The Thin Red Line

March 11, 2026

Elias Haddad

Markets remain on edge as uncertainty persists around shipping through the Strait of Hormuz.

Dollar and crude oil prices reclaim some lost ground.

US February CPI is due today. Markets poised to look through the print.

USD and crude oil prices are firmer while stocks and bonds are under renewed downside pressure. The International Energy Agency (IEA) is looking to bring additional crude oil supply to the market to contain a spike in energy prices. IEA Member countries currently hold over 1.2 billion barrels of public emergency oil stocks, with a further 600 million barrels of industry stocks held under government obligation. The proposed release could exceed the record 182 million barrels deployed during the 2022 Russia invasion of Ukraine.

However, as long as the Strait of Hormuz remains all but shut, tapping IEA emergency oil reserves would only offer a short-lived remedy. 15 million barrels per day, nearly 34% global crude oil trade, transits the Strait.

For financial markets, the duration of the US-led military campaign against Iran matters less than the security of shipping through the Strait. We think the risk of a prolonged disruption in energy shipping through the Strait may have diminished. Iran military capabilities have been “neutered” given the number of Iranian retaliatory strikes has fallen sharply since the start of the war. Importantly, the US and allies have built up a strong naval presence in the region.

However, it would not take much for fears to flare up again. Indeed, the UK Navy reported three incidents today, bringing the total to 17 since February 28, involving vessels operating in and around the Arabian Gulf, Strait of Hormuz and Gulf of Oman.

US February CPI is up next (12:30pm London, 8:30am New York). Headline and core CPI are expected to remain at 2.4% y/y and 2.5% y/y, respectively, for a second straight month. Watch-out for super core services CPI (less housing), a good indicator of underlying inflation trends, which has been stuck at 2.7% y/y since November.

Regardless, markets will look past the February CPI figures given the recent surge in gasoline prices could lift inflation sharply in coming months. Persistent energy price pressure could complicate the Fed’s easing path and heighten stagflation risks as US labor demand is weak.

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