News of the week summary - 01/03/2026

The week's data: equities broad, earnings strong, rotation intact

Through Friday, the story of 2026 continued to unfold as it had all year. The equity market's leadership rotation, in which value stocks, smaller companies and international markets have outperformed the large-cap growth names that dominated 2024 and 2025, deepened further. The Russell 2000 Value index has now gained nearly 9 percent year-to-date. The Russell 1000 Growth index has lost close to 5 percent over the same period. Energy sector stocks within the S&P 500 are up 25 percent for the year; Information Technology is down 5.5 percent. The equal-weighted S&P 500, which treats every constituent the same regardless of size, has risen 7.1 percent for the year against less than 1 percent for the standard market-cap-weighted version.

Corporate earnings continued to beat expectations. With 96 percent of S&P 500 companies having reported fourth-quarter 2025 results, the combined year-on-year earnings growth rate stands at 14.2 percent, which would mark a fifth consecutive quarter of double-digit growth. Three-quarters of companies have come in above analyst estimates. And the 30-year fixed mortgage rate fell below 6 percent for the first time since September 2022, touching 5.98 percent in Thursday's Freddie Mac survey, a development that had been expected to lift housing activity heading into the spring.

That was the world at 4 p.m. on Friday. The world on Sunday morning is different.

What the Strait of Hormuz is, and why it matters so much

The Strait of Hormuz is a narrow passage of water, 34 kilometres at its narrowest point, connecting the Persian Gulf to the Gulf of Oman and then to the open ocean. Until Saturday, roughly 178 ships transited it every day. Through it passes approximately 20 to 25 percent of the world's seaborne oil trade, including the bulk of exports from Saudi Arabia, the UAE, Kuwait, Iraq and Qatar. There is no meaningful alternative. Saudi Arabia has a pipeline that can carry some crude to the Red Sea port at Yanbu, and the UAE has a pipeline to Fujairah that can handle a portion of Abu Dhabi's output. Between them, these bypass routes could handle perhaps 4 to 5 million barrels per day at most. The Strait normally carries closer to 20 million barrels per day, along with roughly 20 percent of globally traded liquefied natural gas, almost all of it from Qatar. There is no LNG pipeline alternative at all.

The first financial market price to move was oil. Brent crude, which had been trading around $72 per barrel on Friday, jumped approximately 8 percent in overnight trading following Saturday's events, moving to around $77 per barrel. That is a large move for a single session, but it still reflects considerable uncertainty about what actually happens next. As of this morning, commercial traffic through the Strait appears to have been severely disrupted by ongoing military activity and the threat of further attacks. No formal closure declaration has been issued, but war risk insurance premiums have already begun to rise sharply: insurers are reportedly quoting 0.5 to 1 percent of vessel value per seven-day transit, compared with roughly 0.25 percent before the conflict, and some underwriters are refusing coverage entirely until the situation clarifies. Without war risk insurance, vessels cannot legally operate. Without vessels, the oil and gas does not move.

Duration is everything: the scenarios analysts are already mapping

The central message from the analysts and economists who have begun publishing assessments this morning is that the outcome for the global economy depends almost entirely on how long the disruption lasts. A short closure, measured in days or a few weeks, would produce an oil price spike followed by a sharp reversal and limited lasting economic damage. A closure measured in months would be a different order of problem entirely, with consequences that spread well beyond energy prices into inflation, monetary policy, growth and potentially financial stability.

Barclays, which had a 2026 Brent forecast of around $75 per barrel before the conflict, has already revised that estimate upward. The bank estimates that Brent could test $120 per barrel if the conflict persists for another couple of weeks, with a higher-end scenario toward $150 before the end of the month if the situation deteriorates further. Goldman Sachs, still working with a base case assumption of a relatively brief disruption, has Brent in the low $80s for March but has explicitly flagged that $100 becomes likely if Hormuz flows remain depressed and no resolution appears in the near term. Both banks are pointing in the same direction on the upside risk: the range of outcomes skews heavily toward higher prices, not lower.

There is a buffer available that was not present in the 1970s energy crisis. The IEA's member countries collectively hold more than 1.2 billion barrels of public emergency oil reserves, plus an additional 600 million barrels of industry stocks held under government obligation. The US Strategic Petroleum Reserve alone holds approximately 400 million barrels. These reserves exist precisely for situations like this one: to bridge a supply gap while a disruption resolves. If deployed, they could meaningfully dampen the immediate price shock and buy the market time. The question is whether a few weeks of reserve releases is sufficient, or whether a more prolonged disruption requires a sustained intervention that eventually depletes those reserves too. The maths is stark: at 20 million barrels per day of disrupted flows, even the full deployment of global strategic reserves provides only about three weeks of cover.

What $100 oil actually means for the rest of the year

For the economies that sit outside the Persian Gulf, the first and most direct channel through which a Hormuz disruption matters is petrol prices. US retail gasoline averaged around $3.20 per gallon on Friday; even a modest further rise in Brent will push that above $4, and if Brent reaches $100, most forecasters expect petrol prices above $4.50 to $5 by the time the refining and wholesale margins adjust. That would represent a cost increase visible to every household every time they fill up, with an outsized psychological effect on consumer confidence relative to its actual weight in household budgets.

The second channel is inflation. The Federal Reserve's preferred measure, core PCE, had been running at 2.7 to 2.9 percent at the end of 2025, still above target but moving in the right direction. A sustained energy price surge reverses that trajectory for headline inflation, and the question the Fed will need to assess is whether it also risks dislodging inflation expectations in the broader economy. In a short disruption of a few weeks, the central bank would almost certainly look through the energy spike, just as it has done in previous commodity price shocks that were supply-driven and temporary. In a longer disruption, where energy costs start to filter through to transport, food production and services, the picture becomes genuinely difficult. The Fed cannot lower rates to support growth if energy-driven inflation is simultaneously pushing headline CPI toward 4 percent or above.

The third channel matters most for Europe and Asia. Both are far more dependent on Gulf energy imports than the United States, which is itself a major oil and gas producer. The eurozone imports the large majority of its energy; Japan imports virtually all of it. Qatar supplies roughly a fifth of globally traded LNG, and most of that goes to customers in Europe and East Asia. If Qatari LNG tankers cannot exit the Gulf, which they cannot if the Strait remains closed, European gas storage, already drawn down through a cold winter, would face pressure at a moment when the gas market had been expecting restocking to begin. That is not an immediate crisis, but it becomes one quickly if the closure extends into April and May, which are the months when storage levels need to start rising to prepare for next winter.

What is known, and what is not

As of this Sunday morning, the Strait of Hormuz has not been formally declared closed by Iran, but the practical effect of ongoing military activity and collapsed war risk insurance is similar. Congressional authorisations for strategic petroleum reserve releases are in place and available to the administration. OPEC+, which has been curtailing production voluntarily, has the spare capacity to add some incremental supply, though most of that spare capacity also sits in Gulf countries whose export routes run through the Strait. Non-OPEC producers in the United States, Brazil and Guyana can increase output, but not quickly: the oil patch moves on timescales of months and quarters, not days.

The economic data from this week confirmed that the US economy entered this episode from a position of genuine underlying strength: strong earnings, improving manufacturing, easing mortgage rates, a healthy if moderating labour market. That matters because a strong economy can absorb an energy shock more readily than a weak one. The question that will dominate markets and macro analysis for the coming weeks is whether this particular shock proves short enough and contained enough to absorb, or whether it becomes the kind of sustained supply disruption that reshapes the inflation, monetary policy and growth outlook for the rest of 2026. The honest answer on the morning of March 1 is that it is far too early to know.