Morning Bid: Central banks' straitjacket

• Oil prices surge as Iran conflict enters third week; U.S. struck Iran's Kharg Island oil hub and seeks international coalition for Strait of Hormuz passage, though several countries have not committed naval support
• Fed unlikely to cut rates Wednesday with only one cut now priced in for December 2026; U.S. core inflation rose in February while Q4 GDP was revised downward, complicating central bank calculus
• Australia's RBA may cut rates for second time this year, while China reports strong retail and industrial data for January-February; U.S.-China trade talks continue in Paris ahead of potential state visit

Market Summary: Central Banks' Straitjacket

Key Developments:

The Iran conflict enters its third week with oil prices surging above $100 for Brent crude. Over the weekend, U.S. forces struck Kharg Island, Iran's main oil export hub, while President Trump is negotiating with nations to secure safe passage through the blocked Strait of Hormuz. Progress remains mixed, with several countries hesitant to provide naval support despite U.S. pressure for coalition formation.

Central Bank Meetings:

Major central banks including the Federal Reserve, European Central Bank, Reserve Bank of Australia, and Bank of England hold policy meetings this week. The Fed is expected to hold rates steady Wednesday, though investors are watching for inflation risk warnings from the oil spike and labor market concerns. Core PCE inflation rose in February while Q4 GDP growth was revised downward. A second Fed rate cut this year has disappeared from futures markets, with the remaining cut not expected until December.

Market Performance:

Asian markets showed mixed results: Japan's Nikkei down 0.3%, South Korea's KOSPI up 1%. Europe's STOXX 600 opened lower. The dollar jumped over 1% against major currencies last week and held steady Monday, while gold prices rose.

Other Notable Events:

• Australia may be the only central bank to cut rates this week (second cut this year)
• China reported strong retail and industrial numbers for January-February
• U.S.-China trade talks commenced Monday in Paris, led by Treasury Secretary Scott Bessent
• Meta reportedly planning layoffs of up to 20% of staff
• Dubai's airport hit by drone strike Monday, causing flight suspensions and continued travel disruptions across Middle Eastern hubs