Operation Epic Fury is now in its 23rd day. The war’s dominant variable has shifted from military targets alone to diplomatic and economic negotiations. A coalition to secure the Strait of Hormuz remains a stated goal for containing the energy shock hitting markets, but questions are now turning towards possible U.S. troop deployment.
USMCA talks kicked off in earnest on Monday between the U.S. and Mexico-without Canada-and the Donroe Doctrine continues to define U.S. hemispheric engagement. Separately, the latest round of U.S./China trade talks concluded in Paris without confirmed agreements.
GEOPOLITICAL UPDATE
War Progression
President Trump told reporters on Monday that U.S. forces have hit over 7,000 targets, sunk or destroyed more than 120 naval vessels (including 30+ mine-laying ships), achieved a 90% reduction in ballistic missile launches, and a 95% reduction in drone attacks. By the President’s estimates, the war is going “way ahead of schedule.”
Likewise, Israel’s Foreign Minister, Gideon Sa’ar, said the war is “already won” but that it would “continue till the point the mission will be completed.” National Economic Council (NEC) Director Kevin Hassett pegged the duration-based on Pentagon estimates-at “four to six” weeks.
Israel continued to target top Iranian officials throughout the week, killing significant regime leaders including: Ali Larijani, Secretary of Iran’s Supreme National Security Council; Brigadier General Gholamreza Soleimani, commander of the Basij paramilitary unit; Intelligence Minister Esmail Khatib, and IRGC spokesman Ali Mohammad Naini.
The Trump Administration invoked the emergency provision of the Arms Export Control Act, bypassing congressional review, in order to sell the UAE radar and air defense equipment ($4.5 billion) and 1,500 small diameter bombs and upgrades for F-16 jet fighters ($644 million). The invocation also allowed the Administration to sell Lower Tier Air and Missile Defense Sensor Radars to Kuwait ($8 billion) and aircraft and munitions support to Jordan ($70 million).
These sales are proof positive of the growing military alliance we’ve previously highlighted between the U.S., Israel, and Middle Eastern allies. The Wall Street Journal reported on Wednesday that Gulf nations are pushing the U.S./Israeli military operation to raze the entire Iranian regime. Given the indiscriminate attacks they’ve now suffered, Gulf countries believe Iran to be an existential threat that must be “so defanged and enfeebled that it could never imperil its neighbors again.” Arab officials are also encouraging the U.S. to seize the Iranian island of Kharg, the center of Iran’s oil operations.
Whether to occupy Kharg to stabilize the Strait and/or attempt to extract Iran’s enriched uranium (likely at Isfahan) are both decisions that would require “boots on the ground.” As we noted last week, the Pentagon has deployed the 31st Marine Expeditionary Unit (2,200 Marines) from Japan to the Middle East. The President has additionally ordered the 11th Marine Expeditionary Unit (2,500 Marines) to the region from San Diego. The 11th‘s assets include the USS Boxer and F-35B fighters. The President’s decision signals have ranged from “I’m not putting troops anywhere” early in the week to “I don’t want to do a ceasefire” on Friday, making his ultimate decision hard to ascertain.
Media reports have primarily focused on the use of troops for securing Kharg Island. While that is a material decision at the heart of the energy crisis, it pales in terms of seizing Iran’s enriched uranium. Such an operation would be perhaps the most complex in modern warfare, far surpassing the Osama bin Laden and Nicolás Maduro raids. First, it’s nearly impossible to gauge the exact location of the fuel (likely buried deep below mountain), though Director of National Intelligence Tulsi Gabbard told Congress that the U.S. has “high confidence” it knows where the stockpile is located. Second, the risk of radioactive contamination is great. And finally, the Iranians have likely created decoy canisters, making identification time-consuming.
Matthew Bunn, a nuclear specialist at Harvard, notes that leaving the material in place would allow “a weakened but embittered regime, possibly more determined than ever to make a nuclear bomb.” George Perkovich, a senior fellow at the Carnegie Endowment for International Peace, agreed, saying, “In their [Islamic Regime] view, they need it more than ever.”
For its part, Iran continues to deny that it is ready to negotiate. Trump also hedged optimism of a near-term diplomatic solution, saying, “I don’t know if they’re ready yet.” And while he confirmed back-channel talks are taking place, he also acknowledged, “We have people who want to negotiate and we don’t know who they are.”
One factor in Iran’s favor is the transformation of modern warfare from overwhelming traditional force to cheap, mass-produced, drone combat. Iran’s Shahed-136 ($20,000-$50,000/unit) has forced the U.S. and its Gulf partners to respond with interceptors costing millions of dollars each, creating a sizeable cost asymmetry. In the war’s opening week alone, Iran launched nearly 2,000 drones across 12 countries. This shifting style of warfare was brought home early in the conflict when an Iranian drone killed six U.S. service members in Kuwait on March 1.
But the U.S. has adapted, deploying 10,000 Ukrainian-designed Merops interceptor drones to the Middle East, an AI-enabled system costing just $14,000 each. The LUCAS (Low-Cost Unmanned Combat System), developed by Arizona startup SpektreWorks, has also been deployed to the theater. As President Trump noted, the combination of traditional air power and AI-enabled drone interceptors-though costly-has driven Iranian drone attacks down 95 percent from their peak.
The changing dynamics of war fighting have also crossed into cyberspace. On March 11, Iran-linked hacker group Handala executed the most significant wartime cyberattack against the U.S. homeland in history. The target was Stryker Corporation, a Michigan-based medical device manufacturer with a $450 million Defense contract and operations in Israel.
Handala, a front for Iran’s Ministry of Intelligence and Security, claimed to have wiped over 200,000 devices across 79 global Stryker offices and exfiltrated 50 terabytes of data. Stryker confirmed a “global network disruption to our Microsoft environment” affecting both client devices and servers. Emergency medical services in Maryland reported that Stryker’s Lifenet ECG transmission system was “non-functional in most parts of the state” in the immediate aftermath.
Prior Iran-linked activity had been largely confined to espionage and minor regional disruptions, but the Stryker attack represents the first strike against U.S. commercial infrastructure at scale. Iranian officials have separately warned they will target banks in the region doing business with the U.S. or Israel-a threat that, if acted upon, would materially widen the conflict’s economic footprint.
Meanwhile, the Administration’s central focus has shifted to coalition-building. Following President Trump’s Truth Social posts last weekend calling on China, France, Japan, South Korea, the UK, and others to send warships to Hormuz, the White House spent the week in intensive coalition diplomacy, culminating in the Takaichi summit and a joint allied commitment to “appropriate efforts” to reopen the Strait.
Shipping
The Administration’s working construct for securing the Strait is now branded the “Hormuz Coalition.” Senior officials told Axios that Trump expects to announce coalition commitments, though no country has publicly confirmed participation. Foreign allies are being asked to contribute warships, command-and-control support, drones, and other military assets.
The early response from allies ranged from cool to openly defiant. The EU foreign ministers met Monday in Brussels to debate whether to redirect a Red Sea naval mission toward Hormuz. The move would require unanimous approval and there is substantial resistance from various EU-member countries.
Although President Trump described French President Emmanuel Macron as an “8 out of 10” on offering assistance, Macron said Tuesday his country “will never take part in operations to open or liberate the Strait of Hormuz in the current context.” Canada, Greece, Norway, Spain, and the UK made similar comments early in the week. Prime Minister Keir Starmer specifically declined President Trump’s request to send two aircraft carriers to the region, though the UK is allowing American use of its bases and is considering deploying autonomous mine-hunting drones.
Other European nations have been less tactful. German Defense Minister Boris Pistorius downplayed European assets while seemingly mocking the President: “What does Donald Trump expect from a handful of European frigates in the Strait of Hormuz that the powerful U.S. Navy cannot do?” Luxembourg’s Foreign Minister Xavier Bettel was the bluntest: “Blackmail is not what I wish for. I want to remind that none of us has been directly attacked. There are no grounds for now to invoke Article 5.”
Asian partners have also been circumspect. Japan and South Korea avoided committing ships earlier in the week, as did Australia. Citing constitutional constraints, Prime Minister Sanae Takaichi said Tokyo has “not made any decisions whatsoever about dispatching escort ships.”
But on Thursday, signs were emerging of a shift. A joint statement from European leaders, Japan, and Canada said the nations would take “appropriate efforts” to reopen the strait. This commitment appears to now be playing out as both the U.S. and its allies are deploying low-flying attack jets and Apache helicopters to the Strait to counter the Iranian threat. Joint Chiefs Chairman General Dan Caine told reporters on Thursday that heavily armed A-10 warplanes (“Warthogs”) and Apaches are flying missions with some allies, though he did not name specific countries.
President Trump, however, ended the week by fully shifting responsibility for security of the Strait to others, posting on Truth, “The Hormuz Strait will have to be guarded and policed, as necessary, by other Nations who use it – The United States does not!” Even if the EU, NATO, or Asian allies did provide meaningful support, it may do little to change the current situation given their lack of scale and the time involved transiting their fleets to the Gulf. Trump upped the ante yesterday, declaring on Truth Social that Iran had “48 HOURS from this exact point in time” to fully open the Strait before the U.S. would “obliterate” their energy infrastructure.
Oil Shock
At this time, commercial navigation of the Strait remains perilous. According to MarineTraffic, a Pakistani-flagged crude tanker, Karachi, successfully sailed through the Strait last Sunday while broadcasting its location. The vessel, carrying Abu Dhabi crude, departed from the UAE hub of Das Island. But Karachi’s passage represents the only non-Iranian aligned vessel to have done so to date. By week’s end, the total number of oil tankers to have sailed through the Strait was just 17 since the outbreak of hostilities according to Kpler.
In total, over 90 ships have successfully crossed the Strait since the outset of the war. This traffic is primarily Iranian crude vessels (16 million barrels) headed to China and operating in the global “dark fleet” based on maritime data from Lloyd’s List Intelligence and Kpler. It also includes vessels tied to India and Pakistan that have pre-negotiated safe passage with the Iranian side. The India-flagged liquefied petroleum gas (LPG) carriers Shivalik and Nanda Dev traversed the Strait between March 13-14. India’s foreign minister, Subrahmanyam Jaishankar, confirmed to The Financial Times that the two vessels were able to pass following talks with Iran. Iraq, too, is reportedly in talks with Iran to allow its oil tankers through the Strait.
IEA modeling puts global oil supply disruption at 8 million barrels per day this month. An Iranian drone strike on the UAE’s Shah oil field at the beginning of the week represented the first damage incurred by a regional oil/gas upstream facility. Suspension at Shah, operated by Abu Dhabi National Oil Co. and Occidental Petroleum, significantly affects the supply outlook. Iran also struck the UAE oil terminal of Fujairah last week, leading to a temporary suspension of loadings on Monday and a halt of commercial flights.
The most damaging attack took place on Wednesday when Iranian missiles caused massive damage at the world’s largest LNG export plant at Qatar’s Ras Laffan Industrial City. Additional attacks were reported on Thursday at a Saudi site as well as a Red Sea facility. According to QatarEnergy Chief Executive Officer Saad al-Kaabi, two of the facilities affected at Ras Laffan will take three to five years to repair. Together, the facilities produce 17% of Qatar’s LNG exports, or about 12.8 million tons a year.
The Iranian strikes took place in response to an Israeli attack on the Iranian South Pars Gas Field. The volley led to a significant spike in already elevated natural gas prices, particularly in Europe, leading to a public admonishment against the Israel attack by President Trump on Truth Social: “NO MORE ATTACKS WILL BE MADE BY ISRAEL pertaining to this extremely important and valuable South Pars Field unless Iran unwisely decides to attack a very innocent, in this case, Qatar.”
More downward pressure is also likely on medium to heavy crude products like diesel, jet fuel, and fuel oil. While crude prices are up approximately 40 percent, fuel costs in parts of Asia have outpaced the global increases and doubled. Outages are leading to substantial cuts in crude best suited for fuels and diesel.
Gulf producers continue to explore alternative shipping options with the Strait effectively closed. Iraq reached an agreement to export oil through the Kurdistan Region of Erbil and on to Turkey’s port at Ceyhan. The move is expected to allow for approximately 300,000 barrels of oil to be pushed through the pipeline per day (Iraq had previously cut roughly 1 million of its 4.2 million barrel per day output).
For its part, the Administration announced a 60-day suspension of the Jones Act this past week in a bid “to allow vital resources to flow freely into U.S. ports.” On Friday, the US Treasury Department issued a general license authorizing the delivery and sale of Iranian crude and petroleum loaded on vessels as of March 20 via the Office of Foreign Assets Control (OFAC). Similar to relief already announced for Russia, the move is meant to tap all available sources of global supply, whatever the source, to help blunt the crisis (at least temporarily).
According to Fatih Birol, the IEA’s executive director, the U.S. has been the biggest contributor to strategic reserve releases with more than 172 million oil barrels, followed by Japan with nearly 80 million barrels. The two account for more than half of the promised release by IEA member countries. The next highest contributors are Canada (23.6 million barrels), South Korea (22.5 million), Germany (19.5 million), France (14.6 million) and the U.K. (13.5 million). Luxembourg, Belgium, Estonia, and Latvia are each releasing less than a million barrels.
Economic Outlook
John Authers writes for Bloomberg that equities are stable in large part because the earnings forecasts that underpin their prices are largely unaffected by the war. Such earnings limit the downside for the market.
Investor surveys since the start of the war confirm this. Bank of America’s global fund managers survey shows less risk-taking than usual, but nowhere near the high caution of 2022, or even “Liberation Day” last spring. The American Association of Individual Investors’ survey suggests retail investors are similarly cautious.
Commodities act as a safe haven during times of market distress and Bloomberg’s commodities index is beating stocks and bonds. BofA’s survey shows fund managers expecting crude to be at a relatively modest $76/barrel by the end of the year. The futures market prices Brent similarly at just over $80/barrel at the end of December. This is an upward indicator for inflation-a key constraint for further Fed rate cutting-but not a seismic impact to the economy. Volatility indexes (MOVE and VIX) show the same trends.
Another indicator worth watching is consumer spending. January demonstrated a slowdown and revised downward economic growth, but that trend had begun prior to the war. Now, the average price of diesel is above $5/gallon, which will most acutely show up in supply chain costs borne by farming, trucking, and construction. At that price, industries will pay roughly $1.6 billion more on fuel per week, a 35% increase, which explains a three-month low in March’s preliminary consumer sentiment reading.
The Reserve Bank of Australia was the first mover of the 18 central bank meetings this past week and chose to raise rates. The Fed made no changes, with only one dissent in an 11-1 vote. All major central banks followed suit, with the Bank of England (BoE), European Central Bank (ECB), Swiss National Bank (SNB), and the Bank of Japan (BoJ) holding rates steady. ECB Governing Council member Joachim Nagel did conclude, however, that an April rate hike would be considered if price pressure isn’t contained. Finally, Brazil’s central bank cut its key interest rate by a quarter point-its first reduction since 2024.
Lastly, the Bureau of Labor Statistics (BLS) reported at the end of the week that wholesale prices rose 0.7 percent in February. Headline PPI inflation was at 3.4 percent. Thus, all-in prices rose faster than the 0.5% pace of January but the core increase was less than the 0.8% for the prior month. On a 12-month basis, headline PPI inflation is the most since February 2025.
As a result, traders are now shifting their bets from a rate cut before the end of the year to a rate increase. According to Gennadiy Goldberg, head of US rates strategy at TD Securities, “The market is no longer pricing in rate cuts in 2026 and is now starting to price in some chance of rate hikes, which is pushing yields sharply higher.”
TRADE UPDATE
China
The two days of meetings between Treasury Secretary Scott Bessent, USTR Ambassador Jamieson Greer and Chinese Vice Premier He Lifeng in Paris concluded on Monday without any confirmed agreements. Sources familiar with the talks described the two days as “remarkably stable” and Bessent concluded that the talks “went very well.” On the table were additional agricultural purchasing commitments (e.g., poultry, beef, non-soybean row crops) and the creation of a “board of trade,” to “focus on areas of mutual benefit,” including investment.
The biggest news coming out of Paris, however, was the announcement by President Trump that his visit to Beijing would be delayed by a “month or so” in light of the war in Iran and his need to stay in Washington. Trump later called it an opportunity to “reset” the meeting and clarified that it would not take place until mid-May.
The Beijing visit is the architecture for the next-phase trade accommodation post-Busan “truce.” An indefinite postponement reopens the possibility of bilateral friction points. Case in point, China’s commerce ministry’s statement on Monday criticizing the latest U.S. Section 301 trade probe.
In a sign of strength entering the talks, China’s economy posted a better-than-expected start to 2026, with industrial output rising 6.3 percent year-on-year, up from 5.2 percent in December and the fastest growth since September 2025. Retail sales rose 2.8 percent year-on-year, up from the 0.9 percent pace in December. Lunar New Year holiday spending was a significant contributor, as were robust exports in the first two months of the year.
The durability of China’s momentum is in question. Nomura analysts noted that “with tensions in the Middle East, no turnaround in the property sector, and declining domestic sales of durable goods, the great divide between external and domestic demand is set to become more pronounced.” Shipping challenges caused by the war and softening global demand could compound structural weaknesses in the PRC economy in the months ahead.
The Wall Street Journal reported on Friday that China’s gross domestic product (GDP) as a share of the global economy has fallen from a peak of 18.5% in 2021 to 16.5% at the end of 2025. According to International Monetary Fund (IMF) data, the Chinese economy is now two-thirds the size of the U.S. economy. Domestic deflation and a weak yuan are both contributing factors as measured in dollar terms. While China continues to produce more goods than ever, the dollar value of those goods has not grown. Overcapacity and lack of domestic consumption are proving difficult for the central government to overcome and leading to trade tensions with the rest of the globe.
Two datapoints on the AI race are worth noting as the negotiating teams prepare for a Beijing meeting. First, Nvidia CEO Jensen Huang disclosed last week at the company’s GTC event in San Jose, California, that his company is in the process of restarting its manufacturing of the H200 chip and has “received purchase orders from many [Chinese] customers.” The move was enabled by President Trump’s limited export ban reprieve last fall.
To date, the CCP had been delaying approval of the chips for Chinese firms, struggling with whether to remain reliant on U.S. hardware. As part of Trump’s order, the U.S. Treasury will receive 15% of all H200 gross revenue orders to China according to a January finalized Departments of Commerce/Treasury structure (Trump had originally announced a 25% cut in December).
Huang is now eyeing sale of the Blackwell chip to Chinese firms later this year, arguing it’s needed to deter Huawei from ramping up development of its own AI chips. Huang noted that he’d make the request of the Trump Administration after Nvidia’s next generation chip, Vera Rubin, reaches U.S. buyers in the second half of the year.
Second, the previously announced CCP review of transactions involving foreign ownership of Chinese firms or firms started by Chinese nationals offshore (e.g., Singapore) is now coming into practice. News broke this week of CCP review of Meta’s purchase of Singaporean AI startup Manus, founded by Chinese nationals. It’s unclear what authority the CCP has to block the sale of a Singaporean company that closed in November. But it is clear that the central party views firms founded by Chinese nationals to be a security threat and will become more aggressive in asserting control, including redomiciling such firms through coercive measures.
The U.S. AI advantage in software, hardware, datacenters, and advanced-manufacturing equipment remains key negotiating leverage for the Administration with China. So long as the U.S. enjoys the free flow of rare earths from China, that advantage is likely to hold and be exported to allied nations. The Commerce Department announced last week that the Administration’s “full-stack” export strategy will enter its next phase on April 1. The American AI Exports Program bundles infrastructure, tools, and models into ready-to-deploy AI systems for allies and partners, a key goal of the White House’s AI Action Plan released last July. Beginning in April, industry will have 90 days to submit proposals for the program.
USMCA
Formal bilateral technical talks kicked off Monday between USTR Ambassador Jamieson Greer and Mexican Secretary of Commerce Marcelo Ebrard, opening a protracted renegotiation of a treaty governing $1.6 trillion in annual goods trade. The U.S. is demanding structural changes: tighter transshipment/rules of origin, stronger domestic production incentives, and expanded access to Canada’s dairy sector.
Mexico’s opening position is nearly the inverse: minimize rewrites, preserve flexibility on rules of origin, and reinforce dispute resolution mechanisms as a hedge against tariff unpredictability. Economy Secretary Marcelo Ebrard has framed Mexico’s core ask as durability-assurances that whatever is agreed to will hold. President Claudia Sheinbaum’s negotiating team faces the additional complication of a domestic security situation still unsettled following the killing of the Jalisco New Generation Cartel’s leader in late February, a variable that is causing nervousness ahead of hosting the World Cup this summer.
USTR said the teams reviewed options to increase U.S. and Mexican production and employment while limiting non-market supply chain inputs, with regular meetings now scheduled toward “key deliverables ahead of the July 1 Joint Review.” Notably, Canada is not yet at the table for the initial U.S.-Mexico round, confirming Ambassador Greer’s demand of structural agreement change from trilateral to bilateral.
Donroe Doctrine
On Monday, President Trump praised Venezuela for having a “fantastic relationship” with his Administration-a public signal of progress as the Doral Charter coalition consolidates and the Administration seeks to bring its Caracas relationship into broader Western Hemisphere alignment efforts. Also this week, the Treasury Department eased sanctions with Venezuela’s state-owned oil and gas company, allowing Venezuela to directly sell its oil to U.S. companies and on global markets.
The coalition brought together by President Trump at Doral is showing signs of further strength. Case in point, the growing U.S. alliance with Ecuador, which moved from Framework to Agreement on Reciprocal Trade (ART) status last weekend.
At the same time, tensions are rising between Ecuador and Colombia over drug trafficking. Aligning with the Trump Administration, Ecuadorean President Daniel Noboa has imposed tariffs on Colombia and accused its government of negligence in fighting the drug trade, posting on X: “Today, together with international cooperation, we continue this fight, bombing the places that served as hideouts for these groups, largely Colombians…”
The Colombian presidential election in two months will have a material impact on the U.S./Colombia relationship. Presidential candidate and Petro Administration ally Iván Cepeda represents a vote for existing policy while his two main rivals, Paloma Valencia and Abelardo de la Espriella, both want to send security forces to fight the drug trafficking militias.
The most pressing goal of the Trump Administration in Latin America-regime change and/or re-alliance in Cuba-is reaching a tipping point as President Trump told reporters that “We’ll be doing something very soon.”
Cuban Deputy Prime Minister Oscar Pérez-Oliva Fraga told NBC on Monday that the government is open to a commercial relationship with the Cuban Americans. The move would open a valuable foreign investor pipeline to the island and is a shift in tone for a regime that has long been hostile to the diaspora. Under current Cuban law, Cuban-Americans can only invest in the island if they re-establish residency in Cuba. Cuban-American capital investments, however, would also require the lifting of U.S. sanctions that bar Americans from business dealings in Cuba.
The diaspora investment opening and previous prisoner releases are the clearest signs yet that the regime is responding to economic pressure. Whether the Administration treats Cuba’s gestures as negotiating currency or a down payment on broader regime change will define the next phase of the Donroe Doctrine.
Miscellaneous
- Brazil. On Thursday, The Wall Street Journal reported that U.S. officials had sent a proposal to Brazil in February for a bilateral agreement on critical minerals. The U.S. has still not received a response from the Brazilian side.
- European Union (EU): The U.S.-EU ART passed the European Parliament’s International Trade Committee, though conditions were included (e.g., a sunset provision).
- Japan. Prime Minister Takaichi’s first meeting at the White House resulted in several deliverables, including: a $40 billion project to build nuclear reactors in Tennessee and Alabama; a $33 billion investment in natural gas power generation facilities in Pennsylvania and Texas; and the enactment of the U.S.-Japan Action Plan on Critical Minerals. Takaichi also indicated Japan would join the President’s “Golden Dome” missile defense initiative. The White House released a fact sheet following the visit.
- South Korea. The National Assembly passed a long-delayed bill to create the $350 billion investment fund under the U.S.-South Korea ART.
- Tariff Updates. The Court of International Trade (CIT) has set an April 10 hearing date for the states filing suit against the Administration’s new Section 122 tariffs. Meanwhile, Customs and Border Protection (CBP) updated CIT on its refund process on March 19, telling the Court that its new portal system is 73% complete. Finally, Ambassador Greer told Fox Business this week that Section 338 tariffs, which the Administration has not yet utilized, remain on the table.
- World Trade Organization (WTO). The WTO’s 14th Ministerial Conference (MC14) will convene in Yaoundé, Cameroon, from March 26-29. The requirement for consensus-based decisions, allowing spoiler countries to veto negotiations, is of particular concern and likely a focus of Administration officials at the MC14.
OUTLOOK/ANALYSIS
Last week’s toplines are simply put: the Hormuz Coalition is still struggling to reverse the energy crisis and the Beijing summit has slipped to mid-May. Thus, the Administration’s two most consequential near-term objectives are stalled and markets will price that uncertainty into the week ahead.
The gap between coalition ambition and allied response is now a market signal in itself-Hormuz reopening through collective action is the governing variable for energy prices.
Drone and cyber-attacks are a preview of future kinetic warfare, first debuted in the Russia/Ukraine theater. Both Ukraine and now Iran have demonstrated that an overmatched adversary can effectively hold off a superpower, at least in the near-term.
The upcoming threat for the U.S. and Western firms this week was previewed by Iran and bears watching: banks, defense contractors, and critical infrastructure are all stated targets. Firms must harden their own internal systems as the war expands beyond the confines and geography of the Middle East.
The Beijing summit delay is the second-order news of the week but matters most in the long run. The Paris talks were notably light on detail, but the U.S./China relationship remains in the relative “truce” status it first reached on October 31 of last year.
A summit delay of more than “a month or so” pushes the bilateral meeting into mid-May at the earliest and further into the new Section 301 investigation timelines. Every week the summit slips is another week missed to provide markets with tariff certainty.
These talks will ultimately inform the U.S./Mexico dialogue given the U.S. focus on Chinese transshipment. President Sheinbaum is navigating a domestic political environment that makes concession costly and the Jalisco cartel’s leadership vacuum adds unpredictable security and economic variables on the Mexican side.
This week opens with a significant decision point: will boots on the ground be needed to finally reopen Hormuz? The Pentagon’s reported $200 billion war supplemental funding request suggests they might.
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