On March 19, Binance Research published an article stating that escalating geopolitical conflicts coupled with a hawkish Federal Reserve have led to a global market experiencing stagflation in oil prices, including:
Oil prices surged: Brent crude rose 7%, WTI crude rose 4.2%. Stocks generally fell: S&P 500 fell 1.45%, Nasdaq fell 1.25%, Russell 2000 fell 1.64%. Metals were under pressure: Gold fell 3.6%, silver fell 4.9%. The US dollar and Treasury bonds: The US dollar index rose 0.76%, the 10-year Treasury yield rose 6.5 basis points, and the VIX fear index surged 17% to 25. Crypto market: Bitcoin fell 4.6%, Ethereum fell 5.2%.
In macroeconomic and Middle East developments, Iran threatened to strike Gulf energy facilities after Israel attacked its largest gas field; Qatar's Ras Raffarin industrial city was confirmed to have been damaged by missiles. Oil shipments through the Strait of Hormuz remain 98% below pre-conflict levels. The Pentagon requested the White House to approve over $200 billion in funding specifically for the war against Iran; the Federal Reserve kept interest rates unchanged, still expecting one rate cut this year, but PPI data exceeded expectations (0.7% month-on-month, compared to an expected 0.3%). France expressed its willingness to assist in securing the Strait of Hormuz after the intense phase of the conflict ends, but most European countries refused to join a US-led operation.
The market is experiencing a classic oil-driven stagflation shock. The US and Israel have directly attacked Iran's upstream energy assets for the first time, compounded by attacks on Qatari facilities and shipping disruptions in the Strait of Hormuz. This energy shock, coupled with higher-than-expected PPI and a hawkish Federal Reserve, creates a positive feedback loop, pushing the dollar higher and yields upward. Risk aversion has spread to all assets. Approximately 45% of S&P 500 constituent stocks have entered a buyback quiet period, further weakening technical support. Gold and Bitcoin have fallen in tandem, confirming a broad-based risk-averse process. Market concerns that a continued blockade in the Strait of Hormuz (over a month) could push Brent crude to $150, exacerbating the risk of recession or stagflation.
In the near term, attention should be paid to the final date of Trump's visit to China, the progress of the Market Structure Act, the IEA's release of 400 million barrels of oil reserves (prioritizing Asia and Oceania), and daily tracking of shipping data in the Strait of Hormuz (which remained in single digits on March 19).
