ops against Iran to continue until objectives are achieved.

- Iran launched new round of missile and drones at US bases.

- Iran Security Chief Larijani stressed that would not negotiate with the US.

Energy

- Oil tested 7-month highs on Asian open. Iran said to have struck 3 US and UK oil tankers with missiles in the Gulf and Strait of Hormuz.

- OPEC+ confirmed to increase oil production by 206K bpd, starting April (above analyst expectations of 137K bpd).

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -1.29% at 625.68, FTSE -0.79% at 10,824.02, DAX -1.85% at 24,842.94, CAC-40 -1.50% at 8,452.25, IBEX-35 -2.44% at 17,913.61, FTSE MIB -1.86% at 46,329.50, SMI -1.82% at 13,818.00, S&P 500 Futures -1.09%].

Market focal points/Key themes: European indices open lower across the board and remained under pressure through the early part of the session; FTSE 100 notable given weighting of oil companies; risk off as markets react to Iran situation; energy is the lone sector in the green; sectors leading the way lower include consumer discretionary and financials; travel subsector the worst performer as airlines cancel flights to Middle East; PPHE acquires Park Plaza London Waterloo; various tech firms announcing product launches at the Mobile World Congress in Barcelona, Spain; earnings expected in the upcoming US session include EchoStar and Sealed Air.

Equities

- Consumer discretionary: Lufthansa [LHA.DE] -6.5%, TUI [TUI1.DE] -8.0% (travel disruptions due to the war with Iran).

- Energy: Shell [SHEL.UK] +3.5% (Saudi Aramco's Ras Tanura refinery shut as precautionary measure after fire cause by drone debris).

- Industrials: Maersk [MAERSKB.DK] +5.0% (concerns over shipping rates after Strait of Hormuz disruptions), Rheinmetall [RHM.DE] +2.0% (US-Iran war; drone attack at Cyprus airbase), Bunzl [BNZL.UK] +2.5% (earnings).

- Technology: AS ML [ASML.NL] -2.5% (reportedly Nvidia is feeling pressure from some customers to produce chips that can more efficiently power AI applications.

Economic data

- (NL) Netherlands Jan Retail Sales Y/Y: 2.2% v 2.8% prior.

- (SE) Sweden SEB Mar Housing Price Indicator: 47 v 44 prior.

- (RU) Russia Feb Manufacturing PMI: 49.5 v 49.4 prior.

- (NL) Netherlands Feb Manufacturing PMI: 50.8 v 50.1 prior.

- (DE) Germany Jan Retail Sales M/M: -0.9% v 0.0%e; Y/Y: 0.7% v 1.2%e.

- (UK) Feb Nationwide House Price Index M/M: 0.3% v 0.2%e; Y/Y:1.0 % v 0.7%e.

- (DK) Denmark Jan Retail Sales M/M: +0.7% v -1.3% prior; Y/Y: % v 3.3% prior.

- (TR) Turkey Feb Manufacturing PMI: 49.3 v 48.1 prior.

- (TR) Turkey Q4 GDP Q/Q: 0.4% v 0.4%e; Y/Y: 3.4% v 3.8%e.

- (CH) Swiss Jan Real Retail Sales Y/Y: -1.1% v +2.8% prior.

- (SE) Sweden Feb PMI Manufacturing: 56.1 v 55.9 prior.

- (HU) Hungary Jan Trade Balance €0.0B v €0.6Be.

- (TH) Thailand Feb Business Sentiment Index: 49.6 v 49.1 prior.

- (PL) Poland Feb Manufacturing PMI: 47.1 v 49.6e (10th month of contraction).

- (HU) Hungary Feb Manufacturing PMI: 51.3 v 50.5e (moved back into expansion).

- (ES) Spain Feb Manufacturing PMI: 50.0 v 50.0e (1st non-contraction in 3 months).

- (CH) Swiss Feb PMI Manufacturing: 47.7 v 49.8e; PMI Services: 54.2 v 53.8 prior.

- (CZ) Czech Feb Manufacturing PMI: 50.0 v 50.5e.

- (NG) Nigeria Feb PMI: 53.2 v 49.7 prior.

- (IT) Italy Feb Manufacturing PMI: 50.6 v 49.2e (1st expansion in 3 months).

- (FR) France Feb Final Manufacturing PMI: 50.1 v 49.9 prelim (confirmed 3rd month of expansion).

- (DE) Germany Feb Final Manufacturing PMI: 50.9 v 50.7 prelim (confirmed 1st expansion in 44 months).

- (EU) Euro Zone Feb Final Manufacturing PMI: 50.8 v 50.8 prelim (confirmed 1st expansion in 4 months).

- (GR) Greece Feb Manufacturing PMI: 54.4 v 54.2 prior.

- (ZA) South Africa Feb Manufacturing PMI: 47.4 v 48.7 prior.

- (IT) Italy 2025 Annual GDP Y/Y: 2025: 0.5% v 0.7% prior’ Budget Deficit to GDP: 3.1% v 3.4% prior.

- (CH) Swiss weekly Total Sight Deposits (CHF): 459.8B v 457.6B prior; Domestic Sight Deposits: 440.5B v 440.6B prior.

- (PL) Poland Q4 Final GDP Q/Q: 1.0% v 1.0% prelim; Y/Y: 4.0% v 4.0% prelim.

- (CZ) Czech Jan Money Supply M2 Y/Y: 4.5% v 3.8% prior.

- (UK) Feb Final UK Manufacturing PMI: 51.7 v 52.0e prelim.

- (UK) Jan Net Consumer Credit: £1.8B v £1.7Be; Net Lending £4.1B v £4.6Be.

- (UK) Jan Mortgage Approvals 60.0K v 62.0Ke.

- (UK) Jan Money Supply M4 M/M: -0.1% v +0.4% prior; Y/Y: 3.0% v 4.7% prior.

- (CY) Cyprus Q4 Final GDP Q/Q: 1.4% v 1.4% prelim; Y/Y: 4.5% v 4.5% prelim.

Fixed income issuance

- None seen.

Looking ahead

- (RO) Romania Feb International Reserves: No est v 80.0B prior.

- (AR) Argentina Feb Government Tax Revenue: No est v 18337.6B prior.

- (ZA) South Africa Feb Naamsa Vehicle Sales Y/Y: No est v 7.5% prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (IN) India Jan Industrial Production Y/Y: 6.0%e v 7.8% prior.

- 05:30 (DE) Germany to sell combined €4.0B in 3-month and 9-month BuBills.

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 60-month bills.

- 06:00 (IE) Ireland Feb Preliminary CPI EU Harmonized M/M: No est v 0-1.0% prior; Y/Y: No est v 2.5% prior.

- 06:00 (PT) Portugal Jan Retail Sales M/M: No est v 1.5% prior; Y/Y: No est v 1.4% prior.

- 06:00 (PT) Portugal Jan Industrial Production M/M: No est v -1.9% prior; Y/Y: No est v 2.3% prior.

- 06:00 (IL) Israel to sell bonds.

- 06:00 (NO) Norway announcement on upcoming bond issuance (held on Wed).

- 06:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 06:30 (CL) Chile Jan Economic Activity Index (Monthly GDP) M/M: 0.3%e v 0.6% prior; Y/Y: 1.0%e v 1.7% prior.

- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 07:30 (AU) RBA' Hunter-Remarks.

- 08:00 (BR) Brazil Feb Brazil Manufacturing PMI: No est v 47 prior.

- 08:00 (SG) Singapore Feb Purchasing Managers Index: No est v 50.5 prior.

- 08:00 (SG) Singapore Feb Electronics Sector Index: No est v 51.1 prior.

- 08:00 (CZ) Czech Feb Budget Balance: No est v 32.4B prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on upcoming issuance.

- 09:00 (FR) France Debt Agency (AFT) to sell €64.8.0B in 3-month, 6-month and 12-month bills.

- 09:30 (CA) Canada Feb Manufacturing PMI: No est v 50.4 prior.

- 09:45 (US) Feb Final S&P Manufacturing PMI: 51.4e v 51.4 prelim.

- 10:00 (US) Feb ISM Manufacturing: 48.3e v 52.6 prior.

- 10:00 (MX) Mexico Feb Manufacturing PMI: No est v 46.3 prior.

- 10:00 (MX) Mexico Jan Remittances Total: $4.7Be v $5.3B prior.

- 10:00 (CO) Colombia Feb PMI Manufacturing: No est v 50 prior.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 12:00 (IT) Italy Feb New Car Registrations Y/Y: No est v 6.2% prior.

- 13:00 (MX) Mexico Feb IMEF Manufacturing Index: 46.8e v 46.4 prior; Non-Manufacturing Index: 49.6e v 49.2 prior.

- 16:10 (AU) RBA's Bullock-Speech.

- 16:45 (NZ) New Zealand Jan Building Permits M/M: No est v -4.6% prior.

- 18:30 (JP) Japan Jan Jobless Rate: No est v 2.6% prior; Job-To-Applicant Ratio: No est v 1.19 prior.

- 18:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v # prior.

- 18:50 (JP) Japan Q4 Capital Spending Y/Y: No est v 2.9% prior; Capital Spending (Ex Software) Y/Y: No est v 2.9% prior; Company Sales Y/Y: No est v 0.5% prior; Company Profits Y/Y: No est v 19.7% prior.

- 18:50 (JP) Japan Feb Monetary Base End of period ¥590.1t.

- 18:50 (JP) Japan Feb Monetary Base Y/Y: No est v -9.5% prior.

- 19:01 (UK) Feb BRC Shop Price Index Y/Y: No est v 1.5% prior.

- 19:30 (AU) Australia Q4 Current Account Balance: No est v -A$16.6B prior.

- 19:30 (AU) Australia Q4 Preliminary Net Exports of GD: No est v -0.1 prior.

- 19:30 (KR) South Korea PMI Manufacturing: No est v 51.2 prior.

- 19:30 (AU) Australia Jan Building Approvals M/M: No est v -14.9% prior; Private Sector Houses M/M: No est v 0.4% prior.

- 22:35 (JP) Japan to sell 10-Year JGB Bonds.

- 23:00 (SG)) MAS to sell 4-week, 12-week and 36-week bills.

- 23:30 (TW) Taiwan to Ssll NT$35B in 3-month bills.