Global Macro Context

Operation Epic Fury (Feb 28) killed Iran's Supreme Leader Khamenei and triggered an effective closure of the Strait of Hormuz, through which ~20% of global seaborne oil and ~22% of LNG normally transit. As of Mar 29, ~4.5–5mn bbl/day of supply is disrupted (~5% of global supply), a figure analysts warn could double by mid-April. The US military began a campaign to reopen the strait on Mar 19. Pakistan hosted a multilateral diplomatic meeting (Egypt, Saudi Arabia, Turkey) on Mar 29 to discuss reopening. Houthis resumed Red Sea attacks, adding a second major chokepoint. Gulf Arab producers (Iraq, Kuwait) have curtailed output as onshore storage fills. CEOs of Shell, Chevron, and Kuwait Petroleum warn physical supply tightness is understated by futures markets. Dallas Fed models a $98/bbl WTI average and -2.9pp annualized global GDP impact in Q2 if disruption lasts one quarter.

The US Supreme Court ruled on Feb 20 that IEEPA does not authorize presidential tariff imposition, invalidating the tariff architecture used since Liberation Day (Apr 2, 2025). The Trump administration immediately pivoted on Feb 24 to Section 122 of the Trade Act of 1974, imposing a 15% universal global tariff valid for 150 days. Section 232 tariffs (50% steel, 50% aluminum, 25% autos/parts, 126% Indian solar) remain legally intact. A new window for Section 232 automobile parts inclusions opens Apr 1–14. The effective US tariff rate is estimated at ~13% — more than 4x pre-2025 levels but below Liberation Day peaks. One year on (anniversary Apr 2), factory jobs are down and inflation is up while the US goods trade deficit has declined for 10 consecutive months.

India's energy security is acutely threatened by the Hormuz crisis. India imports ~88% of its crude — predominantly from the Middle East — and was the world's second-largest buyer of Russian oil (which provided cost cushioning). On Mar 6, the US Treasury granted India a 30-day emergency waiver to purchase stranded Russian oil cargoes, expiring ~Apr 5. With Hormuz closed and the waiver expiring, India faces the prospect of sourcing expensive alternative crude (US, West Africa) at a time when global oil prices are near multi-year highs. This will widen India's current account deficit (already forecast at $37bn for 2026), pressure the rupee, and reignite inflation risks. The RBI, which cut rates 125bp in 2025, may delay further easing.

The ECB held its deposit rate at 2.00% on Mar 19 but explicitly postponed planned rate cuts and raised its 2026 inflation forecast, citing the Iran energy shock. Dutch TTF gas has nearly doubled, and European gas storage entered the crisis at just 30% capacity after a harsh winter. The ECB's 42% probability of a 2026 hike (per Polymarket) is up from 12% pre-war. UK inflation is expected to breach 5% in 2026. The Fed held at 3.50–3.75% on Mar 17–18; hot domestic data (PMI beat, unit labor costs 2x consensus, Michigan inflation expectations 3.8%) have cemented a 'higher-for-longer' narrative and pushed the next cut expectation to September 2026 (52% probability). The BOJ held at 0.75% (30-year high) on Mar 19 with USD/JPY near 158–160 raising intervention risk.

Global LNG markets are in acute crisis. QatarEnergy declared force majeure after missile damage to parts of the Ras Laffan LNG facility, removing ~20% of global LNG supply — a shortfall with no near-term replacement (alternative LNG routes take 28+ days). European gas storage at 30% capacity means the continent cannot afford disruptions through the summer refill season, risking a technical recession in energy-intensive economies. US LNG exporters (Cheniere) are running at peak capacity but cannot offset Asian demand shortfalls. Fertilizer markets are severely impacted: urea prices +50% since the war began, threatening global food security. The Gulf also produces ~45% of global sulfur (critical for copper mining and chemicals) and 20% of aluminum exports.