Morning Bid: Back from the brink?

• The Pakistan-brokered ceasefire faltered after Israel launched its largest attack on Hezbollah and Iran attacked Saudi Arabia's East-West Pipeline, its only crude export route since the war began
• Saudi Arabia's oil output remains down 600,000 barrels per day with pipeline throughput reduced by 700,000 bpd, meaning energy markets will face extended disruption even if the ceasefire holds
• The Fed faces mounting pressure as U.S. services PMIs showed input cost increases and officials grow more worried about inflation risks, with March CPI data eagerly awaited

Market Summary: Iran Ceasefire Volatility

Key Developments:

Markets experienced extreme volatility following a fragile two-week ceasefire in an Iran conflict centered on the Strait of Hormuz. President Trump's Tuesday deadline threat was replaced by a Pakistan-brokered ceasefire, though its durability remains highly uncertain.

Market Reaction:

• Initial ceasefire news sent Brent and WTI crude prices plunging Tuesday
• U.S. equity indexes finished higher, Asian markets rallied, and Europe's STOXX 600 posted best performance against developed-market peers
• Optimism faded Thursday as crude rebounded and stock rallies stalled
• Asian equities tracking toward best week in three years despite ongoing uncertainty

Critical Issues:

The Strait of Hormuz—a vital global energy artery—remains closed. Iran seeks to impose tolls on transiting ships, demands likely to restart conflict. Trump stated on Truth Social: "That is not the agreement we have!"

Additional tensions emerged after Israel's largest attack on Hezbollah during the conflict, and Iran struck Saudi Arabia's East-West Pipeline, its only crude export route since war began February 28.

Energy Market Impact:

• Brent up ~34%, WTI up ~48% since conflict started
• Saudi output down 600,000 barrels per day
• East-West Pipeline throughput reduced by 700,000 bpd
• Asian physical energy markets face prolonged strain even in optimistic scenarios

Policy Implications:

The Federal Reserve faces mounting pressure as elevated energy prices threaten inflation. U.S. services PMIs showed rising input costs, while PCE inflation accelerated in February pre-conflict. IMF chief Kristalina Georgieva warned "all roads" lead to stagflation concerns.

Fed minutes revealed officials increasingly worried about inflation, though rate cuts remain base case for later this year. March CPI data awaited eagerly.

Outlook: Peace talks continue in Islamabad this weekend, but production capacity depression and closed shipping routes suggest prolonged market disruption regardless of ceasefire outcome.