“US diesel jumped above $5 a gallon for the first time since December 2022 as the war in Iran disrupts supplies, placing further pressure on the world’s largest economy.”
Bloomberg Markets Daily Newsletter, March 17, 2026, (https://www.bloomberg.com/news/newsletters/2026-03-17/stocks-globally-are-sinking-even-if-us-shares-are-holding-up)
TS Lombard’s Chief US Economist, Steve Blitz, gave me permission to quote his March 11th note. I thank him on behalf of those readers who normally might not see his research. Steve writes,
As much as the front oil contract spiked, forward expectations for the funds rate based on SOFR pricing refused to follow in full (Chart 1). Typically, forward rate expectations are closely aligned with front oil contract volatility. My guess is the cause of this oil price jump gave no cause for worry that the spike would last. Everyone wants to believe this war broke nothing, I disagree but the view is fair enough given how China has an interest in cheap oil.
Chart 1: This time the forward funds rate fails to follow front oil
Perhaps the market’s response on the funds rate was muted because this oil price hike is hitting a softening rather than hard charging economy. Payrolls reversed in February, on a M/M basis, but more critically, private payrolls without health services declined as did private payrolls ex health, restaurants, and retail. That is, taking out weather and the strike, payrolls still declined. We see the drop in payrolls in Chart 2 since mid-2024 – long before deportations began. The 2025 data would look even worse if the recently released Q3 QCEW data were used for the benchmark.
Chart 2: Payroll levels — private sector ex hospitals, leisure and retail. Not demographics
(“What Next? Receive or Pay? [Both].” | GlobalData. TS Lombard, https://hub.tslombard.com/report/macro-strategy-ideas/what-next-receive-or-pay-both/35443/493e11a1f7de79e2fa954397050d59bb)
If you look at the American K-shaped economy through a payroll data lens, the Hormuz closure oil price shock hits an already weakening US economy. The latest QCEW data mentioned by Steve is confirmation. Essentially, there is no job growth; healthcare employment is the exception. And we continue to chase out of the country some folks who would prefer to stay legally and work.
Note that GDP driven by the AI hyperscalers’ buildout has added to the current US economic growth rate. And now there are concerns about the borrowing undertaken to finance those facilities, and those concerns land on top of concerns about private credit. Note: Credit spreads are widening!
The Iran war hasn’t impacted US economic data releases yet. That will soon change.
As I see it, data through the end of February tells us where we were. It is not helpful now in trying to determine the direction and magnitude of the Iran war shock. My suspicion is that we won’t like where we find ourselves by summer. Meanwhile, our elected incumbent congressional idiots hamstring the US economy with five-hour delays at airports because some unfunded TSA workers must call in sick so they can work another job to feed their families and make their mortgage payments. Idiots! I’m being kind to Congress.
For the US, the closing of the Strait of Hormuz is an oil price shock. The US is a net exporter of oil (light sweet crude). The US also imports heavier crude that US refineries are equipped to refine and that is needed for certain purposes. An overview of exports and imports can be found at USA Facts. Other countries are more exposed to oil supply shocks than the US is, to the extent that they depend on oil that passes through the Strait of Hormuz.
The price of a widely consumed product, gasoline, which is a necessity for most in the lower branch of the K, rises as the conflict continues. Gas is their essential means to get to work, to take their kids to school, to get to the grocery store. The people in the upper branch of the K may complain about the higher price, but higher fuel prices don’t substantially impact their lifestyle choices. My estimate (guesstimate) is that American consumers are already shouldering an additional cost burden of up to $10 billion a month, and the figure is rising.
Look again closely at Steve Blitz’s charts. Note how 12-month secured overnight funding rate (SOFR) is rising and trending well above 3%. In my opinion, the SOFR is the single most important riskless short-term rate for policy. It captures all one needs to know about monetary policy today and what the financial market agents think about tomorrow. I track the SOFR and SOFR futures (and SOFR forward rates derived from futures) regularly.
I again thank Steve Blitz for permission to use his excellent charts.
Today, I’d like to leave readers with a March 15 LinkedIn post from strategic advisor Eduardo José B., who points out how energy shocks play out in various facets over time. We’ve only just begun to see the impacts.
When Kharg Enters the Battlefield, Oil Markets Lose Their Synchronization
A strike near Iran’s main export terminal may matter less for the physical damage it causes than for the timing shock it introduces into the global energy architecture.
Energy markets do not break only through supply shocks.
Sometimes they break through time.
When conflict reaches Kharg Island, the implications extend far beyond a regional military event. Kharg is the terminal through which most Iranian crude exports flow, embedded within the logistical architecture surrounding the Strait of Hormuz — a corridor through which roughly one fifth of global oil trade moves.
Once such a node enters the military theatre, the market question changes. The issue is no longer merely whether infrastructure has been physically damaged. The more consequential question is whether the oil system remains synchronized.
Energy markets operate across multiple clocks. Financial markets react within minutes. Shipping routes, tanker insurance and freight markets adjust over days or weeks. Production capacity, refinery allocations and industrial supply chains often take months to realign.
In energy systems, shocks propagate through time.
This temporal asymmetry explains why relatively contained geopolitical disruptions can generate persistent economic consequences. As Mohamed A. El-Erian has noted, restoring oil supply is not like turning on a light switch. And as Ian Bremmer has emphasized, the Strait of Hormuz remains one of the most fragile choke points in the global economy.
Taken together, these observations point to something more subtle than a conventional supply shock: Energy System Synchronization Risk.
This risk emerges when geopolitical shocks disrupt logistical nodes and cause the different economic clocks of energy markets — finance, shipping, supply chains and industrial production — to fall out of alignment.
Even if infrastructure remains largely intact, the entry of Kharg into the military theatre can trigger synchronization risk across the oil system anchored around Hormuz. Financial markets react immediately. Shipping and insurance adjust later. Industrial supply chains — fertilizers, agriculture and food systems — follow with further delay.
By the time geopolitical tensions appear contained, the economic transmission may already be underway.
Energy shocks rarely end in energy markets. They travel through transportation costs, fertilizers and agricultural production before reaching food systems, inflation dynamics and fiscal balances. What begins as a localized geopolitical disruption can evolve into macro-financial risk.
If the logistical heart of the oil system becomes part of the battlefield, the issue may no longer be supply disruption alone.
The deeper question is synchronization.
Are energy markets facing a temporary supply disruption — or the early stages of a systemic synchronization shock?
(Eduardo José B., “When Kharg Enters the Battlefield, Oil Markets Lose Their Synchronization” | LinkedIn, March 15, 2026,
https://www.linkedin.com/posts/activity-7438654647894040576-Dhpr?utm_source=share&utm_medium=member_desktop&rcm=ACoAAAGI4M0BVhuL6CoueEAqm4wuqvr8Z_0-Qx8)
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