Wartime is back in Markets – North American Session Market Wrap for March 2

Log in to today's North American session Market wrap for March 2

Another day in the mid-2020s, another wild session for Markets.

The world learnt that a military intervention in Iran had commenced on Saturday, where US and Israeli forces began striking the government and army infrastructures of the Islamic regime in Iran.

The conflict had been foreshadowed for a while now, with historic revolts in the Persian region that saw brutal repression, leading to +30,000 deaths (casualty numbers are from late January, no official update since).

President Trump had expressed that he would not allow the regime to persecute its citizens. The history of the US-Iran conflict now comes a long way, with the Mullahs taking power in 1979 and declaring that one of their core beliefs and motives is: "Death to America, death to Israel".

Ali Khamenei, the successor of Ruhollah Khomeini and Ayatollah of Iran, was killed during the first hours of the conflict.

The Iranian regime had since established a spiderweb influence against Western civilizations through repression and ideology, notably sponsoring militias like Hamas, the Houthis in Yemen, supporting the Al-Assad regime in Syria, and others like Hezbollah in Lebanon, which entered the conflict this morning – Their leader also got killed this morning. Iran has also been a long-time partner of Russia and a provider of weapons in their conflict against Ukraine.

The conflict already spread to the UAE, Jordan, Kuwait, Bahrain, Qatar, and other Gulf countries that were targeted as retaliation by the IRGC.

What concerns Markets are the impact of a prolonged war, particularly on Oil and inflation expectations. This concerns particularly the Strait of Hormuz, where roughly 20% of global Energy commodities flow, particularly towards the Asian continent.

The weekly Globex open saw significant gaps higher in Oil, Natural Gas, and most energy products; the opposite was seen in Global Stock Market futures, which then recovered particularly in the North American session, while the US Dollar ran higher, buoyed by safe-haven inflows into the Reserve Currency.

Paradoxically, the risk-off flows did not sustain bids in Bonds, which retracted significantly from their Friday close. Let's discover more Market flows right below.

Read More:

• War begins, Wall Street unfazed (for now!) – Dow Jones and US Stocks outlook
• Geopolitics and Crude: Why WTI pulled back despite escalating Middle East risks
• A look around Markets as Iran operations begin – Market reactions
• Markets Today: Chaos as Middle East conflict widens, natural gas jumps 22%, DXY at five-week highs & FTSE 100 retreats

US Stocks marked a contradictory session, with some Market leaders like Nvidia and Microsoft rebounding while the rest took a hit. Healthcare and Consumer Non-Durables sold off the most.

Energy and defense equities were the largest performers on the other hand – A clear wartime trade.

Energy products were the main benefactors of the recent conflicts, with Brent wicking to $82, WTI to $73.50 before they both slightly eased.

Natural Gas is also up close to 5% on the session, as fears of supply bottlenecks bolstered the commodities' prices. Gulf nations expressed their views towards accelerated production to replace the seized Iranian activity – Nevertheless, Saudi Arabia and Qatar have both had to close some of their branches due to Iranian attacks.

Among Metals, only Gold finishes higher by 2%, to $3,350 . The positive effect for metals had long been priced in into Markets ("Buy the rumor"), so their reactions wasn't uniform and actually saw some "sell the news" flows. Silver and Platinum both close down around 3% on the sessions.

Gold also stands as the king of Safe-havens, as US Treasuries also sold off – The reasoning there isn't too clear for now, but it seems that it could also be some risk-off positioning closure along with renewed inflationary fears – Friday's PPI report had widely been discarded by investors.

Global Stocks also sold off, with fears of supply disruptions notably hurting risk-sentiment – But these flows weren't so widespread. US Equities ran back higher at the open, closing the weekly gap before retracing very slightly in the early afternoon.

Cryptocurrencies have on the other hand largely rebounded, with the entire space closing largely higher – Supported by some better technicals and the fundamentals of wartime and US Sanction helping their prospects.

Look at Ethereum and Bitcoin on the daily chart!

Safe-haven flows were really erratic in today's FX session.

The US Dollar shot up higher during most of the session, before giving up some of its lead towards the afternoon. What was surprising however was to see both the Japanese Yen and Swiss Franc, the two safe-haven currencies, performing the least in today's session.

The Swiss National Bank did warn of a potential intervention to prevent too swift flows, hurting the already too-strong CHF.

Other outperformers saw the Australian and the Canadian dollar, respectively third and second in today's forex race – Tracking risk-sentiment doesn't seem to be enough these days, hence keep a close eye on the Loonie and USD for their relationship with Oil.

This evening should be slightly busy, particularly around the JPY. With governor Ueda speaking at 23:00 (ET), any hawkish turn towards a hike in the March 19 meeting could bring back some stronger demand in the Japanese currency.

For the rest, keep track of the EU inflation report at 5:00 A.M, and the many Central Bank speeches to see how they envision the conflict and respective views towards inflation.

Keep a close eye on sentiment and Middle East news.

Safe Trades!

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