Options To Address The Spike As Oil Breaches $80

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Good morning! Here’s the latest in trending:

Jobs Day: Don’t expect February’s nonfarm payrolls report to repeat January’s upside surprise.

AI feud: The Pentagon has designated Anthropic as a “supply chain risk,” prompting the startup behind Claude to challenge the label in court.

The response: History says the Fed is key to counter a recession from oil shocks, but any reaction to the Iran war will likely depend on duration.

Crude oil has officially topped $80 per barrel as the conflict in Iran continues to escalate. The WTI benchmark (CL1:COM) has surged 21% since closing at $67.02 just before the war commenced last Saturday amid increased risks to the global oil trade and the Strait of Hormuz. A fifth of the world’s oil and gas flows through the strategic waterway, but tanker traffic there has ground to a halt, with hundreds of ships trapped on each side of the critical chokepoint. China presses Iran for safe passage

Snapshot: The national average cost of gasoline has additionally climbed by 34 cents over the past week to $3.32 per gallon, according to AAA, erasing all of the savings seen since President Trump took office. “If they rise, they rise,” Trump declared in response to the spike in energy prices, saying “they’ll drop very rapidly when this is over” and the current campaign is “far more important than having gasoline prices go up a little bit.” For now, the bet is that a 4-to-5-week conflict will prove the spike is temporary, but emergency measures are being entertained if things get prolonged or prices spiral out of control. U.S. must have a role in choosing Iran’s next leader

The first plan announced by the administration is to provide insurance guarantees and U.S. Navy escorts for oil tankers and other vessels traveling through the Strait of Hormuz. Other options under consideration range from a federal gasoline tax holiday and higher ethanol blends to having the U.S. Treasury trade oil futures and drawing from the Strategic Petroleum Reserve (which is hovering at 60% capacity after being heavily tapped by the Biden administration during the Ukraine war). Looking to ease global supply, the U.S. also just issued a 30-day waiver to India for purchasing crude from Russia. Shipping industry sees pledge to reopen Hormuz as only partial fix

Elsewhere: Oil is not the only commodity that has policymakers worried about an energy crunch. While the U.S. is largely insulated against natural gas disruptions due to its large domestic production, alarm bells are going off in Europe as prices jumped 70% over the past week. It comes as the highly import-dependent EU was about to phase in a ban on Russian LNG imports, while climate ambitions that saw the bloc pivot away from nuclear and coal might be a wake-up call for carbon credits and its broader emissions trading system. (6 comments)

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What else is happening…

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Trump removes Kristi Noem as DHS head after congressional clashes.

Beyond oil deals: U.S. and Venezuela re-establish diplomatic ties.

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China approves Pfizer’s (PFE) GLP-1 drug for weight management.

Airline stocks lose altitude amid Middle East disruptions, fuel surge.

U.S. weighs permits for Nvidia (NVDA), AMD global AI chip sales.

Today’s Markets

In Asia, Japan +0.6%. Hong Kong +1.7%. China +0.4%. India -1.4%.
In Europe, at midday, London -0.3%. Paris -0.5%. Frankfurt -0.2%.
Futures at 6:30, Dow -0.2%. S&P -0.3%. Nasdaq -0.4%. Crude +4% to $84.26. Gold +0.5% to $5,102.30. Bitcoin -3.5% to $70,565.
Ten-year Treasury Yield +3 bps to 4.17%.

On The Calendar

Companies reporting today include Embraer (EMBJ) and Tsakos Energy Navigation (TEN).

See the full earnings calendar on Seeking Alpha, as well as today’s economic calendar.