Strait of Hormuz remains effectively closed as Iran war rages on

EU mid-market update: Strait of Hormuz remains effectively closed as Iran war rages on; US claims domination over airspace and sea, triggering optimism about length of conflict; Macro dynamics in limbo as inflation impact is unclear.

Notes/observations

- Equity markets opened weaker, reversing part of Weds rebound, with weight on banks, luxury and airlines, partially offset by gains in energy stocks. US equity futures were modestly lower before making a bid at premarket open. Global yields pushed higher by 3-5bps, with German bund 10yr at 2.78% and UK gilt 10yr at 4.48%, while US dollar firmed following stronger data.

- Energy markets remain the dominant driver as the Middle East conflict continues to disrupt supply. Qatar’s halt to LNG production pushed Dutch TTF gas prices more than 10% higher to a one-year high, while the Strait of Hormuz remains effectively closed, supporting crude prices and reviving inflation concerns. The move in energy has led markets to scale back expectations for central-bank rate cuts. Press reports are conflicting about whether Iran has been or is interested in making a deal to end war.

- Secretary of War Hegseth and Sec of State Rubio are reportedly in a heated dispute regarding whether to deploy US special operations teams into Iran to target Revolutionary Guard officials. While Hegseth supports the initiative at Israel’s request, Rubio is wary of the move potentially entangling the United States in a prolonged military conflict. Concurrently, U.S. Central Command has reportedly requested more military intelligence officers at its Florida headquarters to support operations against Iran through at least September.

- European macro data were mixed, with Spain’s January industrial production rising just 0.3% y/y (vs 1.7% expected), Switzerland’s February unemployment ticking up to 3.0%, and France’s January industrial output matching expectations at +0.5% m/m. Morgan Stanley analysts now expects the ECB to hold rates through 2026, with cuts potentially delayed until 2027 unless growth weakens materially.

- Worth noting there was a sharp rebound in Korean KOSPI, up nearly 10% after historic decline yesterday. China’s National People’s Congress (NPC) reaffirmed growth targets of 4.5–5.0% GDP and announced CNY300B of treasury issuance to support bank capital.

- Nvidia is reportedly reallocating its manufacturing capacity at TSMC away from H200 chips to focus on its next-generation Vera Rubin architecture. The move follows tightening export controls that have stalled sales in China, leading the company to halt production of chips specifically intended for that market.

- Notable EU corporate updates: Profit warning from Wizz Air weighing on airlines, strength in energy names on higher oil and gas prices, a rally in Galderma on strong guidance, and gains in Bloomsbury Publishing after new releases from Sarah J. Maas boosted profit expectations. Puma bidding after Michael Ashley stake.

- DHL Group reports that Middle East disruptions are heavily constraining air and ocean freight, which poses a significant risk to the region's food self-sufficiency. To maintain its Express network, the company is leveraging its established road network to truck cargo to open airports while certain airspace remains restricted. Management noted that while TDI import trends currently mirror previous quarters, it is still too early to determine the demand impact of the Supreme Court ruling against IEEPA tariffs. The overall strategic risk is compounded by the region's critical dependence on vulnerable desalination plants, which the CIA warns could trigger a domestic collapse if targeted during a conflict.

- Asia closed higher with KOSPI outperforming +9.6%. EU indices +0.2-0.6%. US futures -0.2%. Gold +0.2%, DXY +0.1%; Commodity: Brent +1.7%, WTI +2.2%; Crypto: BTC +2.1%, ETH +2.7%.

Asia

- China National Peoples’ Congress (NPC): sets 2026 GDP Growth target between "4.5-5.0%" (compared to 5.0% prior; set CPI target ~2.0%" (same as 2025). Dealers noted the sheer volume of specialized debt is intended to show that the government will maintain relatively large fiscal spending in 2026.

- New Zealand Q4 Volume of All Buildings Q/Q: -3.1% v +1.9%e.

- Australia Jan Trade Balance (A$): 2.6B v 3.8Be; Exports M/M: -0.9% v +0.9% prior; Imports M/M: +0.8% v -1.8% prior.

- Australia Jan Household Spending M/M: 0.3% v 0.4%e; Y/Y: 4.6% v 5.1%e.

Global conflict/tensions

- Iranian official categorically denied reports that Tehran had sent message to the US. No message has been sent from Iran to the US and Iran would not reply to the messages sent by the American side.

- US Senate voted 53-47 to block war powers resolution that would have prevented additional Iran strikes without Congressional approval.

Europe

- ECB's Wunsch (Belgium): Greater global role for Euro could mean a stronger Euro.

Americas

- Fed Beige Book noted that overall economic activity increased at a slight to moderate pace in 7 of the 12 districts.

Trade

- US Fed Trade judge ordered US to stop calculating IEEPA tariffs for importers. Ordered all unliquidated entries to be liquidated without IEEPA tariffs.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.49% at 615.70, FTSE +0.34% at 10,607.56, DAX +0.14% at 24,250.78, CAC-40 +0.34% at 8,195.68, IBEX-35 +1.08% at 17,680.80, FTSE MIB +0.44% at 45,534.50, SMI 0.01% at 13,524.60, S&P 500 Futures -0.15%].

Market focal points/key themes: European indices open generally lower and remained under pressure through early part of the session; surging gas prices seen as catalyst for latest downward move; outperforming sectors include energy and utilities; sectors leading the way lower include materials and industrials; oil & gas subsectors supported as Brent approaches $85/bbl amid conflicting reports on Strait of Hormuz and attacks in Persian Gulf; travel subsector under pressure after Wizzair was the first airline to cut outlook; Senior plc confirms received non-binding offer from Acrline; earnings expected in the upcoming US session include Piaggio, Ciena, and The Kroger.

Equities

- Consumer discretionary: Puma [PUM.DE] +3.5% (Michael Ashley discloses 5.77% stake), PageGroup [PAGE.UK] -17.5% (earnings; earnings call comments), Entain [ENT.UK] +6.0% (earnings), Deutsche Post [DPW.DE] -3.5% (earnings).

- Consumer staples: Reckitt Benckiser [RKT.UK] -3.5% (earnings).

- Healthcare: Merck KGaA [MRK.DE] -0.5% (earnings).

- Industrials: Maersk [MAERSKB.DK] -2.0% (temporarily suspending cargo bookings acceptance in and out of UAE, Oman, Iraq, kuwait, Qatar, Bahrain, and Saudi Arabia until further notice).

- Technology: ASML [ASML.NL] +0.5% (Broadcom earnings).

Speakers

- ECB’s Villeroy (France): Following energy prices and markets very closely. Financial stability was not at risk.

- ECB’s De Guindos (Spain): Outlook for Europe is shaped by war in Iran; Balance of risk was two-sided before the war. Could change policy stance if inflation expectations change as a result of the Iran war.

- ECB's Rehn: Cool heads are needed to assess war impact; this kind of conflict tends to dampen demand and lead to more subdued growth.

- Bank of England (BoE) Feb Decision Maker Panel (DMP) Survey raised the 1-year ahead CPI from 2.9% to 3.0% (2.8%e) whil cutting the 3-year ahead CPI from 2.9% to 2.8%.

- German Bundesbank 2025 Annual Report: Loss reduced by more than half from 2024 to €8.6B.

- Italy Dep Foreign Min stated that Iran was ready to abandon its nuclear program on condition that the US presents a satisfactory alternative offer; Govt was ready to intervene to mitigate economic impact of Iranian crisis.

- Malaysia Central Bank Policy Statement noted that current monetary policy stance was appropriate and supportive of economy. Acknowledged uncertainties from ongoing Mid-East conflict. 2026 Headline CPI expected to remain moderate and core inflation expected to remain stable and close to its long-term average. Growth momentum expected to continue in 2026.

- Japan Rengo (Japan largest union) demanded 5.94% wage hike in 2026 v 6.09% 2025.

- Iran military official: Iran has not closed Strait of Hormuz.

- Iran Dep Foreign Min: Iran was ready to abandon its nuclear program on condition that the US presented a satisfactory alternative offer.

Currencies/fixed income

- Tension in the Gulf continued to dominate FX trading. USD off its best levels of the session. Some unwinding of safe haven flows and some risk appetite seemed to take hold after an Irian official noted that the country was ready to abandon its nuclear program on condition that the US presented a satisfactory alternative offer.

- EUR/USD managed to climb back above the 1.16 level. ECB officials noting that Outlook for Europe was shaped by war in Iran. Pair at 1.1620 by mid-session.

- GBP/USD at 1.3350 area. Markets continued to dial back expectations of BOE rate cuts during the course of 2026.

- USD/JPY at 157.00. Markets also scaled back BOJ rate hike expectations with Apr still being as the likely time frame. The current OIS pricing on BOJ fo April down to 60% (vs 67.5% day before) and June at 86.5% (vs 91.5% day before).

- USD held onto its recent gains as safe-haven flows continued to dominate due to ongoing mid-east tensions.

- 10-year German Bund yield last at 2.79%, France 10-year Oat at 3.41% and 10-year Gilt yield at 4.51% 10-year Treasury yield: 4.12%; 10-year JGB: 2.14%.

Economic data

- (SE) Sweden Feb CPI M/M: 0.6% v 0.7%e; Y/Y: 0.5% v 0.5%e.

- (SE) Sweden Feb CPIF M/M: 0.6% v 0.8%e; Y/Y: 1.7% v 1.8%e.

- (SE) Sweden Feb CPIF (ex-energy) M/M: 0.6% v 0.7%e; Y/Y: 1.4% v 1.5%e.

- (MY) Malaysia Central Bank (BNM) left Overnight Policy Rate unchanged at 2.75% (as expected).

- (HU) Hungary Jan Retail Sales Y/Y: 3.5% v 2.0%e.

- (FR) France Jan Industrial Production M/M: 0.5% v 0.4%e; Y/Y: 2.4% v 2.3%e.

- (FR) France Jan Manufacturing Production M/M: 0.6% v 0.1%e; Y/Y: 2.7% v 2.2% prior.

- (TW) Taiwan Jan Industrial Production Y/Y: 28.5% v 29.0%e.

- (ES) Spain Jan Industrial Production M/M: -0.4% v +0.5%e; Y/Y: 0.3% v 1.1%e; Industrial Output NSA (unadj) Y/Y: -2.7% v +3.0% prior.

- (CH) Swiss Feb Unemployment Rate: 3.2% v 3.2%e; Unemployment Rate (seasonally adj): 3.0% v 2.9%e.

- (TW) Taiwan Feb Foreign Reserves: $605.5B v $604.46B prior.

- (DE) Germany Feb Construction PMI: 43.7 v 44.7 prior.

- (IS) Iceland Q4 Current Account Balance (ISK): -38.0B v +34.1B prior.

- (UK) Feb New Car Registrations Y/Y: 7.2% v 3.4% prior.

- (IT) Italy Jan Retail Sales M/M: +0.6% v -0.7% prior; Y/Y: 2.2% v 1.1% prior.

- (UK) Feb Construction PMI: 44.5 v 47.0e.

- (EU) Euro Zone Jan Retail Sales M/M: -0.1% v +0.3%e; Y/Y: 2.0% v 1.7%e.

- (CY) Cyprus Feb CPI M/M: -0.1% v -0.3% prior; Y/Y: 0.1% v 0.5% prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €5.34B vs. €4.5-5.5B indicated range in 2029, 2033 and 2041 SPGB bonds.

- (ES) Spain Debt Agency (Tesoro) sold €592M vs. €250-750M indicated range in 1.15% Nov 2036 inflation-linked bonds; Real Yield: 1.292% v 1.508% prior; bid-to-cover: 2.09x v 1.90x prior (SPGBei); Real Yield: % v 1.508% prior; bid-to-cover: x v 1.90x prior.

- (FR) France Debt Agency (AFT) sold total €13.449B vs. €11.5-13.5B indicated range in 2035, 2036, 2043 and 2046 Bonds.

- (UK) DMO sold £3.5B in 4.0% May 2029 Gilts; Avg Yield: % v 3.821% prior; Bid-to-cover: x v 3.66x prior; Tail: bps v 0.3bps prior.

Looking ahead

- (MX) Mexico Citi Survey of Economists.

- (AR) Argentina Central Bank Survey.

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

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-year, 5-year and 10-year bonds.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 06:00 Ireland Q4 Final GDP Q/Q: No est v -0.6% prelim; Y/Y: No est v 3.7% prelim.

- 06:00 Ireland Q4 Current Account Balance No est v €13.9B prior.

- 06:00 (ZA) South Africa Jan Electricity Production Y/Y: No est v -7.9% prior; Electricity Consumption Y/Y: No est v -7.1% prior.

- 07:00 (BR) Brazil Jan National Unemployment Rate: 5.4%e v 5.1% prior.

- 07:00 (MX) Mexico Dec Gross Fixed Investment M/M: 1.0%e v 0.4% prior; Y/Y: +1.2%e v -6.4% prior; Private Consumption Y/Y: 5.5%e v 1.4% prior.

- 07:00 (MX) Mexico Feb Consumer Confidence: No est v 44.0 prior.

- 07:00 (CL) Chile Jan Nominal Wage Y/Y: No est v 5.9% prior.

- 07:30 (US) Feb Challenger Job Cuts Total: No est v 108.4K prior; Y/Y: No est v 117.8% prior.

- 07:30 ECB Publishes Account of Feb Rate Decision (aka Minutes).

- 08:00 (RU) Russia Gold and Forex Reserve w/e Feb 27th: No est v $797.2B prior.

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

- 08:30 (US) Jan Import Price Index M/M: 0.3%e v 0.1% prior; Y/Y: 0.2%e v 0.0% prior; Import Price Index (ex-petroleum) M/M: 0.5%e v 0.4% prior.

- 08:30 (US) Jan Export Price Index M/M: 0.2%e v 0.3% prior; Y/Y: No est v 3.1% prior.

- 08:30 (US) Q4 Preliminary Nonfarm Productivity: 1.8%e v 4.9% prior; Unit Labor Costs: 2.0%e v -1.9% prior.

- 08:30 (US) Initial Jobless Claims: 215Ke v 212K prior; Continuing Claims: 1.85Me v 1.833M prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:00 (PL) Poland Central Bank (NBP) Gov Glapinski post rate decision press conference.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (CA) Canada to sell 30-year Bonds.

- 12:00 (EU) ECB chief Lagarde.

- 13:00 (BR) Brazil Feb Monthly Trade Balance: $4.0Be v $4.3B prior; Total Exports: $26.2Be v $25.2B prior; Total Imports: 22.8Be v $20.8B prior.

- 18:00 (KR) South Korea Feb CPI M/M: 0.4%e v 0.4% prior; Y/Y: 2.1%e v 2.0% prior; CPI (ex-food/energy) Y/Y: 2.1%e v 2.0% prior.

- 18:00 (KR) South Korea Jan Current Account Balance: No est v $18.7B prior; Balance of Goods (BOP): No est v $18.9B prior.

- 21:05 (VN) Vietnam Feb CPI Y/Y: 2.8%e v 2.5% prior.

- 21:05 (VN) Vietnam Feb Trade Balance: -$2.1Be v -$1.8B prior; Exports Y/Y: 13.0%e v 29.7% prior; Imports Y/Y: 13.7%e v 49.2% prior.

- 21:05 (VN) Vietnam Feb Industrial Production Y/Y: No est v 21.5% prior.

- 21:05 (VN) Vietnam Feb Retail Sales Y/Y: No est v 9.3% prior.

- 22:00 (ID) Indonesia Feb Foreign Reserves: No est v $154.6B prior.

- 23:30 (JP) Japan to sell 3-Month Bills.