getting worse

Good morning everyone 🌅

Nearly three full weeks of war.

Last night was one of the busiest news nights of this entire conflict. Israel struck the world's largest natural gas field. Iran hit Qatar's biggest LNG terminal. The Fed held rates and basically told us rate cuts are on pause indefinitely. And markets had one of their worst closes of the year.

A lot to unpack. Let me get into it.

💥 THE ESCALATION NOBODY WANTED.

This is the one that changes everything about the energy picture.

On 18 Mar, Israel struck the South Pars natural gas field in the Persian Gulf and its neighboring refineries in Iran . The strike disabled most of Iran's gas production and halted the flow of gas from Iran to Iraq.

South Pars is not just any gas field. It is the single largest natural gas field on the planet. Shared between Iran and Qatar, it supplies a significant portion of the world's LNG.

Iran was furious to say the least. The IRGC issued evacuation orders for energy assets in Qatar, Saudi Arabia and the UAE, saying these facilities had become "direct and legitimate targets" and would be hit in the coming hours.

They followed through. QatarEnergy confirmed several of its LNG facilities at Ras Laffan were attacked, causing significant fires and damage. Ras Laffan is Qatar's main LNG export hub. It supplies gas to many parts of Europe and Asia.

Trump threatened to "massively blow up" Iran's South Pars gas field if Iran continues attacking Qatar, while simultaneously distancing the US from Israel's strike, posting that "The United States knew nothing about this particular attack."

Qatar's response was swift and decisive. Qatar expelled Iranian embassy personnel, and ordering them to leave within 24 hours, citing Iran's repeated attacks on its territory.

Pete's Take 👇

This is the most significant energy escalation of the entire war. We have moved from oil disruption to gas disruption ⛽️ . South Pars and Ras Laffan together supply a substantial portion of global LNG. Europe was already on edge about energy security. Asia gets roughly 90% of its Middle East energy through the Strait. Now the gas field itself is burning. LNG prices in Europe and Asia were already up 50% since the war began. Watch what happens to them over the next 48 hours. This is not a headline to read and scroll past.

🗡️ IRAN LOSES ITS TOP NEGOTIATOR. THAT IS BAD NEWS FOR PEACE.

Israel killed security chief Ali Larijani and Basij force commander Gholamreza Soleimani in strikes. Their deaths mark a severe blow to the Iranian regime.

Larijani was not just a military figure. He was the most experienced diplomat in the Iranian system. He led Iran's nuclear negotiations before the war started.

Think about that carefully. The man most capable of negotiating Iran out of this conflict is now gone. Deliberately. That is a strategic choice to make this war last longer, not shorter.

Israel also killed Iran's intelligence minister Esmail Khatib in a separate strike. Israeli Defence Minister Katz said he authorised the military to kill "any senior Iranian official" once an opportunity arises, "without the need for additional approval."

Iran has now lost its supreme leader, its security chief, its intelligence minister, its Basij commander and dozens of other senior officials since 28 Feb.

Pete's Take 👇

The killing of Larijani is the strategic detail that most news consumers will miss. When you eliminate the person capable of cutting a deal, you are choosing escalation over negotiation. The Trump-Xi summit is now even more critical as the only remaining meaningful diplomatic off-ramp but Trump is postponing it. China is the one party with leverage over both sides.

🏦 THE FED HELD RATES. POWELL DELIVERED BAD NEWS CALMLY.

On top of everything happening in the Gulf, the Fed met yesterday and the outcome was not what markets wanted to hear.

The Federal Reserve kept rates unchanged at 3.5% to 3.75%. The dot plot now shows only one cut expected in 2026, down from earlier hopes of two.

Powell said it was "too soon to know" the full impact of the war. "Near term measures of inflation expectations have risen in recent weeks, likely reflecting the substantial rise in oil prices caused by the supply disruptions in the Middle East," he said.

Then he delivered the line that sent stocks to session lows. Powell said. "The rate forecast is conditional on the performance of the economy, so if we don't see that progress, then you won't see the rate cut." 🤦 

Translation: if oil stays elevated and inflation runs hot because of this war, there may be zero cuts in 2026. Not one. Zero.

To make things worse, PPI data released Wednesday came in at 0.7% month on month, well above the 0.3% expected. On a 12 month basis, PPI inflation hit 3.4%, the highest since Feb 2025.

PPI is producer prices. That feeds into consumer prices in the months ahead. The inflation pipeline is filling up fast.

Pete's Take 👇

In simple terms, the Fed cannot cut rates because inflation is rising due to oil. Oil is rising because of the war. The war shows no sign of ending. Therefore rate cuts are being pushed further and further out. This matters for property owners with floating rate mortgages. It matters for anyone carrying debt. And it matters for the growth stocks that have been priced on the assumption of falling rates in 2026. That assumption is now looking very shaky.

📊 WHAT MARKETS TOLD US YESTERDAY

The Dow closed lower by 768 points, or 1.63%, hitting its lowest level of the year. The S&P 500 fell 1.36%. The Nasdaq sank 1.46%.

Global oil prices surpassed $112 per barrel today as the war continued to roil markets. Prices climbed after Iran said the US and Israel attacked oil and natural gas facilities.

Oil above $112. Stocks at their lowest of the year. Fed cutting forecasts for rate cuts. PPI hotter than expected. And South Pars on fire.

Wednesday was the clearest picture yet of what stagflation looks like in real time. Prices going up. Growth slowing down. The Fed stuck in the middle with nowhere to go.

10-year Treasury yield: rose more than 6 basis points to 4.265%. When yields go up and stocks go down at the same time, that is the bond market telling you it is worried about inflation more than recession. That is the stagflation signal.

🎯 Pete's Investment Takeaway

Three weeks in. Here is my honest war.

The war is escalating, not de-escalating. South Pars struck. Qatar's LNG hub hit. Iran's top diplomat killed. The Fed on pause. PPI running hot. Oil above $108.

Every pillar that was supporting the bull market case in January 2026 is under pressure. Falling rates? Gone. Cooling inflation? Gone. Geopolitical stability? Gone.

What is left is what has always worked in environments like this.

Defensive Option Strategy. Selling OTM options on quality stocks is my preferred right now (You can learn more about it from my latest course, Dividend Market Genius)

Gold. Still the cleanest hedge in an inflationary war environment. You might not see gold rising immediately but I am happy to buy some when it is low.

Cash and patience. Sometimes the best trade is not making a trade. If you are well positioned, the noise of week three does not require you to do anything.

The Trump-Xi summit remains the single biggest macro event on the calendar. If China steps in as a credible mediator, this war has an off-ramp. If that summit collapses or gets cancelled, the scenario gets much darker.

Position. Don't predict.

Also Property webinar TONIGHT at 9pm.

FOMC just held rates and there is something important happening with interest rates that every mortgage holder needs to understand. Come with your questions.

🔗 https://us06web.zoom.us/meeting/register/-0S3gqGqQlCACdVBwr--9A

Happy Hunting!

Pete
Invest with Pete

🚨‼️ By the way, I’ll never PM anyone on telegram or any other social media platforms. If you receive any “Pete” messaging you, these are scammers impersonating me. Pls beware!

The information provided in this newsletter is for informational purposes only and does not constitute financial advice. Readers should seek their own independent financial advice before making any investment decisions. Please note that while Pete is a portfolio manager, the opinions expressed in this newsletter are his own and do not represent the views of any organization. Always perform your own research and due diligence before investing.