PremiumGold Suffers Worst Week In 43 Years As Crude Crisis & Hawkish Fears Spark Bond Bloodbath; Stocks Sink
Tl;dr: Three weeks into the war, and while today felt a little less chaotic (maybe just wishful thinking), there are little to no signs of an end anytime soon... and the longer the disruptions continue, the harder it is for equity (and bond) narratives to 'look through' short-term oil pain. This week saw oil mixed (WTI flat-ish, Brent and Gulf crude up). Stocks extended post-war losses, but bonds were battered everywhere as rate-cut odds evaporated into rate-hike bets. Bitcoin was down on the week but bullion was a bloodbath with its biggest weekly loss since Oil-producing nations dumped it for cash in 1983.
All with a stagflationary backdrop that worsened this week (inflation 'outperforming', growth 'underperforming')...
And with a $5.7 trillion OpEx - the largest March options expiration ever with negative gamma abounding in the SPX - and that remains true post-OPEX.
It's not the economy, it's oil stupid!
Energy
Today's oil market moves were relatively calm for the first time since the war began...
-
Overnight: relatively stable with a gentle drift higher in crude prices as Kuwait partially closed a key refinery as attacks from Iran continued, US considers occupying Kharg Island. UAE and Saudi Arabia intercepted missiles overnight. Also we note that Friday marks the start of the Persian New Year and the festival of Eid al-Fitr, marking the end of Ramadan - is everyone too busy in the mosques to be shooting missiles?
-
Morning: IEA head says "it will be six months for some [sites] to be operational, others much longer" - oil pushes higher
-
0945ET *TRUMP CALLS NATO 'COWARDS' FOR NOT JOINING FIGHT AGAINST IRAN - oil rises
-
1000ET *US SENDING THREE WARSHIPS TO MIDDLE EAST: WSJ... and 2,500 additional Marines - oil spikes
-
1300ET *IRAN SAID TO STICK TO HARDLINE POSITION ON STRAIT OF HORMUZ - WTI spikes above $98
-
1400ET *MORE PAKISTAN-BOUND OIL TANKERS TO ARRIVE VIA HORMUZ: NIKKEI, *UK MINISTERS: CONFIRMED DEAL FOR US DEFENSIVE OPS TO PREVENT HORMUZ ATTACKS - oil rotated lower
-
1420ET *US MAKING PREPARATIONS FOR POTENTIAL GROUND TROOPS IN IRAN: CBS - price rebounds higher
-
1545ET *TRUMP ON IRAN: I THINK WE'VE WON - oil dropped
By the end of the week, something interesting occurred - WTI (+1.6%) and Brent (+9.2%) had diverged with the latter 'outperforming' the former (until this afternoon's ramp, WTI was lower on the week)...
WTI oscillated in a wide band between $92 and $100 this week, ending towards the upper end of the range...
Gulf crude prices continued to soar...
Source: Bloomberg
Of course, it's not just crude, NatGas prices have exploded higher in Europe (and are elevated in the US). The following chart adjusts the EU TTF NG contract to be equivalent to the US contract. EU NG at highest since Jan 2023...
Source: Bloomberg
Before we leave the energy complex, we note that while American consumers are mostly focused on gasoline since the start of the Iran war, businesses are more worried about the fact that average diesel prices blew past $5 this week for the second time in US history...
Source: Bloomberg
As Bloomberg's Nathan Risser noted, diesel powers key machinery from tractors plowing the fields to trucks and buses transporting goods and people coast-to-coast. Industries will need to start raising prices to account for higher fuel prices, which in turn will lift the prices of everyday consumer items including food.
No bueno!
Stocks
Since the war began, The Dow and Small Caps are down almost 7% with Nasdaq down less than 4%...
This week saw stocks down around 2% close-to-close (but most notably a major swing intra-week from solid gains of over 2% midweek). All the majors were basically correlation-one with each other as ETF flows dominated...
All the US majors are now below their 200DMAs...
The Energy sector strongly outperformed this week. Financials eked out a green week while Materials were clubbed like a baby seal (margin pressure)...
Source: Bloomberg
There were so many huge movers under the hood this week - here is a quick smattering...
Big squeeze fail as 'Most Shorted' stocks were slammed...
Source: Bloomberg
Mag7 stocks underperformed S&P 493 (source of funds?)...
Source: Bloomberg
The Software vs Semis pair ended unchanged - but not before some insane intraday swings...
Source: Bloomberg
It seems Memory was the only place to hide this week...
Source: Bloomberg
What stood out at the index level was the violence of the intraday swings - thanks in large part to the market's negative gamma exaggerating trends - and as Bloomberg's Michael Ball pointed out earlier, the immediate danger for stocks is market structure.
A wider backdrop of negative gamma holdings means market makers are chasing prices in a larger range that is continually skewing lower.
Thin e-mini liquidity and heavy 0DTE activity make intraday swings bigger, and Friday’s triple witching adds another accelerator.
When that much exposure rolls, support and resistance levels tend to change, in this case likely lower.
We also saw both index and single-stock vols jump this week (though the focus on index-hedging leaves VIX decoupled)...
Source: Bloomberg
And with that, as SpotGamma put it a bit more plainly: the gamma board is reset.
The TRACE visual shows the impact of the SPX AM expiration at 9:30 AM EST, which is when the bulk SPX contracts expire. You can see the TRACE map loses a lot of intraday negative gamma (dark red zones) between 6,700 and 6,400 at 9:30AM. Then, after the 4PM expiration, large zones of positive gamma expired >6,700 and <6,400 roll off.
The current negative GEX (purple line) "smooths out" a great deal (GEX - today's OPEX, dashed line) after OPEX.
You can also see the dominant strike on the board is the 6,475 JPM put position, which expires on 3/31.
If the SPX remains in the 6,400-6,600 range, then the gamma at 6,475 will continue to grow, which makes it even more of a support/magnet for markets.
That 6,475 level is now only about 100 handles (-1.5%) from current SPX levels, and so it's distinctly in play until the end of March.
Goldman's trading desk noted that US L/S Gross leverage fell for a 2nd straight week, as managers unwound risk amid continued market volatility.
US equities were net sold for a 5th consecutive week, driven by short sales in both Single Stocks and Macro Products
Rates
It was carnage in global bond markets this week, with yields up dramatically in UK and Europe...
Source: Bloomberg
Bund yields climbed to the highest since 2011 and UK peers surged to reach 5% for the first time since 2008...
Source: Bloomberg
UST yields were all higher on the week, led by the short-end...
Source: Bloomberg
5Y UST yields topped 4% for the first time since July
Source: Bloomberg
The yield curve (2s30s) has flattened drastically, now testing the lowest levels since Oct 2025...
Source: Bloomberg
Bond Vol finally snapped higher this week (VaR shock time?) to its highest since May 2025 (as the hangover from Liberation Day faded)...
Source: Bloomberg
At the short-end, expectations for central bank action have exploded hawkishly higher with the market now pricing in a 50% chance of a rate-hike by The Fed in 2026...
Source: Bloomberg
Are rates markets anticipating a second wave of inflation?
Source: Bloomberg
Because growth (Cycs/Defs) is not driving this move...
Source: Bloomberg
Stagflation much?
Everything Else
The dollar reversed last week's losses and rallied this week - albeit with some notable intraday volatility on the way. Since the start of the war, the Bloomberg Dollar Index is up over 2.5%...
Talking of 'dollars', there appears to be some funding stress showing up in the plumbing of the market (as cross-currency basis swaps start blowing out)...
Which could explain what happened in gold (what's the first thing you sell if you need dollars?)
Gold plummeted to seven week lows this week after losing the $5000 handle...
Source: Bloomberg
That was gold's worst weekly loss since March 1983...
Source: Bloomberg
What triggered gold's decline in 1983? Another oil crisis...
Heavy selling by Middle Eastern oil-producing countries (notably OPEC members or related entities).
This began around February 21, 1983, shortly after British and Norwegian oil producers cut prices, increasing pressure on OPEC to lower oil prices amid a global oil glut.
Oil exporters, facing revenue shortfalls, sold bullion holdings to raise cash, flooding the market and triggering the decline.
This was a pivotal moment in crude markets: After years of price hikes (especially post-1973 and 1979 crises), it signaled the beginning of a prolonged bearish phase for oil through the 1980s, with eroding OPEC discipline and market share.
Deja vu all over again!
It appears gold has suddenly rediscovered its (inverse) relationship with 'real rates' as they soar...
Source: Bloomberg
Metals suffered their biggest downdrafts this week during the Asia and EU sessions (dollar shortage growing?)
Bitcoin has outperformed bullion for three straight weeks, with 'digital gold' now back to its strongest relative to 'old gold' in seven weeks...
Source: Bloomberg
Bitcoin has found support around the $70,000 level...
Source: Bloomberg
While BTC ended the week slightly lower, Ethereum was higher (albeit only modestly)...
Finally, a shit-or-get-off-the-pot moment is upon us (in terms of price and time) as we noted earlier, the chart below shows that the S&P 500 is currently down just under 4% since the attacks on Iran, over 13 trading days.
Historically, when looking across more than 30 geopolitical shocks since 1939, the average path by day shows that US equities tend to bottom around T+15, at a little over 4% below their pre-shock level.
That matters because the news flow has looked materially bleaker over the last 36 hours.
So the question is whether this marks the start of a more serious sell-off, or whether we are simply following the usual geopolitical playbook - one in which the worst news flow and the greatest market damage on average tend to coincide around this stage.
Goldman's Chris Hussey offered some useful big picture views of the state of play:
The hoped-for quick resolution of the latest Iran conflict is now beginning to fade as the Strait of Hormuz blockade extends into its 4th week tomorrow, effecting an estimated ~15% decline in global oil supply (and a big drop in LNG exports as well).
The conflict does raise the prospects that OPEC could deploy substantial spare capacity after the Strait reopens to help stabilize tight markets. But the Hormuz shock and lingering uncertainty may cause faster strategic stock building from 2027 because end-2026 reserves will likely be low and because countries may raise SPR targets -- offsetting the beneficial effects of increased oil well pumping. As a result, we see upside risks to oil prices and the risk that oil prices may stay above $100 for longer.
...
If the war drags on, keeping oil prices high, the ramifications for the global economy become more pronounced, raising questions about inflation and growth. Goldman's Joseph Briggs expects higher energy prices to cut global GDP by 0.3% and raise headline inflation by 0.5-0.6pp over the next year, with a more modest 0.1-0.2pp boost to core inflation...
The good news is that our historical analysis of past geopolitical events shows that while conflicts have sometimes led to large spikes in oil prices that lasted for a while, their impact on financial conditions has usually been more limited and has been briefer.
All of this, plus increased uncertainty (just how long will this continue?) also raises questions for the world's central banks, and has reintroduced the prospect of higher-for-longer rates...
As for markets, the decelerating economic growth, the threat of rising inflation (and the resulting impact on bond markets), already low equity risk premia, and stretched valuations all make global equities increasingly vulnerable.
Looking ahead, oil and the macro will likely dominate market discourse for sometime, especially since there is a dearth of both macro and micro data next week, keeping us all in a 'wait and see' mode.
RIP Chuck Norris!
