Brent Crude Breaks $100, Dashing Rate-Cut Hopes

Market Overview

Yesterday, escalating tensions between the United States and Iran pushed Brent crude oil above the $100 mark for the first time since August 2022, reigniting market fears of persistent long-term inflation. As a result, expectations for Federal Reserve rate cuts have nearly vanished, sending U.S. Treasury yields and the U.S. dollar sharply higher.

At the same time, stress emerged in the private credit market. Funds managed by Morgan Stanley and Cliffwater were forced to restrict withdrawals amid a wave of redemption requests, raising concerns about potential liquidity strains. The shock triggered heavy selling in bank stocks. U.S. equities fell broadly, with the S&P 500 dropping to its lowest level since November of last year.

Market performance showed clear divergence across asset classes:

Precious Metals and Energy

A surging U.S. dollar and rising Treasury yields became the primary headwinds for precious metals, with spot gold and silver plunging roughly 2% in a single session, undermining bullish safe-haven sentiment.

Meanwhile, energy markets continued their surge. Brent crude jumped nearly 10% intraday, while WTI crude climbed close to 9%, highlighting how rapidly rising energy costs are tightening financial conditions and draining market liquidity.

Technology and Financial Stocks

Major technology stocks suffered broad losses. Tesla led declines with a drop of more than 3%, while the Philadelphia Semiconductor Index tumbled 3.5%.

In after-hours trading, Adobe shares plunged 7% after issuing a weaker-than-expected outlook and announcing the resignation of its CEO.

The financial sector became the epicenter of the sell-off, with Morgan Stanley and Goldman Sachs each falling more than 4%, reflecting mounting concerns over redemption pressure in credit markets.

Bond and Currency Markets

Markets are now pricing in an extreme scenario in which the Federal Reserve may cut rates fewer than once in 2026.

The 2-year U.S. Treasury yield jumped as much as 11 basis points, bringing the weekly increase to nearly 20 basis points.

Meanwhile, the U.S. Dollar Index rose to its highest level in nearly two months, while the Japanese yen plunged around 2% under widening interest-rate differentials, intensifying volatility in the foreign-exchange market.

Key Developments to WatchU.S. Treasury: Naval Escorts Likely When Conditions Allow

U.S. Treasury Secretary Scott Bessent stated that plans for naval escort operations have been under discussion for some time, with scenario analysis regarding potential disruptions to oil shipments conducted for weeks or even months.

Energy Secretary Chris Wright added that escort operations could begin before the end of the month, though preparations are still underway.

President Donald Trump emphasized that preventing Iran from acquiring nuclear weapons is far more important than oil prices, warning that if Iran lays mines in the Strait of Hormuz and fails to remove them, it would face unprecedented military consequences.

The U.S. military reported that 16 Iranian mine-laying vessels were sunk on Tuesday, while the United Kingdom indicated Iran may have already begun deploying naval mines in the region.

Nvidia Commits $26 Billion to Open-Source AI Development

Nvidia announced plans to invest $26 billion over the next five years to develop open-source large language models, marking a strategic shift from a hardware-focused company toward a full-stack AI enterprise.

The newly unveiled Nemotron 3 Super, featuring 128 billion parameters, scored 37 points in comprehensive benchmarking, surpassing OpenAIs GPT-OSS model, which scored 33.

By adopting an open-source strategy that tightly integrates its software ecosystem with its hardware platforms, Nvidia is challenging leading AI research labs while simultaneously reinforcing its dominant position in the global AI computing infrastructure market.

Key Economic Data to Watch (GMT+8)

20:30 (US)

• U.S. Core PCE Price Index YoY (January)

• U.S. Personal Spending MoM (January)

• U.S. Q4 Real GDP Annualized Revision

• U.S. Core PCE Price Index MoM (January)

• U.S. Durable Goods Orders MoM (January)

22:00 (US)

• U.S. JOLTS Job Openings (January)

• U.S. 1-Year Inflation Expectations Preliminary (March)

• University of Michigan Consumer Sentiment Index Preliminary (March)