Key Points
- Iranian missiles damaged Qatar’s Ras Laffan Industrial City, the world’s largest LNG export facility.
- Brent crude futures spiked to $115 per barrel.
- The Fed kept the fed funds target rate unchanged at 3.50%-3.75%.
- Gold is testing support at $4,800 per barrel.
From CNBC:
Qatar said Wednesday that Iranian missiles caused “extensive damage” at Ras Laffan Industrial City, home to the largest liquefied natural gas, or LNG, export facility in the world….
Qatar halted LNG production on March 2 due to Iranian drone strikes at Ras Laffan and Mesaieed Industrial City. The Gulf state is the second-largest LNG exporter in the world, after the US Qatar accounts for nearly 20% of global LNG exports, according to data from energy consulting firm Kpler.
Iran is also attacking oil export facilities outside the Persian Gulf to further restrict global energy supply. From Reuters yesterday:
Omani crude – exported from a terminal outside the Strait of Hormuz – is trading at a record premium of $51 a barrel to Brent, compared with an average of just 75 cents in February, pushing the outright price to around $150 a barrel for May loading.
A similar pattern is playing out elsewhere. Cash premiums for Dubai crude jumped to $56 a barrel on Monday from an average of 90 cents in February, according to data from S&P Global Platts and Reuters.
The surge reflects the enormous uncertainty over the actual amount of supply available amid repeated Iranian strikes on oil terminals in Oman and at Fujairah, the United Arab Emirates’ main oil-exporting terminal outside Hormuz.
Brent crude futures (ICE May’26) climbed to $115 per barrel.
Fed Monetary Policy
Meet the new head of monetary policy at the Fed.
Spoiler alert: it’s not Kevin Warsh. Iranian cleric, Mojtaba Khamenei, recently appointed supreme leader of the Islamic state, now dictates global monetary policy.
Iran’s chokehold over Gulf states crude oil and LNG production will dominate global employment, inflation, and liquidity for the foreseeable future.
The Fed was on track for further rate cuts, with financial markets expecting three cuts by year-end as the economy slowed and the labor market shed 92,000 jobs in February.
However, the attack on Iran has flipped the script. Rising crude oil prices are expected to increase inflationary pressure and restrict the Fed’s ability to cut rates.
Core PCE inflation, the Fed’s preferred measure of underlying inflation, had already increased to 3.1% for the 12 months to January 2026, from 2.6% in April 2025.
Rising energy prices (LHS) will likely cause a spike in CPI (RHS) similar to the increase in 2021 and ’22.
Moody’s Baa corporate bond spread climbed to 1.85% on March 17, warning of tighter liquidity in financial markets.
The S&P 500 retreated to 6,625 following news of renewed Iranian attacks. We expect a test of primary support at 6550.
Copper broke support at $12,500 per tonne, anticipating a contraction in demand as the global economy slows.
Gold broke support at $5,000 per ounce, finding short-term support at $4,800. Axel Merk attributes the recent sell-off to “deleveraging among speculators, global growth headwinds, and an oversold condition in some markets after a very strong January run-up.”
However, there was a similar sell-off in March 2020 (below), shortly after the outbreak of the COVID-19 pandemic. A liquidity contraction and the rebalancing of risk-parity funds caused a sell-off across all major asset classes, including stocks, bonds, and precious metals. Gold recovered in April, rallying to $2,050 per ounce by August 2020.
Gulf states could also be liquidating reserves to support their economies while oil exports are restricted.
The monthly chart below shows the long-term uptrend since March 2024, when gold broke out above resistance at $2,000. We are now witnessing a pull-back to test primary support at $4,500. Respect of support will likely signal another strong advance.
Conclusion
The Fed is powerless to fight inflation caused by the Iranian chokehold over global energy supplies. They are also constrained in their ability to use monetary policy to support a weak labor market because of the looming threat of inflation.
Our bullish thesis for gold remains. Precarious sovereign debt levels limit governments’ ability to support their economies without fueling inflation. Political leaders are also reluctant to adopt more restrictive fiscal policy because of the impact on their economies. The outcome will likely be prolonged currency debasement through inflation, with gold bullion eventually replacing US Treasuries as the global reserve asset.
Acknowledgments
- Federal Reserve of St Louis: FRED Data
- CNBC: Brent Crude Futures
- ‘Deer In The Headlights’ Fed Leaves Rates Unchanged | Axel Merk
- CNBC: Iran missile attack on Qatar causes ‘extensive damage’ to facility housing huge gas plant
- Ron Bousso, Reuters: Iran’s $200 oil threat isn’t that far-fetched
- Peter Boockvar: Meet the new Chairman of the Federal Reserve, and it’s not Kevin Warsh
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.
