When the world woke up on the morning of February 28, everything had changed. The US and Israel attacked Iran, Khamenei was assassinated, and Iran closed the Strait of Hormuz. Markets suddenly faced a different reality. Everyone is talking about oil, but the real danger is hidden elsewhere: the fertilizer crisis, food security, and the Fed's trap. How did the war start, where is oil headed, what does the fertilizer crisis mean, why is the NFP a disaster, and how did the indices react? Warsh is coming in May, and liquidity will be withdrawn. Is the system ready for this?
On the morning of February 28, the US and Israel launched a joint attack on Iran. In the first 12 hours, there were over 900 airstrikes ("Operation Epic Fury"), and Supreme Leader Ali Khamenei and dozens of high-ranking officials were killed. Trump spoke of "regime change," and Israel targeted nuclear facilities. Iran retaliated. Between March 1 and 5, over 500 ballistic missiles and over 2,000 drones were launched. Targets: Israel, US bases (Bahrain, Qatar, Kuwait, UAE, Jordan, Saudi Arabia), airports, oil infrastructure. Several tankers were struck near the Strait of Hormuz. As of March 9th, the war intensified following attacks on oil refineries, increasing inflation concerns in the global economy.
Markets had been trying to price in the Iranian risk in the second half of 2025, but panic ensued when the "real war" arrived. The Strait of Hormuz closed (20-25 million barrels of oil pass through it daily), Kuwait and Iraq cut production, air traffic halted (Emirates, Qatar Airways, Lufthansa canceled all flights). The US evacuated 32,000 citizens from the region. Trump said it "could take a month or more." Oil prices skyrocketed, inflation fears returned, and markets expecting a Fed interest rate cut were confronted with the realities of war.
February NFP data was released on March 6th: -92,000 job losses. The expectation was +59K, the actual figure was -92K. Job losses occurred in 3 out of 5 months. Healthcare -28K (Kaiser Permanente strike), federal government -10K (Trump's downsizing program continues, a total of 330K people have lost their jobs), transportation -11K, manufacturing -12K. January data was also revised downwards (130K → 126K). Unemployment rose to 4.4%. But wages are above expectations: 0.4% monthly, 3.8% annually (expected 0.3% and 3.7%). The Fed is in a tight spot: weak GDP, job losses, but rising wages and 3.8% inflation. Normally, -92K job losses would call for an interest rate cut, but wage increases are preventing this. On top of that, the Iran war drove oil to $115, and inflation expectations exploded. The probability of a March rate cut dropped from 9.8% to 4%. The waiting period will continue until Warsh arrives, but this data gives Warsh the perfect excuse for a "QT start."
With the Iran war, oil prices have risen uncontrollably, seeing the biggest weekly increase in history. The Strait of Hormuz is effectively closed. Daily tanker traffic has dropped from 24 to 4 (only Iranian-flagged vessels are passing through). The Iranian IRGC stated, "We will burn any ship that attempts to pass without permission." Kuwait, Iraq, and the UAE have initiated production cuts. A total of 6-11 million barrels/day is at risk. The Qatari Energy Minister stated, "If the Strait is not opened, Gulf producers will completely cut production, and oil will rise to $150." Trump said, "The rise in oil is a small price to pay; we are eliminating the nuclear threat." The Pentagon stated, "Ship traffic will return to normal, but it will take time." Markets thought oil would remain around $70, but now it's over $115, and the Strait of Hormuz is still closed. Morgan Stanley raised its 2026 target from $62.5 to $80. Some analysts are predicting $120-150. Inflation fears have returned, the Fed is in a trap, and there's a risk of a second European energy crisis (LNG prices doubled in 48 hours). Trump said "a month or more."
Gold reached $5,419 on its first trading day following the start of the conflict, but subsequently retreated and is trading around $5,100. Goldman Sachs: According to oil scenarios, gold could rise another 12-18% (if the Strait of Hormuz closes for a month). Some analysts are targeting $5,500-$6,000. Silver also tested $95 but remains volatile.
Everyone is talking about oil, but the real danger lies in fertilizer prices. 20-30% of global fertilizer exports pass through the Strait of Hormuz: urea, ammonia, phosphate, sulfur. Modern agriculture is dependent on natural gas. The Haber-Bosch process: natural gas → ammonia → urea (the most common nitrogen fertilizer). Natural gas prices have skyrocketed, making fertilizer production increasingly expensive. On top of that, the Strait of Hormuz is closed, halting exports. Kuwait and Saudi Arabia are the region's largest fertilizer producers, and both are at risk. Spring planting season begins in the Northern Hemisphere. If fertilizer deliveries are delayed, farmers will face difficult choices: either pay higher prices or reduce fertilizer application. Even a 10-15% reduction in nitrogen use could lower yields by 30-50% (wheat, corn, rice). This means millions of tons of crop loss.
This isn't just an energy crisis; a fertilizer crisis equals a food crisis. Nitrogen fertilizer supports approximately 50% of global food production. If the Strait of Hormuz remains closed for a few weeks, spring planting will be disrupted, severely impacting the 2026 harvest. CF Industries shares rose over 3% (fertilizer companies are profiting, but farmers are going bankrupt). In short, the fertilizer crisis could trigger food inflation.
Wheat prices are projected to rise by approximately 25% by 2026. Wheat prices rose slightly when the war began but then retreated. The main issue for wheat is this: Iran and the US are not wheat producers (unlike the Russia-Ukraine war). Iran is a major wheat consumer, and the Middle East is a major importer (Saudi Arabia opened a 655 Kt tender, Algeria a 600 Kt tender). In the short term, wheat supply is good (two good harvests in a row in the Northern Hemisphere). But the 2026 harvest is at risk. Fertilizer is expensive, and planting decisions may change (a shift from wheat to soybeans is possible).
Wheat prices are currently calm, but this is deceptive. If the war drags on and fertilizer shortages occur, coupled with rising diesel prices, the 2026 planting could be disrupted. If Middle Eastern imports are disrupted (the Strait of Hormuz is closed, transportation costs are exorbitant), a regional food security crisis could begin. In France, 84% of the winter wheat is in "good/excellent" condition, but February was the wettest month, and spring planting remained at 32%. Food inflation risk is still underpriced.
Indices are generally trying to price in uncertainty and rising energy costs, leading to increased inputs and decreased profits. In this situation, instead of taking an early step to chase opportunities, it is more important to wait for (not chase) opportunities to buy promising instruments at the right time using DCA (cost averaging). Here, we can wait for good opportunities using two different technical tools: "moving averages" and "Fibonacci retracements".
