From 48 hours to five days

Oil prices plunged more than 10% on Monday in the wake of Trump's announcement, with Brent dropping to as low as $97 per barrel and WTI touching $86. Other markets rallied on the back of that, with all major U.S. stock indexes finishing up more than 1%.

But Iran claimed that no negotiations with the U.S. had taken place and that the whole thing was "fake news" aimed at calming markets.

That's dampened things somewhat, with oil retracing some of its losses on Tuesday to leave Brent hovering just above $100 per barrel and U.S. crude around $90.

In equities, Asian shares managed to eke out a gain on Tuesday, but European shares were shaky and U.S. stock futures edged down before the bell.

The Strait of Hormuz remains closed - except to a handful of India-flagged tankers - and missiles kept flying overnight. If nothing gets resolved, it's going to be another nervous Friday ahead.

Whatever the truth behind all the politics and maneuvering, financial traders subscribing to the idea that Trump always backs down when financial markets quake will see this latest episode as confirmation of that stance.

Specifically, the surge in U.S. Treasury yields early on Monday to their highest in seven months - before easing after Trump's post - was another indication that rising government borrowing costs are the president's kryptonite during his more disruptive ventures.

Either way, markets remain nervous and will today keep tabs on just how much damage the Middle East conflict has done to business confidence in March as flash business surveys are released around the world.

Elsewhere, Asian countries are examining different ways to alleviate energy costs and shortages, with South Korea exploring an energy saving campaign and China limiting rises in its fuel price ceiling.

And Japan recorded a surprisingly large drop in inflation for February, back below 2% for the first time in nearly four years. Although the figures are from before the war, they could complicate things for the Bank of Japan as it strikes a more hawkish tone.

In more anxiety-inducing news from the private credit world, Apollo on Monday became the latest asset manager to cap heavy redemptions from its flagship private credit fund. It will curb redemptions at 5% of its shares after investors tried to withdraw approximately 11.2% of the total.

With that, onto today's column.

Investors seeking safety from the Iran war just ran into harm's way. Government bonds and gold have both failed to protect portfolios. Gold at least had an excuse - it had already doubled last year - but bonds have never really recovered from the Ukraine invasion and may well need an outright recession to perform again.

It's not easy to keep tabs on the Iran conflict day to day or the financial fallout. But since the first attacks on February 28, two things have been clear: energy prices are significantly ‌higher, and neither bonds nor gold has offered any haven.

Graphics are produced by Reuters.

Graphics are produced by Reuters.

Futures markets no longer see any further Federal Reserve interest rate cuts this year, with the energy shock from the Iran war expected to keep U.S. inflation at levels that keep the Fed on hold at least until the second half of 2027.

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