How long will the fury last?

Operation Epic Fury has hit oil and particularly gas prices, but a lot really depends on how long this goes on for weeks, months, at polls shows and not a popular move at all for the US president.

So could he want to put an end to it sooner rather than later, while his rhetoric suggests otherwise.

Well look at how the market is reacting, does it change anything in regards to what central banks do with interest rates this year?

It's Tuesday, it's the 3rd of March, 2026, it's the morning call from NAB. Good morning.

Well oil is up 5.7% this morning for Brent, now over 77 a barrel of 5% lifting WTI buff 70 a barrel natural gas up 2.5% as well.

Spot gold only up 0.7% this morning silver is actually down 5.6% curious isn't that shares in the US.

Well not affected a great deal by what's going on in the Middle East, the Nasdaq is up 0.4% the S&P is flat, but Europe is a different story.

The DAX is down 2.6% same in Spain, 2.2% lower for the cat caront, 1.2% lower for the FTSE 100 massive moves in bond yields.

So 10 year treasuries up 12 basis points up 10 in Canada up 14 for the UK and 708 basis points increase in yields across Europe for 10 years.

Aussie 10 years were down 2 basis points down 2 basis points yesterday to 4.63% but 10 basis points higher than that this morning on futures.

And the rush to safe havens well even if it's the US dollar which is up 1% on the DXY the Swiss franc is up 1.3%.

But the yen is down 0.9% the Aussie as you might expect down 0.6% to 70.7 US cents and it's NABs Rodrigo Catrill who's with me today.

Actually out of all of that gas seems to be the big worry doesn't it particularly for Europe catar shut down its liquefied natural gas production facility because of a drone attack European gas prices grows more than more than 50%.

And I guess the longer this goes on then we could expect even higher prices for gas and oil couldn't we wonder whether there's a bit of pricing now because there's expectation that maybe this is just a few weeks and then things return to normal.

Morning filled yes that's exactly right so we have seen essentially it's a U-turn if you're liking in in the rates market because yesterday you know when the news broke out or rather when the market opened we saw 10 year trashy yields move sharply lower trading just well below the 3% marketer to 3.92.

And now we've seen a whole repricing back up to 405 so linked to that is to your point that all of a sudden there's a question mark around how long energy supplies going to be affected particularly gas as well as as oil.

And that's created a whole rethinking about what does this mean for the economy and in particular what does this mean for central banks reaction function so not only we've seen 10 year trashy yields move higher.

But if we look at pricing expectations for central banks it's an interesting dynamic because you know for instance the you know the market was priced in 60 basis points of rate cuts for the Fed on Friday and now the price in 50 so there's a 10 basis point reprise similarly you look at the UK and if you remember the UK everybody's kind of been or the market has been thinking

yep there they need to do more inflation's coming down so there were 52 basis point price on Friday and now the 38 so that's a big reprise in in in in which implies that everyone is thinking this is going to have a long term with precautions because if you are thinking well it's going to be a week or two weeks then you know things would just return to normal which is normally what happens in with events like this.

But all of this implies that this got longer term inflationary impact doesn't it well as opposed to that that's the that's the gist of it do you think this is going to be just a couple of weeks sort of gig and then and then we go back to normal or is this going to have a more longer lasting effects and then.

So one you know what I think is happening now is that you actually shifting a little bit away from this idea well there's a risk here that things could get messy and that they don't get resolve as quickly as President Trump hopes he's been talking about this idea that it should be you know three to four four weeks.

But there's a couple of observations to making that regard you know they've taken out quite a lot of the leadership within Iran.

Iran is tried quickly to to reestablish a new leadership but in at the moment the message coming from Iran is that they don't want to negotiate.

Now from a military perspective Iran doesn't look to be in a very strong position they particularly when you think about air defense they haven't really got a great deal of it so it's easy for Israel and and and the US to attack and keep bombing.

And the theory is that the more the bomb the more it will force the Iranians to come to the table but at the moment they're not they're not willing to come to the table so.

We have to wait and see if this escalates then there's the scenario that the economy and all infrastructure gets destroyed therefore you force Iran to come and then we are done in four weeks.

The other extreme scenario is that this instigates a civil war massive disorderly stuff and then there's a very different scenario and creates instability particularly in the state of hummus where Iran can can do quite a lot of this stabilization without a great deal of you know military prowess if you like.

So I think the market is now pricing that that risk that this could take longer and hence why you see the whole repricing.

Because from a central bank perspective what do you do well at the moment it means that if if energy prices are going to be higher for longer that's bad for growth and it's bad for inflation.

So it's that flationary you know dilemma and at the moment at the minimum you will think central banks will have to wait and see to see how this plays out because they don't want to be a situation where you have high levels of inflation and the economy is slowing and that's a much tougher decision to make.

It's going to take a while isn't it because it's on the one side you've got the fact yes you've got Iran saying well we're not going to come to the negotiating table while all this is happening you've got the president saying we're going to do whatever it takes.

You've got I mean Bloomberg is saying today the Qatar and the UAE are lobbying allies to try and persuade president Trump to find an off ramp he has no off ramp because he's said you know he's going to do whatever it takes.

But on the other side and it's just a poll over the weekend showed only one in four Americans support the US president on this 43% disapproved 29% weren't quite sure.

Or which is probably not the outcome he was hoping for in him for his midterm campaigns.

So maybe he'll pull back for political reasons although again you know is retic is suggesting otherwise isn't it.

Yeah I mean the hope there is that you know by the midterm so as we get closer to the midterms some sort of resolutions should be to be reached.

But we are still a long way from there in fact you know when we look at at the pricing of the curve in the oil market in for Brent for instance.

The market is fine enough thinking that we're going to get back to that 70 cent level or 72 cent level where we were prior to when things kicked off in October this year.

It's still six to seven months of you know of high elevated levels of energy in general so it can still be significant in terms of inflationary impact as well as you know the growth impact of the last six months.

Yeah yeah so the yen we're talking about as in the introduction of struggling with safe havens so obviously the odds is down because it's not one.

But the yen also down is it lost its safe haven status is it is what's going on in Japan sort of overturning the the influences the place for where money would go to in a time like this.

Yes so well I think there's a couple of things one when we think about the Russia Ukraine war for instance and a big spike in gas prices along with energy prices.

I think the market quickly started shifting about that topical dynamic of who is actually energy independent who isn't.

And then that's where Europe and Japan you know stand out within the major economies that they still have a great deal of you know need to import energy and of course that's why they get impacted.

So if you like the terms of trade shock that this energy shock can can create history will tell you that currency such as the yen and the euro would struggle to perform.

And in fact that's kind of pretty much the breakdown that you see within currencies you know the yen kind of in the middle there that it should be performing better from say home perspective the euro as well.

And then just sort of reinforcing the view when you look at commodity spectrum energy prices of course cold performing WTI oil and so on very strong jumping significantly between five and close to 9%.

And then you have the growth sensitive ones like copper and metal prices that they're a negative they're down close to 2%.

So it is that dynamic of slower growth and high inflation that is also been reflected in the commodity prices.

And in the share market in the US I mean it looks like you know the S&P's relatively flat but actually if you look at sectors energy and IT are both up over 1% but consumer discretionary in healthcare both down more than 1%.

I guess you know this is the opportunity where people look to buy the dip but it's hard isn't it to buy I mean you could get your fingers burned if you're buying thinking you're going to buy the dip but actually things get worse because the wall goes on for longer.

Yeah my my my sense is that the will come a point where you can probably start looking at those opportunities but it feels a little bit too early for that given so much uncertainty.

And and you know it's important to to know that the strata hummus is basically paralyzed and not just because of uncertainty that you have in potential attacks but also from the insurance perspective no one's going to ensure any ship going through it.

So we need to have clarity in in that area whether some sort of calmness can be rich and at the moment also just that that's not going to happen.

Right the next couple of days no weeks or whatever we'll see now let's look at some other data is only a little bit of it yesterday but it was quite significant I think the ISM manufacturing PMI for February and the United States well it was down a bit at 52.4 from 52.6 which actually was better than expected.

The manufacturing PMI by contrast was up a little so I don't know which one you believe.

But the ISM the number that stuck out to me prices spiked from 59 to 70.5 that's rather a large move.

Yes so the couple of takeaways that the ISM manufacturing was essentially unchanged in February of 52.4 but that's following the big jump that we we had in January.

So just in terms of history you know we are a three and a half year high and then the market was sort of bracing for a bit of a payback and it didn't come.

So it's telling us that this you know there's an army here that the manufacturing sector that has been one of the sick puppies if you like of the US economy is actually recovering and now it's expanding.

So that's a good news but to your point the bad news is that prices paid are actually surging and at 70.5 is a pretty pretty big number and then of course you know linked to that will be well now we go energy prices that are potentially going to be high for like another six months.

That's only going to add to to those inflationary pressures so it puts that that pressure on on the central bank where you know best case scenario they probably do nothing just to wait on seeing how this dynamic places.

Okay so today Australia gets building approvals the RBA governor Michelle Bullock is going to speak at the AFR business summit this morning 10 past 8 this morning.

So unfortunately there's no title to his speech the governor will be speaking at 10 past 8 in the morning and yeah my sense is that you know she's likely to get a lot of questions around what does this mean what would any the spark and energy prices mean.

We did have Sarah hand to speaking in overseas over nice.

Yes I suppose one of the take was that the topic was very much along the lines of defending the RBA strategy in the post pandemic era where you know as we know compared to other other nations that the RBA was a little bit more gradual in the approach in terms of lifting rates.

And more patient if you like and allow inflation to come down and and her argument has been that you know that also help protect the labor market and you know when we compare to the likes of the UK New Zealand and even Canada is certainly true that we have come out in a much better shape compared to to those economies.

But of course the flip side to that is that now that we were expanding or we are expanding and we we have that capacity constraint compared to what we're seeing in New Zealand also today.

Japan gets labor market data for January and then the preliminary February CPI for the euro zone which you sort of assume would be on the way down because that seems to be the general direction for Europe but not for long perhaps.

Yeah exactly so now because of this new dynamics the big question mark will be well that decline which you know you know Gavin has been going to remind us is only expected to be temporary that the base case was for inflation in Europe to get back closer to two percent.

Of course now with this this dynamics you know maybe the pressure will be that it kind of we should a little bit higher.

If you know energy prices proved to be higher for longer.

It is the big question that how long everything depends on how long this all goes on for for which we watch every day for hints on that but at the moment it's not looking good but anyway.

Rodrigo good to talk and we'll get we'll get you on again soon thanks.

In the words of the great Kamal why are people so inclined good and snows that's it for today I'm back tomorrow I'm Phil Dobby for now thanks for joining us today.