Morning Brief | Mar. 30, 2026

Programming note: At some point, likely this week, this publication will shift over to Substack. That transition should be smooth, with nothing required of you.

Good morning, and welcome back to Clearing House after a weeklong break while I took a trip to Houston for the annual CERAWeek by S&P Global energy conference. Lots of interesting conversations on the margins of the main events.

Global markets are starting the week with a shift in tone: what began as a violent inflation shock driven by disrupted energy supply is now showing early signs of evolving into a genuine growth shock. Oil is rising again — now pushing toward what could be the largest monthly gain on record — but rates are moving the other way, with Treasury yields falling as investors begin to price the risk that sustained energy disruption will begin to erode demand, industrial activity, and ultimately growth.

The tension for policymakers is getting clearer. Central banks are still confronting an inflation impulse they cannot ignore, yet the longer this shock persists, the more it begins to resemble the kind of supply-driven slowdown that historically forces a reversal in policy. In the Middle East, President Trump has moved thousands of US troops into the region — and reportedly, is considering a high-stakes mission to extract uranium out of Iran, per The WSJ — while saying that he is ready to cut a deal with Iran. Iran's leaders, for their part, continue to insist they are not negotiating with the US.

MARKET READOUT (7:28 a.m. ET)

US 2-year, 10-year: -4.5bps (3.869%) / -5.4bps (4.374%)
DXY: +0.12% | EUR/USD: -0.12% | USD/JPY: -0.5%
S&P Futures: +0.49% | Euro Stoxx: -0.11%
Nikkei: -2.79% at close | Kospi: -2.97% at close
Brent, WTI: +2.44% ($115.01) / +1.52% ($101.16)
Copper: +0.43% | Gold: +0.95% | Aluminum: +4.83%
VIX: 30.95 (-0.11)

MOVING THE TAPE

The Houthis have opened a second front in the energy war.
The Houthis’ entry into the war matters not only because it broadens the conflict, but because it puts renewed attention on the Bab el-Mandeb chokepoint at the southern end of the Red Sea. Saudi Arabia has been relying heavily on Red Sea loadings from Yanbu to keep oil flowing, which means any meaningful disruption there would hit one of the few remaining relief valves in the global supply system.

The market’s main workaround is maxed out.
Saudi Arabia’s East-West pipeline is now running at full capacity of roughly 7 million barrels per day, redirecting crude away from the effectively closed Strait of Hormuz. Even with that system fully utilized, oil prices continue to climb — underscoring how little slack remains in the system.

Jay Powell speaks at 10:30 a.m. ET with the market split between inflation and slowdown.
The speech from the Federal Reserve chair will be closely watched, especially as bets have shifted on how the Fed will respond to the energy crisis. German inflation is accelerating, euro-area inflation expectations jumped, and Australia is pricing more hikes — but major bond managers are preparing for a growth break, per Bloomberg.

Governments moves toward fallout management policy.
France is expanding energy aid to another 700,000 households, Qatar’s central bank is offering payment deferrals and unlimited repo liquidity, Australia is halving fuel taxes for three months, and New Zealand is looking at IEA options to secure gasoline, diesel, and jet fuel. Those are market-moving because they signal policymakers no longer see this as a brief dislocation.

The energy shock spills into agriculture and power systems.
Wheat is rising on fears that disrupted fuel and fertilizer flows will raise farm input costs, while coal is getting a fresh bid as countries in Europe and Asia fall back on it to offset gas and power stress. That broadening matters because it turns the story from an oil shock into a wider cost shock across food, power, and industry.

IMMEDIATE TELLS

1. Rates are starting to price growth risk, not just inflation. Both the 2-year and 10-year Treasury yields are lower even as oil pushes higher — a notable shift from last week’s action. Markets are seemingly beginning to consider that higher energy costs may ultimately suppress demand rather than simply feed through to inflation.
2. Oil is rising despite maximum mitigation efforts. Saudi Arabia's East/West bypass pipeline is running at full capacity of 7mbpd, and yet Brent has crossed $115. The global oil market is facing severely restricted optionality, especially as the Houthis threaten to close off those 7mpbd with violence in the Bab el-Mandeb strait. In the physical market, the disruption is even steeper, with Dubai barrels trading at a $40 premium over dated Brent, compared to typical spreads of just a few dollars.
3. Industrial metals are beginning to experience their own shock. Aluminum’s sharp move higher following attacks on regional production facilities highlights the expansion of the disruption beyond hydrocarbons in an already tight market for the crucial metal.
4. Equities are trading headlines, not fundamentals. The bounce in US futures after the steepest two-day loss in the US market since last April contrasts sharply with losses across Asian markets and the broader deterioration in positioning, with major growth names and large-cap tech already down significantly year-to-date. The market remains sensitive to any signal of de-escalation, even as underlying conditions worsen.
5. Volatility remains structurally elevated. The VIX is holding above 30 despite a modest equity rebound — a sign that even with a bit of hope in US equities, markets are still pricing in risk levels not going anywhere.

BYPASS SYSTEM UNDER STRAIN

Since the effective closure of the Strait of Hormuz, supply has been partially rerouted through alternative channels — most notably Saudi Arabia’s East-West pipeline, which carries crude from the kingdom’s eastern fields to the Red Sea port of Yanbu for export. But that pipeline is now running at its maximum capacity of roughly 7 million barrels per day, with tanker traffic redirected westward in an effort to maintain baseline flows to global markets. Essentially, there is no additional buffer left inside the system, and any incremental disruption must now show up in prices.

More importantly, that workaround is geographically dependent on a second chokepoint now back in focus. Cargoes loaded at Yanbu must transit south through the Red Sea and exit via the Bab el-Mandeb strait — a narrow corridor that sits between Yemen and Djibouti, directly within the operating range of Houthi forces. With those forces now actively engaged in the conflict, the market must price in risk that a second chokepoint is closed. Global commodity markets are increasingly at risk of losing the few pathways that allow remaining supply to move. In that environment, price becomes less about deficit and more about optionality.

Insurance costs for vessels transiting the Red Sea have risen sharply, shipowners are increasingly avoiding the route altogether, and traffic through the corridor has already been running well below normal levels. Even without a full closure, effective capacity is already reduced. Taken together, the structure of the market is shifting from a supply problem to a logistics problem. The barrels that remain available are becoming harder to move, harder to insure, and harder to price. That is a more unstable equilibrium — and one that tends to resolve not gradually, but through sharper repricing when confidence in those routes deteriorates further.

MARKETS PRICE A GROWTH SHOCK

The shock to global markets is broadening out beyond crude markets and a straightforward inflation effect, now forcing its way into commodities, policy responses, and consumer behavior in a way that is beginning to resemble a full transmission into the real economy Industrial metals are directly in the line of fire, as attacks on aluminum production facilities in the Middle East — a region responsible for roughly 9% of global output — have pushed prices sharply higher and raised the risk of sustained supply disruptions. In the agriculture market, rising fuel and fertilizer costs are already feeding into higher wheat prices, tightening another critical input channel for the global economy.

Consumers are already adjusting. Households are responding to rising gasoline prices by cutting discretionary spending, trimming travel, dining, and other non-essential consumption. Governments, particularly in energy-importing economies, are implementing demand-management measures, subsidies, and contingency planning to secure fuel supplies. These are all early-stage signals of demand destruction.

Cross-asset markets are starting to reflect that shift. The initial phase of the shock was: higher oil –> rising yields –> repricing central bank expectations. As of this weekend, crude continues to move higher, and the rates market is looking like traders are anticipating a legitimate growth impact and large asset managers are positioning for a slowdown that could ultimately pull yields lower. For central banks, this tightens down constraints. Policymakers cannot ignore the inflationary impacts of rising energy prices — particularly as expectations begin to move higher in Europe and elsewhere — but tightening policy into a supply-driven slowdown risks accelerating the downturn. The longer the shock persists, and the more it spreads across sectors, the more likely it is that the dominant policy challenge shifts from managing inflation to stabilizing growth.

Elsewhere...

In Germany, inflation is re-emerging just as growth risks build. Consumer prices are tracking around 2.8% year-over-year for March, up sharply from 2.0% the prior month, as higher energy costs feed through into the broader economy. At the same time, euro-area inflation expectations have jumped, raising concern at the European Central Bank that price pressures could become entrenched again. Policymakers may be forced to lean hawkish into what is increasingly looking like a supply-driven slowdown.

In South Korea, Lee Jae-myung's government is preparing to actively suppress demand. Officials are considering extending driving restrictions to the general public if oil prices breach $120 a barrel, a measure not deployed since the early 1990s, per Bloomberg. The country has already imposed limits on government vehicle usage and is urging households to reduce energy consumption.

In Sri Lanka, the scramble for supply is already underway. The country is in talks with Russian suppliers for gasoline and diesel as Middle East flows tighten, while at the same time raising domestic fuel prices and implementing austerity measures to manage demand. Authorities say jet fuel stockpiles are good for just under two months.

Closing thoughts...

For now, flows are still moving through rerouted pipelines, strategic reserves, sanction flexibility, and political intervention that has helped contain the immediate dislocation. But those mechanisms are finite, and increasingly strained. The IEA is coordinating a 400 million-barrel release, the US has rolled back years of foreign policy to remove sanctions from Russian and even Iranian oil, and governments around the world are implementing severe austerity measures. Oil prices are still going up. The question now: how long can the remaining infrastructure — physical, financial, and political — continue to absorb the deficit without breaking?

As those buffers erode, the adjustment moves into higher prices, into forced changes in consumption, and increasingly into slower growth. The longer the conflict persists, the more the burden shifts from logistics to demand and from inflation to growth. Iran is starting to charge tolls for Hormuz passage, the Houthis are opening a new front, Israel is continuing to push further into Lebanon, and the US is looking increasingly positioned for ground forces in Iran. With no clear offramp, markets are looking further down the growth curve.