Two States, Two Visions: California Wants To Add A Wealth Tax; Florida Wants To Remove One

Authored by Siri Terjesen & Michael Ryall via The Epoch Times,

While Sacramento legislators debate how to extract more money from residents who are already leaving, Tallahassee legislators are moving in the opposite direction. The fiscal philosophies now playing out in California and Florida represent the starkest tax policy divergence in modern American history—and the numbers tell the story.

In California, there is a $12 billion budget deficit, the product of spending commitments that expanded faster than the revenue base meant to fund them. The legislative response, rather than spending restraint, has been a parade of wealth tax proposals. The latest—Initiative 25-0024, the 2026 Billionaire Tax Act—would impose a one-time 5 percent excise tax on the net worth of California residents exceeding $1 billion as of Jan. 1, 2026. Applied to the state’s approximately 200 billionaires, the measure is projected to raise roughly $100 billion, with 90 percent directed to Medi-Cal.

The details deserve scrutiny. The tax is retroactive: Liability attaches as of Jan. 1, 2026, but the measure cannot be enacted until after a November 2026 election, meaning the law would penalize conduct before the law formally exists. Legal analysts have identified constitutional vulnerabilities on due process, the Dormant Commerce Clause, and uniformity—making the measure’s survival uncertain. More practically, the California Legislative Analyst’s Office has warned that if even a fraction of targeted billionaires depart, the income tax revenue they currently pay disappears with them. The top 1 percent of California taxpayers already account for more than 40 percent of state personal income tax receipts. The margin for error is thin.

This is not California’s first attempt. Assembly Bills 259, 2289, 310, and 2088—all wealth tax proposals—have been introduced and abandoned in the past five years. One proposed exit provision would have continued taxing departing residents for up to 10 years after leaving. The structure prompted one legal commentator to invoke the lyric from “Hotel California”: you can check out anytime you like, but you can never leave—fiscally speaking.

The market is responding. Google co-founder Larry Page has reportedly registered Florida LLCs and many other billionaire tech founder CEOs are exploring a move outside California, including Peter Thiel, Sergey Brin, and Mark Zuckerberg. These are rational responses to a state signaling that accumulated wealth is a resource to be liquidated before its owners can move it elsewhere.

Now consider Florida, in which the policy signals are vastly different. The state already has no income tax—a structural advantage that has driven a decade of net migration from high-tax states. Governor Ron DeSantis is now pushing further: a constitutional amendment on the November 2026 ballot that would eliminate property taxes on homesteaded primary residences. The Florida House passed HJR 203 on Feb. 19, 2025, by an 80–30 party-line vote. If the Senate concurs and 60 percent of voters approve, Florida would become the first state in American history with neither an income tax nor property taxes on primary residences.

The fiscal challenge is real. Property taxes generate roughly $55 billion annually in Florida, funding significant county and municipal services. Critics argue that eliminating them would necessitate either dramatic service cuts or offsetting revenue increases—potentially raising the state sales tax from 6 percent toward 12 percent. Governor DeSantis disputes this, pointing to budget surpluses and government waste that can be redirected. That debate will play out in Tallahassee and at the ballot box.

But the directional signal is unmistakable. California responds to budget pressure by widening the net it casts on wealth. Florida responds by asking whether the net needs to exist at all.

The migration data confirm which model high earners find more credible—and reveal the fiscal irony California is engineering for itself. IRS data show that over the past decade, California has lost $14.5 billion in tax revenue to interstate migration, while Florida has gained $4.1 billion. Goldman Sachs Research, analyzing IRS filings from 2017 to 2023, found that 4 percent of households with more than $1 million in adjusted gross income changed states during that period, with large outflows from California and substantial inflows to Florida—a trend that was still accelerating in 2022 and 2023. Goldman Sachs estimates that tax-driven emigration has already reduced California’s tax revenue by up to 3 percent. U-Haul’s 2025 Growth Index ranked California the top outbound state for the second consecutive year and Florida the second-best inbound (behind Texas).

Every high-income household that relocates from Sacramento to South Florida takes its future income tax payments—and its business payroll—with it. California’s proposed billionaire tax may be designed to prevent that exit; the evidence suggests it will accelerate it instead.

Tyler Durden Wed, 03/04/2026 - 12:20

Costco Beats Out Walmart As Cheapest Grocery Store In The U.S.

A new pricing analysis from Consumer Reports suggests shoppers may find better deals than expected—sometimes well below Walmart’s prices.

The February study, carried out by the New York–based Strategic Resource Group, compared grocery baskets in six major metro areas across the U.S. Walmart, the nation’s largest and most widespread grocer, served as the pricing benchmark. Researchers ranked major supermarket chains—along with several warehouse clubs and specialty stores—based on how their total basket costs stacked up against Walmart’s.

The baskets included a mix of packaged goods, produce, and meat. However, basket sizes varied depending on what each store carried. Comparisons were most comprehensive among mainstream grocers that stock a broad range of identical national brands. Stores that emphasize private-label products or specialty items had fewer overlapping products with Walmart, resulting in smaller comparison baskets.

For instance, in the Chicago-area portion of the study, baskets at chains such as Food4Less, Jewel-Osco, Mariano’s, Meijer, Target, and Walmart each included 56 items. By contrast, Trader Joe’s basket there included just 23 comparable products.

Price differences were significant. Among warehouse clubs, Costco Wholesale and BJ’s Wholesale Club offered the steepest discounts—both averaging 21% less than Walmart. Alabama shoppers can access both chains, with Costco planning a new Irondale location and BJ’s expanding in Foley.

Discount grocers Aldi and Lidl were also cheaper, coming in a little over 8% below Walmart. Aldi continues to expand in Alabama, including converting former Winn-Dixie stores, while Lidl does not operate in the state.

On the higher end, Target averaged 5.9% more than Walmart, followed by Kroger (14.8%), Publix (20.3%), Piggly Wiggly (22.6%), and Trader Joe’s (24.6%). Whole Foods Market was the priciest, at nearly 40% above Walmart.

Overall, the gap between the least and most expensive mainstream supermarkets reached 33%, widening further when warehouse clubs were included. One notable omission from the rankings was Sam’s Club, which was not included in the survey without explanation.

Consumer Reports acknowledged that stores with limited assortments were harder to compare directly. Whole Foods also pushed back, arguing the analysis did not account for its quality standards, recent price reductions, or member perks.

Tyler Durden Wed, 03/04/2026 - 12:00

QatarEnergy Declares Force Majeure As One-Fifth Of Global LNG Supply Goes Dark

Qatar’s long-standing image as the world’s most reliable LNG supplier abruptly ended on Wednesday after QatarEnergy halted LNG production and declared force majeure to customers, a major shock to global gas markets given that Qatar accounts for 20% of global LNG exports, with 80% of those volumes to Asia. 

"Further to the announcement by QatarEnergy to stop production of liquefied natural gas (LNG) and associated products, QatarEnergy has declared Force Majeure to its affected buyers," QatarEnergy wrote in a press release on Wednesday morning.

Qatar’s LNG chief Saad Sherida Al-Kaabi is confronting the biggest energy shocks of his career after an Iranian drone strike earlier this week forced the shutdown of Ras Laffan, Qatar’s top LNG export hub, for the first time in three decades. 

The most immediate consequence is reputational. Wall Street analysts say the drone attack may permanently weaken Qatar’s ability to command premium gas pricing and long-term contract terms, as customers, especially in Asia, rethink their exposure to U.S. LNG in the calm warm waters of the Gulf of America. 

The duration of the shutdown at the world’s leading LNG exporter is not yet known, but restarting gas liquefaction after a full shutdown can take up to two weeks, with another two weeks needed to return to full capacity. In other words, the shutdown and the time required for liquefaction plants to return to full capacity could last a month or more.

In terms of flows, Qatar’s LNG exports mostly go to Asia. The latest data shows more than 80% of Qatar’s LNG is shipped to China, India, Japan, and South Korea. Europe is also another large customer. 

At the start of the week, European gas (TTF) futures nearly doubled on LNG disruptions from the Gulf area due to the Strait of Hormuz being paralyzed.

European Gas Prices Soar 50% After Qatar Shuts World's Largest LNG Export Plant https://t.co/0Yfq1SWoXq

— zerohedge (@zerohedge) March 2, 2026

On Monday, Goldman analysts wrote (read report) that "significant upside risk to prices from a potential sustained disruption of LNG supply through the Strait of Hormuz. In a scenario where flows halt for one month, we think it is likely that TTF and JKM could approach 74 EUR/MWh ($25/mmBtu) -- 130% above current levels -- a threshold that triggered large natural gas demand responses during the 2022 European energy crisis."

Vessel tracking website MarineTraffic said Wednesday morning that traffic in the critical waterway has collapsed by 90%.

"Unlike several other vessel segments where movements have largely ceased, some tankers are still travelling east and west through the strait, with a number of voyages occurring under AIS blackouts," Kpler analyst Matt Wright wrote in a note. 

Tanker traffic through Strait of Hormuz down by 90%

Analysis of vessel activity indicates tanker transits are now around 90% lower than last week. Matt Wright, Principal Freight Analyst at Kpler, explains: "Unlike several other vessel segments where movements have largely… pic.twitter.com/JIhFoAkQKO

— MarineTraffic (@MarineTraffic) March 4, 2026

Related:

• US Chemical Companies "Net Beneficiaries" Of Middle East Energy Disruption Crisis

Here's the latest from UBS analyst Nayoung Kim on "Qatar LNG, Hormuz risks":

Upgrading 2026 global gas prices on rising geopolitical risks and uncertainty

Global gas prices are surging due to the Middle East conflicts and the effective closure of the Strait of Hormuz. The Qatari LNG production halt has pushed TTF prices to €60/MWh (about $20), with JKM seeing a modest increase to $13.5/mmBtu. Although Qatar sends >70% of its exports to Asia, market reactions suggest Europe as the main concern. How much and how long prices rise depends on the extent and duration of disruptions; our revised forecasts assume disruptions could persist for next 1-2 weeks. Given a tight market, any disruption may cause widespread effects, leading to elevated prices in 2026. We raise TTF to €38 in 1Q26E, €37 in 2Q26E, and €35 on average for 2026E. JKM revised up to $14 in 1H26E and $13 in 2026E. US Henry Hub is less affected but rising US LNG demand may push prices up to $5.00 in 1Q26E, then down to $3.15 in 2Q26E, averaging $4 for 2026E. Longer-term forecasts unchanged (see Figure 1).

How much gas has been impacted so far?

Currently, nearly 140bcm of gas supply is either disrupted or at risk. 1) 118bcm from Middle Eastern LNG exports: Qatar accounts for 110bcm, and the UAE adds 8bcm, together representing 21% of total LNG flows. 2) 10bcm of gas exports from Israel to Egypt have been completely halted. 3) 10bcm of pipeline supply from Iran to Turkey is also at risk. Given the significant volumes involved, markets remain focused on the duration and impact of Qatar’s suspension.

What are the alternatives?

Spare capacity remains limited. The US could increase production in response to prices, but has little room for growth (Figure 15). We see Russian piped gas as the feasible option with capacity of >130bcm but faces political barriers (link). Short disruptions may be offset by later ramp-ups, but persistent supply issues may be hard to resolve without new capacity. Golden Pass start-up is near, yet the project will steadily boost output. It is too early to say the situation mirrors the 2022 energy crisis, yet we cannot dismiss the possibility of additional shocks. The previous supply shortfall was offset equally by reduced demand and increased LNG supply, but now there is little scope for such move.

Are flows shifting? or stalling? how importers to react?

Despite only 7% of Qatar's exports going to Europe, Europe faces more pressure due to low storage, limited alternatives, and potential for greater competition for spot cargos with Asia. Pre-disruption, EU storage was estimated at 26% by end-March. The ongoing disruption from Qatar throughout March could bring a loss of up to 1bcm. Given Qatar’s monthly exports to Asia (excl. China) reaching 4–5bcm, if these buyers enter the spot market, storage levels could drop further toward 20%. China is less vulnerable given its other fuel/supply options and natgas storage. We expected Europe to need an 8% y/y increase in LNG imports (see our Jan outlook), which may now be even more with Qatar and other disruptions, making the impact most pronounced.

A wide range of outcome and prices; upside risks remain

Uncertainty around Middle East tensions may cause significant volatility in prices, with risks skewed to the upside while conflicts persist. Iran's attacks on Qatari LNG/energy facilities could drive prices >€100 (or $30) if they escalate. With limited alternatives, prices may stay higher for longer in that case, with potential demand adjustments as situation develops. If US/Israeli operations conclude and Iran ceases attacks soon, risk premiums could drop quickly, lowering prices to ~€30s (or $10-11) as weather gets mild.

The full note can be viewed here and is available to pro subs.

Beyond Qatar, Iraq has shut in 460,000 barrels per day of production at the West Qurna 2 field and will likely be forced to cut more than 3 million bpd if the Strait of Hormuz remains paralyzed. President Trump has offered insurance and U.S. military escorts in an effort to unfreeze the critical maritime energy chokepoint. 

China's massive exposure to cheap energy from Iran and other Gulf nations has infuriated Beijing, and Foreign Minister Wang Yi said that his government will send a special envoy to the Middle East for mediation. China really needs the strait to remain open

China, the world's biggest crude importer, sources about half of its seaborne imports - or 5.4 million bpd - from the Middle East.

If the Strait of Hormuz stays disrupted for an extended period, China would take a meaningful energy and industrial hit, first through soaring energy prices, then through supply woes, and ultimately through an economic growth hit. It is increasingly clear that Beijing will do everything in its power to keep the strait open and pressure Tehran to avoid a prolonged shutdown. All of this comes before Trump heads to Beijing.

Tyler Durden Wed, 03/04/2026 - 11:20

Watch: Bessent Teases 'Series Of Announcements' To Stabilize Oil; Says Trump's 15% Tariff Will Kick In This Week

Authored by Andrew Moran via The Epoch Times (emphasis ours),

President Donald Trump’s 15 percent global tariff will take effect sometime this week, Treasury Secretary Scott Bessent said.

Following the Supreme Court’s rebuke of the president’s signature economic policy last month, Trump imposed a 10 percent global tariff, invoking Section 122 of the Trade Act of 1974. A day later, Trump pledged to raise the rate to 15 percent.

Treasury Secretary Scott Bessent testifies before the Senate Committee on Banking, Housing, and Urban Affairs on Capitol Hill in Washington on Feb. 5, 2026. Madalina Kilroy/The Epoch Times

In an interview with CNBC’s “Squawk Box” on March 4, Bessent confirmed that the new rate would be introduced sometime this week and remain in place for 150 days.

He also anticipates tariff rates would return to the levels that were in place before the high court’s decision.

“It’s my strong belief that the tariff rates will be back to their old rate within five months,” Bessent said.

“They have survived more than 4000 legal challenges. They are more slow moving, but they are more robust.”

Bessent says the global tariffs will be raised to 15% "likely sometime this week," and adds "it's my strong belief that the tariff rates will be back to their old rate within 5 months" pic.twitter.com/jBwAcrhf9C

— Aaron Rupar (@atrupar) March 4, 2026

Bessent’s comments come two days after a U.S. federal appeals court rejected the president’s effort to postpone legal proceedings connected to tariff refunds, sending the battle to a lower court.

Estimates suggest the federal government’s tariff refunds could total $175 billion.

Fiscal year-to-date, the administration’s tariffs have generated more than $150 billion, according to Treasury data as of March 2.

Oil Announcements Coming

Global energy markets have been highly volatile since the Iran War, with crude oil and natural gas prices rocketing on fears of supply disruptions.

The president calmed down the oil market on March 3.

In a Truth Social post, Trump said the White House would offer naval escorts and guarantee political risk insurance for commercial oil and gas tankers traveling through the Strait of Hormuz.

The Strait of Hormuz is a vital global chokepoint that handles approximately 20 million barrels of oil and petroleum products per day. It has effectively been shuttered as insurance companies canceled coverage or dramatically raised premiums.

But the administration will make additional announcements to help stabilize prices, Bessent said.

“We have a series of announcements that we’re going to be making,” Bessent stated.

“We began yesterday with the announcement that [Development Finance Corporation] will provide the insurance for both the crude carriers and the cargo ships operating in around the Gulf over the weekend.”

He shrugged off a possible energy shock as the Middle East conflict intensified, saying that the United States and the global marketplace maintain ample supplies.

Bessent: "Over the weekend, Lloyd's of London nullified the insurance, so the US government is going to step in and provide safe passage through the straits for the oil tankers" pic.twitter.com/ItR5vFSQDG

— Aaron Rupar (@atrupar) March 4, 2026

“This was a well telegraphed geopolitical event. The crude market had already moved substantially over the past two months. The crude markets are very well supplied,” Bessent said.

A barrel of West Texas Intermediate—the U.S. benchmark for oil prices—fell by about 0.5 percent in pre-market trading to around $74 on the New York Mercantile Exchange.

Brent—the international benchmark—was little changed at slightly above $81 a barrel on London’s ICE Futures exchange.

“Oil prices retreated after news the U.S. will ensure safe passage through the Strait of Hormuz, easing fears of a major global supply shock,” Adam Turnquist, chief technical strategist for LPL Financial, said in a note emailed to The Epoch Times.

“Softer oil prices are also helping cool inflation concerns and pull interest rates lower.”

Market watchers had warned that the risk of oil prices reaching $100 were high if the narrow waterway were closed for an extended period.

U.S. stocks also rebounded midweek, with the leading benchmark averages in the green prior to the opening bell.

The blue-chip Dow Jones Industrial Average crashed by as much as 1,200 points on March 2 before paring most of its losses. The tech-heavy Nasdaq Composite Index also fell by about 400 points before trimming its decline. The broader S&P 500 had also fallen by around 1 percent.

Tyler Durden Wed, 03/04/2026 - 11:00

Crude Stocks Rise 3.5 Million, Highest Since May 2025

With oil flows passing through the Straits of Hormuz blocked indefinitely, markets were paying especially close attention to today's weekly DOE report on oil stocks, to see how much capacity the US has in case of a prolonged lockout. The result was satisfactory. 

The DOE reported the following weekly changes:

• Crude +3.475MM, more than the expected +3.00MM, and the highest since May 2025
• Gasoline -1.704MM, down to the lowest since Jan 9, 2026
• Distillates +429K, biggest increase since Jan 2026
• Cushing +1.6MM, rising to the highest since Aug 23, 2024. 

Visually:

Also notable: production dipped modestly by -6kbd to 13.696MMb/d, yet the total US output remains remarkable especially when considering the sharp drop in wells in recent years.

Finally, while still relatively low, Cushing stocks continue to rise, and this week's 1.6 million barrel increase to 26.5 million pushes them to the highest since August 2024.

Overall, this was a welcome report as it showed that not only is US oil production humming along, but US commercial stocks continue to increase and in a worst case scenario of prolonged Hormuz closure, the US can remain relatively energy independent, even if Asia and especially China and Korea scramble to find alternatives to Gulf energy. 

 

Tyler Durden Wed, 03/04/2026 - 10:48

Novo Nordisk Finally Catches Bid After FDA Warns Telehealth Companies

Novo Nordisk shares in Copenhagen finally caught a bid after the U.S. Food and Drug Administration issued 30 warning letters to telehealth companies for making false and misleading claims regarding compounded GLP-1 products (otherwise known as copycat GLP-1s) offered on their websites.

FDA has warned 30 telehealth companies about misleading drug ads.

Consumers should not be fooled into thinking that unapproved, compounded GLP-1 drugs—marketed by telehealth companies—are generic versions or the same as FDA-approved products.

— Dr. Marty Makary (@DrMakaryFDA) March 3, 2026

Citi analyst Geoff Meacham told clients that a quick scan of some of the warning letters "shows the agency is taking issue with telehealth companies calling their compounded products' generic Zepbound' or 'generic Mounjaro' when these products are not FDA-approved."

"It's a new era. We are paying close attention to misleading claims being made by telehealth and pharma companies across all media platforms—and taking swift action," FDA Commissioner Marty Makary wrote in a statement.

Makary noted, "Compounded drugs can be important for overcoming shortages or meeting unique patient needs—but compounders should not try to compound drugs in a way that circumvents FDA's approval process."

Novo and the telehealth firm Hims & Hers have been locked in a GLP-1 battle over the firm's copycat GLP-1 drugs. Sagging demand, lower prices, and copycat GLP-1s have pressured Novo's outlook for the year. 

Hims & Hers

Novo Wegovy 

Shares of Novo caught a bid in Copenhagen, rising about 5%, but the key question is: who is stepping in to catch this falling knife?

The latest on Novo and the GLP-1 feud:

• "Big Miss": Wall Street Disappointed After Dismal Novo Nordisk GLP-1 Sales Outlook, Shares Plunge

• GLP-1 Feud: HIMS Fires Back At Novo Nordisk, Slams Lawsuit As "Blatant Attack" By Big Pharma

• "Worst-Case Scenario": Novo Nordisk Plunges After Next-Gen Obesity Drug Falls Short Of Lilly Rival

• Novo Nordisk Extends Slide After Announcing Price-Cuts For Blockbuster Obesity Drugs

Meanwhile, Novo's biggest bull, Goldman analyst James Quigley, downgraded the stock from "Buy" to "Hold" earlier this week. Quigley's full note can be viewed here and is available to pro subs.

Tyler Durden Wed, 03/04/2026 - 10:40

The post Minnesota Fraud, Trump’s Lawsuits, and His Big Pentagon Budget appeared first on CEPR.

Services ISM Smashes Estimates, Prints At 56.1 Highest Since 2022, As Prices Paid Tumble

After the Manufacturing ISM print earlier this week came modestly stronger than expected (albeit with the Prices Paid component spiking and sending 10Y yields higher), some were expecting a similar improvement in today's Services ISM print. What they got instead, was a blowout number, and one suggesting that whatever weakness the US economy was in for much of the latter part of 2025, is now over.

At 10:00am ET, the ISM Services print came out at 56.1, the highest print since July 2022, and was 2.3 higher than the 53.8 reported in January - the biggest monthly increase since Sept 2024

Economists expected a print of 53.5. Not only did the number come above the highest estimate, it was a six-sigma beat to the consensus estimate. 

The breakdown shows improvements across virtually every category (a decline in prices paid is actually a good thing, as it means less inflation/stagflation risk).

Digging into the report we find that three demand indicators (the New Orders, Backlog of Orders and New Export Orders indexes) are in expansion, and the Customers’ Inventories Index remains in 'too low’ territory, contracting at a slightly slower rate. That said, a 'too low’ status for the Customers’ Inventories Index is usually considered positive for future production.

Regarding output, the Production Index is in expansion for the fourth month in a row, and the Employment Index, though still in contraction, improved by 0.7- percentage points. However, 45% of panelists still indicate that managing head counts is the norm at their companies as opposed to hiring.

Finally, inputs (defined as supplier deliveries, inventories, prices and imports) all increased since the previous month’s reading. The Supplier Deliveries Index indicated slower deliveries, Inventories Index contraction has slowed, and the Prices Index took a huge leap to 70.5 percent from 59 percent in January.

And while both employment and new orders posted gains, perhaps the most important indicator was that Prices Paid tumbled from 66.6 to 63.0, the lowest print in 11 months.

Here is a snapshot of what the ISM respondents are saying: 

• “India tariffs are anticipated to provide some measure of cost relief once current inventory levels are worked through. At a high level, we are addressing price/value perception which continues to drive negative sales impact.” [Accommodation & Food Services]
• “Our industry seems to have adapted to the tariffs. The costs are embedded into the import cost the company has to shoulder.” [Agriculture, Forestry, Fishing & Hunting]
• “Residential homebuilding continues to lag due to affordability and interest rate issues. While we saw improved sales last month due to further discounts, we struggled to achieve similar results in February. More material cost increases have rolled in for beginning of the second quarter, so margins continue to be reduced.” [Construction]
• “Higher education institutions are operating cautiously due to enrollment fluctuations and uncertainty in state and federal funding and name, image and likeness licensing. While supply chains have improved, costs remain high for technology, facilities, utilities, and contracted services. Labor expenses are also increasing due to competitive hiring. As a result, purchasing decisions are focused on essential needs, cost control, and maintaining key operations, with some noncritical projects being delayed.” [Educational Services]
• “Tariff volatility and shifting bilateral trade agreements are materially impacting our purchasing operations. Changes in U.S. semiconductor supply constraints continue to pressure component pricing and availability. The combination of tariff exposure and semiconductor market instability is increasing procurement risk, compressing margins, and requiring more aggressive supplier diversification and contractual protections to maintain cost competitiveness.” [Mining]
• “The business climate remains solid overall, but significant unknown risks from further potential tariff actions by the U.S. government are dampening business investment.” [Real Estate, Rental & Leasing]
• “Due to random-access memory shortages, we are seeing increased cost and lead times from key technology providers. Quotes that were normally secure for 90 days are now 30 days or less.” [Retail Trade]
• “Transportation/truck capacity has been extremely tight, causing rates to spike 30 percent to 40 percent. Some of this can be attributed to the weather; some can be attributed to the Federal Highway Administration’s push to make sure all drivers are proficient in English and others can be attributed to an increase in commerce.” [Transportation & Warehousing]
• “Mid-first quarter business conditions are good. The unseasonable cold weather has helped to increase demand and boost revenues. All else is on track so far.” [Utilities]
• “Overall, our business performance in January and February has been solid (minus some winter storm hurdles). Our upstream oil and gas business has stalled for two years and is not supporting our growth. On the other hand, all data center-related activity continues to grow substantially. Downstream is always steady, but we are taking more market share within it. The business here is busy. All industries are doing well, minus the oil field business.” [Wholesale Trade]

The report listed the following commodities as going up in price: Cement Products; Chips; Computers; Copper (3); Fuel; Labor (7); Lumber (2); Memory Products (2); Software; Software — Licensing; Software Maintenance; and Wire & Cable.

There were two commodities that dropped in price: Diesel Fuel (3); and the all important Gasoline which is now down 12 months in a row.  

Commenting on today's ISM report, Bloomberg says that it comes as close as it possibly can to goldilocks as "the headline reading posted its highest level since the summer of 2022, with lower-than-expected prices paid (63 versus 68.3 forecast) and nice jumps in new orders and employment, both of which comfortably exceeded market forecasts. If you are a believe that AI will drive non-inflationary growth, this is the survey for you, and it’s given equities a bit of a fillip as a result."

Judging by the positive market reaction which has sent stocks sharply higher after the report, the market agrees. 

Tyler Durden Wed, 03/04/2026 - 10:28

Rising Energy Costs May Hit All Sectors Eventually

By Bas van Geffen, Senior Macro Strategist at Rabobank

Nowhere To Run

There don't appear to be many safe havens as the situation in Middle East continues to evolve. Not in markets, and not in the region either. At the time of writing, Israel has launched a new strike on Iran. And the US is considering arming Kurdish forces, trying to convince them to take part in a ground offensive against the regime.

Iran, meanwhile, has retaliated not only against the US and Israel, but against various countries in the region and against both military and civilian targets. Maybe this is simply an attempt to sow more chaos as the Iranian regime feels it is on its last legs. Or, perhaps, this is an attempt to convince its neighbors to appeal to the US to stop further operations; a signal that more of these attacks may happen if the US doesn’t.

Yet, if this was the plan, then it has backfired. Iran may have drawn its neighbors into the conflict – and they may side with the US instead. Saudi Arabia may attack Iran soon, Qatar reportedly already has. That’s quite the shift: it effectively sees them side with Israel in this conflict.

Iran’s strikes have reached as far as Cyprus, which means the EU is now involved too – if its energy security wasn’t a reason yet. However, European leaders remain divided on how to deal with the situation. The UK, Greece and France are scrambling to bolster Cyprus’ defences. Elsewhere, Spain has denied the US access to its military bases for air strikes.

That angered President Trump, who has threatened to cut trade ties with Spain. This follows on his Greenland threats earlier this year, and the recalibration of the US tariff structure after the Supreme Court invalidated many of Trump’s original tariffs.

The spat also raises the question whether the US is willing to protect European ships, or ships headed for the continent. President Trump has announced that the navy will escort tankers and freighters through the Strait of Hormuz, as a surge in petrol prices adds to US inflation fears. However, does that protection apply to all ships, or just to US allies? And does the EU have the capacity to protect its own tankers, if necessary? A French carrier does not suffice, but Europe does have some other assets in the area already. In fact, the US may lack the required assets, such as minesweepers, implying it may need its allies to back its pledge with the required muscle.

Nous sommes à l’initiative pour bâtir une coalition afin de réunir les moyens, y compris militaires, pour reprendre et sécuriser le trafic dans ces voies maritimes essentielles à l’économie mondiale. pic.twitter.com/Dv7vNJQA9N

— Emmanuel Macron (@EmmanuelMacron) March 3, 2026

The effective shuttering of the Strait of Hormuz also poses a dilemma for China. What options does the country have? Escalate too, in order to distract the US and draw it away from the region? Or will Beijing work with Washington to end the conflict as quickly as possible and/or to safeguard energy flows through the Strait?

The longer world leaders take to effectively reopen the Strait of Hormuz, the more backlogs in energy supplies will build. So, thus far, markets have largely traded the Middle East war as an inflation risk. Money markets across the globe priced in tighter monetary policy – in the case of the Fed and Bank of England that means fewer rate cuts are being priced, but EUR money markets are now pricing in around 40% odds that the ECB may have to hike rates before the end of the year.

The inflation shock in the aftermath of the Russian invasion of Ukraine is clearly still in peoples’ minds. And yesterday’s Eurozone inflation data probably did not help either. At 1.9% y/y in February, the inflation rate still ran slightly below the ECB’s target, but prices rose faster than the 1.7% that had been expected – and that’s before any real disruptions to energy supplies. We estimate that recent energy price increases could add about 0.5pp to Eurozone inflation. This would see inflation average 2.3% this year, instead of undershooting the ECB’s target.

But if monetary policymakers do prioritize the inflation risks, where does that leave the economic outlook? Equity markets were deeply in the red yesterday, and a 12% drop in the Korean KOSPI index today suggests that global equity markets may not have bottomed out yet.

Rising energy costs may hit all sectors eventually, and aluminium and fertilizer prices are already being affected. But energy-hungry AI data centers are another key sector that comes to mind.

Governments may step in to shield households and companies from surging energy prices, like they did a couple of years ago. However, that will weigh on public finances, while fiscal space is already limited. Long-term sovereign bonds have taken a hit as a result, both in terms of outright yields, and in terms of swap spreads.

And in other markets, too, there appears to be little to no escape. Traditional safe havens, like gold, are not playing their usual part. Curiously, the metal has fallen 5% from its intraday peak at the start of this week. Considering the sharp appreciation of the DXY index, dollar liquidity appears to be king.

Tyler Durden Wed, 03/04/2026 - 10:20

Air Freight Rates To Spike As Iran War Escalates

By Eric Kulisch of FreightWaves

The war launched by the United States and Israel against Iran on Saturday is already disrupting air cargo traffic in the Middle East, a key freight corridor between Asia and Europe where two of the world’s largest cargo airlines are based, and raising the potential for a rise in air freight rates. 

Airlines are suspending flights, rerouting traffic around the conflict zone and unable to use key transload hubs in Dubai, Abu Dhabi and Qatar because of retaliatory missile attacks by Iran. More scheduling changes are anticipated in the days ahead. 

Longer routes require more fuel, reducing the amount of cargo aircraft can carry so as not to exceed weight limits. Some airlines are expected to add refueling stops.

“We are expecting some potentially significant move in rates, especially Asia-Europe, if the situation continues with large-scale flight cancellations,” said Neil Wilson, editor of global price reporting agency TAC Index, said in an email exchange.

FedEx has suspended flights to and from Bahrain, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, United Arab Emirates and Saudi Arabia.

“The safety and well-being of our team members is our highest priority. As a result, pickup and delivery services in Bahrain, Kuwait, Iraq, Qatar and United Arab Emirates have been temporarily suspended until further notice. Shipments to and from other markets throughout the region may experience extended transit times,” the company said in a service alert. “We are closely monitoring the situation and will resume services as soon as it is safe to do so.”

UPS has not announced any operational changes, but said in a statement provided to FreightWaves, “We are closely monitoring this fluid situation and using established contingency plans to manage our operations safely and efficiently.”

Qatar Airways, which operates 29 Boeing 777 freighter aircraft and carries huge volumes of cargo on widebody passenger planes, has temporarily halted flights to, and from, Doha due to the closure of Qatar’s airspace. Qatar Airways Cargo offers shippers 13 tons of capacity per day.The airline warned customers to expect flight delays once the airspace re-opens and it resumes operations there. In the meantime, tendered cargo is being held at its hub and other stations around the world. 

Emirates Skycargo, the fourth-largest cargo airline by traffic, has similarly suspended flights through Dubai. It operates nearly a dozen Boeing 777 freighters and leases several crewed Boeing 747-400s from third-party carriers. The United Arab Emirates has closed its airspace and Dubai International Airport sustained minor damage to a passenger concourse from an Iranian attack, according to news accounts from the region.

 Air cargo terminals at Dubai International Airport as seen on Feb. 21, 2019. (Photo: Shutterstock/Sorbis) 

Bahrain’s international airport also suffered minor damage from a drone attack.

Etihad Airlines, which operates five Boeing 777 freighter aircraft in addition to a large fleet of widebody passenger aircraft, has suspended all flights through Abu Dhabi until Monday at 2 a.m. Airlines are monitoring the situation and could choose to extend any flight suspensions.

The cargo arm of Oman Air said it is experiencing limited disruption to some services within the region. Oman Air is a smaller carrier, with nine Boeing 787, 10 Airbus 330, and  32 Boeing 737-800/MAX8 passenger jets, plus one 737-800 converted freighter, according to Flightradar24 data. Services to Europe and the Asia Pacific continue to operate as scheduled, with rerouting implemented and some minor delays. As a precautionary measure, the carriage of perishable cargo has been temporarily restricted, while general cargo operations continue as normal.

Hong Kong-based Cathay Group, a hybrid carrier with 20 Boeing 747 cargo jets, suspended all operations in the Middle East, including passenger services to and from Dubai and Riyadh, as well as freighter services to and from Al Maktoum International Airport in Dubai. Flights typically passing over the affected area are being rerouted, it said.

Data from Netherlands-based consultancy Rotate shows global air cargo capacity is down 18% from last week due to flight suspensions by Middle East carriers and other carriers opting not to serve the Middle East. Freighter operators in Asia pivoting from the Middle East and flying over Russia (depending on sanctions), or central Asia, to reach European destinations, according to Rotate. 

Air India has suspended all flights to destinations in the Middle East, as well as many flights to Europe and New York.  

United Airlines has cancelled all departures to and from Tel Aviv, Israel through March 6. The airline has also canceled flights through Dubai through March 4. SWISS suspended flights to Dubai through March 4 and to Tel Aviv through March 8. “Until and including 8 March, we will continue to avoid the airspace of Israel, Lebanon, Jordan, Iraq, Iran, Kuwait and Bahrain,” the passenger airline said in a notice.

In addition to suspending flights to the region, European carriers impacted because they must take the longer northern route through central Asia to reach south and east Asia, instead of the southern corridor over Turkey, Iraq and Iran.

Freightos, an international cargo marketplace and freight data provider, said air cargo rates in and out of the Middle East have remained stable so far. 

“While the situation is still developing, we can already now advise of significant delays ahead for both shipments already in transit and for upcoming shipments to and from the Middle East. It is also likely that there will be delays on the Asia-Europe trade lane as a result of this,” said Scan Global Logistics in a notice to customers.

Immediate hikes in air cargo rates could be tempered by the fact that Chinese exports are still slow as factories come back online following the Lunar New Year holiday, which means there is more slack in aircraft supply than there will be in a week or two, said Dmitry Kulisch, executive director of Air Cargo APAC Ltd., a Hong Kong freight consolidator. He said cargo rates could be pressured upward too because fewer passenger aircraft will be available to carry cargo as airlines prioritize repositioning aircraft within their networks to restart operations once the war ends.

Meanwhile, on the ocean front, container shipping lines Maersk, Hapag-Lloyd, MSC and CMA CGM are ceasing services to and diverting vessels away from the Strait of Hormuz and the region, with CMA CGM introducing a $4,000 emergency surcharge per forty-foot container for services to the region. Hapag Lloyd announced a war risk surcharge of $1,500 per 20-foot equivalent unit for cargo transiting the Arabian/Persian Gulf, effective March 2. Reefer and special containers will be charged at $3,500 per TEU.

Marsk also cautioned customers about possible service disruptions in the UAE, Oman and Qatar.

Iranian Revolutionary Guards attacked two oil tankers on Sunday. Four seafarers on the MT Skylight were injured and transferred ashore for medical treatment after their vessel was attacked in the Strait of Hormuz, according to officials in Oman and the Palau Ship Registry.

DP World has suspended operations at the port of Jebel Ali in Dubai after an aerial interception caused a fire there Saturday night.

Iran-backed Houthi rebels in Yemen have threatened to resume strikes. In response, carriers that had restarted some Red Sea sailings have diverted vessels back around the Cape of Good Hope, postponing industry plans to return to the shortcut between Asia and Europe.

The Freight & Trade Alliance and the Australian Peak Shippers Association, representing logistics providers and cargo owners in Australia, said Sunday night “the situation is already having direct and measurable impacts on Australian supply chains, with disruptions to air cargo connectivity, container shipping schedules, and the rapid imposition of significant conflict‑related surcharges by major international carriers.”

International supply chains have buffeted by geopolitical events in recent years, including the Ukraine war, the Israel-Hamas war and the proliferation of global tariffs triggered by the United States.

Tyler Durden Wed, 03/04/2026 - 10:00

"A Watershed Milestone": Kraken Becomes First Crypto Firm To Gain Access To Fed's Payment System

Kraken has secured a Federal Reserve “master account,” giving its banking arm direct access to the Fed’s core payment systems and making it the first crypto firm to operate on the same rails as traditional financial institutions, Coindesk reported.

The company said its unit, Kraken Financial, received approval for a Federal Reserve “master account,” the Wall Street Journal reports. The account allows direct access to Fedwire, a major interbank payment network that processes trillions in transfers a day, and will be able to move money on the same rails that banks and credit unions use. The firm also noted that the approval would enable them to handle transactions more quickly and seamlessly for big clients and professional traders, as it would have access to Fedwire.

Pro-crypto Senator Cynthia Lummis described this as a “watershed milestone in the history of digital assets." That's because until now, Kraken had to rely on partner banks to send or receive U.S. dollars. Direct access changes that flow as the firm can now settle payments itself, which may speed up deposits and withdrawals for large traders and institutional clients.

Kraken Financial operates under a Wyoming charter designed for crypto-focused banks. The Federal Reserve Bank of Kansas City oversaw the application.

The approval is limited, however. Kraken will not receive the full set of services available to traditional banks as it won’t earn interest on reserves or be able to tap into the Fed’s emergency lending.

Kraken, a cryptocurrency exchange founded in 2011, has been slowly moving towards an iniital public offering (IPO). Several of its rivals, including Gemini, Coinbase, and CoinDesk’s parent company Bullish have already made their public markets debut.

Its parent company, Payward, has been on an acquisition spree, last month adding token management platform Magna to it. Last year, it acquired U.S. futures trading platform NinjaTrader for $1.5 billion and U.S.-licensed derivatives trading venue Small Exchange for $100 million.

It also moved into the tokenization space with the acquisition of tokenized stock specialist Backed Finance, the issuer of xStocks.

Meanwhile, it is worth noting that crypto firms such as Ripple and Anchorage, along with crypto-friendly Custodia Bank, have filed for a Fed master account. Custodia filed its application around the same time Kraken did, while Ripple filed its application last year.

In an X post, crypto journalist Eleanor Terrett revealed that the Kraken Fed master account approval is designed as a “pilot” program for the proposed skinny master account. This comes as Fed Governor Chris Waller, who proposed the framework, looks to finalize the initiative by the end of this year.

As CoinGape reported, the bank and crypto industry have clashed over this proposed Fed skinny master account. Banking groups have raised regulatory concerns. The American Bankers Association said many eligible entities lack a long history of supervisory oversight. It also warned that federal safety and soundness standards remain inconsistent across applicants.

Under the proposed skinny master accounts,  firms would be able to hold reserves and settle transactions using the Central Bank’s payment system. However, they cannot lend, access the Fed’s discount window, or operate as a traditional commercial bank, Terrett explained.

It is worth noting that other banking regulators, such as the OCC, are also warming up to the crypto industry. The OCC has conditionally approved national trust charters for Ripple, Crypto.com, Circle, and Paxos. The OCC recently expanded Trust Bank’s services, a move that could also provide these crypto firms with access to the U.S. financial system.

Meanwhile, Fed Governor Michelle Bowman recently stated that they are working with other banking regulators to implement the GENIUS Act. She added that they will provide clarity on the treatment of digital assets to ensure the banking system is well-positioned to support crypto activities.

Tyler Durden Wed, 03/04/2026 - 09:21

Minnesota Sues Federal Government Over Medicaid Funding Freeze

Authored by Aldgra Fredly via The Epoch Times (emphasis ours),

Minnesota filed a lawsuit on March 2 to block the federal government from withholding $243 million in Medicaid funds, saying the freeze could lead to potential cuts in medical services for low-income individuals.

In a still from video, Minnesota Attorney General Keith Ellison talks to The Epoch Times in Chicago on Aug. 22, 2024. NTD

The Centers for Medicare and Medicaid Services (CMS) last month temporarily deferred $259 million in Medicaid funds to Minnesota over alleged fraud in the state’s program, according to the court filing.

The lawsuit, filed by Minnesota Attorney General Keith Ellison and the state’s Human Services Department, asked the court to block the withholding of $243 million of those funds that were tied to 14 services the government identified as “high-risk” and subject to “noncompliance action.”

“These cuts are the latest in a long series of efforts to go around the law to punish Minnesotans — but just as we fought back and won when they illegally tried to cut funding for childcare, hungry families, and our schools, we are suing them again today to make them follow the law,” Ellison said in a statement.

The suit called the funding freeze unlawful, alleging that the government used the program as “political punishment” against the state, citing its previous attempts to withhold other funding from the state, including funds tied to the Supplemental Nutrition Assistance Program (SNAP).

According to the lawsuit, the federal government announced in January that it would freeze more than $2 billion in annual Medicaid funding to Minnesota over allegations of noncompliance.

The state appealed but said the federal government has not clarified the alleged conduct it deemed noncompliant or how Minnesota can remedy the issue.

“Impatient that it cannot withhold the $2 billion until Minnesota is provided a hearing and other due process, the administration ‘deferred’ $243 million from the state on February 25, 2026,” it stated.

The lawsuit is seeking a temporary restraining order to block the funding freeze, saying the withholding of funds would affect more than 1 million Minnesota residents enrolled in Medicaid.

“Unless the deferral is quickly reversed, the state will be irreparably harmed. The administration has already stated that the deferral will recur every quarter, crippling the state budget,” it stated.

The lawsuit names the Department of Health and Human Services and the Centers for Medicare and Medicaid Services, as well as Dr. Mehmet Oz, in his official capacity as CMS administrator, and Robert F. Kennedy Jr., in his official capacity as health secretary.

CMS said it does not comment on litigation.

John Connolly, deputy commissioner of the Minnesota Department of Human Services and state Medicaid director, said the state has invested “massive effort and resources” to address fraud in the program.

Medicaid is known as Medical Assistance in Minnesota. A family of four may qualify for the program if their income does not exceed $42,759, according to the state attorney general’s office.

Vice President JD Vance said on Feb. 25 that the government halted Medicaid funds to Minnesota to ensure that the state “takes its obligations seriously to be good stewards of the American people’s tax money.”

“A lot of people are getting rich off the generosity of American taxpayers. But more fundamentally and more importantly than that, it means that there are kids in Minnesota who deserve these services, who need these services. And they’re not going to those kids; they’re going to fraudsters in Minneapolis,” he said.

“That is unacceptable. And that’s the sort of thing that we’re cutting off with this action today.”

The Associated Press contributed to this report.

Tyler Durden Wed, 03/04/2026 - 08:50

Futures Bounce, Oil Slides After Report Of Iran Backchannel Outreach

It was shaping up as a catastrophic, margin-call driven Wednesday session after Japan's Nikkei tumbled about 4% and Korea's Kospi suffered its biggest drop ever, plunging by a record 12%. But after initially plunging overnight, S&P futures rose as much as 0.4% after the New York Times reported that operatives from Iran’s Ministry of Intelligence used backchannels to contact the Central Intelligence Agency a day after US-Israeli attacks began. The report also stated that US officials are skeptical that either the Trump administration or Iran is ready for an offramp. Then futures faded modestly after Treasury Secretary Scott Bessent said a proposed 15% global tariff may take effect this week, bringing trade tensions back into focus as traders followed developments in the Middle East. As of 8:00am ET, futures for the S&P 500 - extremely illiquid and jittery - were little changed after rising as much as 0.4%, while Nasdaq futures were also modestly in the green with Mag7 and Semis leading in premarket trading, and Cyclicals outperforming Defensives. Asia’s benchmark index plunged the most in nearly a year, led by a record selloff in South Korean equities which crashed 12% in one session. The yield curve is bear steepening with yields +1-2bp and USD sees some profit-taking following its best 2-day gain since Apr 2025. In the commodity space, crude prices are higher by 1-2%, WTI and Brent, as natgas sees a slight pullback; precious & base metals are surging on the US pullback with Ags adding to gains. The Energy complex seems to be reflecting a view that markets need more information before finding a level as there are mechanical reasons why the US commerce guarantee will not reverse recent price gains.  Aside from US / Iran update, the macro data focus is on ADP, Mtge Applications, and ISM-Srvcs. 

In premarket trading, Mag 7 were  mixed: Nvidia rose 0.6% after billionaire Leo KoGuan said he bought 1 million shares of the semiconductor giant and that he is “convinced AI is NOT a bubble, it is only the beginning.” (Tesla +1.1%, Meta +0.05%, Microsoft -0.5%, Alphabet -0.4%, Amazon -0.3%, Apple -0.4%)

• Cryptocurrency-linked stocks are rallying as Bitcoin rebounds after a selloff spurred by the escalating conflict in the Middle East.
• Gitlab (GTLB) drops 8% after the software company’s forecast for fiscal 2027 adjusted EPS fell short of the average analyst estimate.
• Latham Group (SWIM) jumps 20% after the swimming pool designer’s net sales forecast for the full year surpassed the average analyst estimate.
• Moderna (MRNA) rises 11% after the biotechnology company agreed to pay Genevant, a subsidiary of Roivant Sciences, and Arbutus $950 million to settle litigation related to the delivery technology behind its Covid shot. Analysts note that the settlement value was better than feared and that this should lift some litigation overhang on the stock.
• SSR Mining Inc. (SSRM) rises 8% after entering into an agreement to sell its 80% ownership stake in the Çöpler mine in Turkey to Cengiz for $1.5 billion in cash.
• Staar Surgical (STAA) falls 10% after the health care supplies firm reported net sales for the fourth quarter that missed Wall Street’s estimates.
• Webtoon (WBTN) declines 13% after the storytelling platform reported revenue for the fourth quarter that missed the average analyst estimate

In other corporate news, the architect of Alibaba’s AI model has surprisingly quit as tech lead for Qwen. Anthropic is on track to generate annual revenue of almost $20 billion, more than doubling it run rate from late last year. The CEOs of Nvidia and Microsoft deliver keynote speeches at the Morgan Stanley TMT conference later today in San Francisco. And a billionaire Tesla ‘whale’ says he bought shares in Nvidia, convinced AI is not a bubble. Novo Nordisk shares are higher after the FDA issued 30 warning letters to telehealth companies for “making false and misleading claims regarding compounded GLP-1 products offered on their websites.” Sinclair’s The Tennis Channel is added to Amazon as part of a broader push into the online TV market. Intel says Craig Barratt, a board member since November, to become chair following the annual shareholders meeting on May 13.

Markets have endured days of volatility after the US-Israeli attack on Iran destabilized the Middle East, curbing energy supplies and damaging infrastructure. The main focus remains on crude as traders weigh President Donald Trump’s plan to insure and escort tankers passing through the Strait of Hormuz, with traffic in the vital waterway all but halted.

“We’re in a headline market,” said Guillermo Hernandez Sampere, head of trading at asset manager MPPM. “Rapid movements with higher volatility will remain for a longer period until supply chains are secure again. It will take some time to calm markets.”

Trump on Tuesday said the US will ensure the free flow of energy through the Persian Gulf with insurance guarantees and even naval escorts. But the shipping industry sees it at best as only a partial solution to a historic crisis. Meanwhile, China may need to lean on US gas supplies to cover potential shortfalls. South Korea imports nearly all of its oil and gas, and Asia’s dependence on oil is illustrated in the table below.  Indeed, while the US is relatively immune as a “gigantic energy superpower,” according to Barclays’ global chairman of research Ajay Rajadhyaksha, Asian economies like China, India, South Korea and Japan are more dependent on oil flow through the Strait of Hormuz. 

Goldman’s David Solomon said he wasn’t surprised to see volatility measures climb. “It’s going to take a couple of weeks for markets to really digest the implications,” he said. Meanwhile, derivative strategists note a shift higher at the front end of the VIX futures curve signaling a market that is rapidly pricing short-term risk, without an escalation to full-on panic. Although risk assets face a “significant headwind” from rising geopolitical tensions and AI disruption, underlying growth and earnings growth mean the depth and extent of a correction will be limited, note Goldman strategists led by Peter Oppenheimer. 

Mohit Kumar, chief strategist for Jefferies in Europe, said the firm’s US clients are generally more optimistic than those in Europe and Asia. The gap reflects US investors’ greater focus on Trump’s actions, which could lead them to underestimate Iran’s response. For Aneeka Gupta, director of macro-economic research at Wisdomtree, the real test for markets will be whether oil and the dollar remain higher long enough to significantly change the behavior of central banks.

“If the shock is short-lived, energy settles, and dollar strength doesn’t become persistent, then the macro impact is mostly a risk premium event — volatility up, but growth intact,” she said.

In geopolitics, German Chancellor Merz says the EU won’t accept US trade deal on worse tariff terms. Several Chinese financial firms are scaling back exposure to Middle Eastern debt, while regulators are stepping up oversight as the conflict raises concerns over the nation’s extensive lending in the region.

In Europe, the Eurostoxx 50 is up some 1.6% posting a modest rebound from the worst two-day decline since April triggered by shocks from the Middle East conflict. Stocks turned green for the year following the NYT report that Iran is trying to backchannel with the US. Positive earnings news also buoys sentiment. The sector breakdown shows a preference for tech, industrial and financials.Here are some of the biggest movers on Wednesday:

• ASM International shares rise as much as 5.8% after the chip equipment firm guided 1Q revenue ahead of expectations, driven both by strong demand from advanced chipmakers amid AI infrastructure rollout, and a rebound in sales from Chinese clients.
• Scor shares gain as much as 4.8% following its fourth-quarter report, with net income coming in significantly ahead of expectations and analysts highlighting solvency “reassuringly ahead.”
• Galliford Try shares rally as much as 6.8% after the UK construction firm beat expectations in the first half and raised its guidance for the full year, stating it has improved confidence from its high level of revenue visibility over the coming years.
• Bayer shares drop as much as 4.2% after the German conglomerate forecast little change in profit and sales in 2026.
• Adidas shares fall as much as 7.8% after the German sportswear maker’s 2026 operating profit forecast missed analysts estimates.
• Continental shares fall as much as 3.2% with analysts disappointed by aspects of the German auto supplier’s 2026 guidance following a pre-release earlier in the year.
• Aroundtown drops as much as 4.9% as Jefferies says the German real estate firm’s funds from operations “landed at the low end of guidance.”
• Redcare Pharmacy shares slide as much as 17% after the online pharmacy reported earnings that missed expectations and gave cautious guidance for this year that disappointed across the board, according to analysts.
• Vistry shares plunge as much as 25% to the lowest since 2016 as the UK homebuilder guides to a lower margin following increased sales incentives to generate cash in a challenging market.
• Traton shares dive as much as 5.8% after the truck maker issued broad growth and margin targets for this year that fell significantly short of expectations at the midpoint.
• Weir Group shares fall as much as 9% after the British engineering company reported adjusted operating profit for the full year that met the average analyst estimate.

Earlier in the session, Asia looked like a missile crater as stocks extended their selloff for a third straight day.  The MSCI Asia Pacific Index dropped as much as 4.5%, the most since April 7, driven by sharp losses in Korean equities and regional tech heavyweights including TSMC, Samsung Electronics and SK Hynix. Korea’s benchmark Kospi plunged 12%, its biggest drop ever, as the Iranian war triggered the biggest-ever selloff in what had been the world’s hottest stock market. The Kospi’s rout triggered a 20-minute trading halt early in the session. Benchmarks in Taiwan and Japan slid around 4% each, with virtually all major regional equity indexes in the red. China’s onshore CSI 300 Index wiped out its year-to-date gains.

Taking a quick look at earnings, Out of the 481 S&P 500 companies that have reported so far in the earnings season, 73% have managed to beat analyst forecasts, while 22% have missed. 

In FX, the improvement in sentiment has weighed on the greenback with the Bloomberg Dollar index down 0.2%, snapping a two-day run of gains. The yen gained during APAC trade amid intervention talk from Japan’s Katayama.

In rates, a selloff in global bonds eased, with the yield on 10-year Treasuries rising two basis points to 4.08%. 

In commodities,WTI crude trimmed gains after the New York Times reported that Iranian operatives made an offer to the US to discuss terms for ending the conflict a day after attacks began.

Treasuries are down a handful of ticks with yields up 1-2bps across the curve. Spot gold and silver are higher by 2% and 5.1%. Bitcoin has also marched higher, up 4.4%.  Brent crude retreated from an intraday high to trade near $82 a barrel. Bitcoin jumped to nearly $70,000, suggesting some return of risk appetite.

Looking at the day ahead, data releases include the final services and composite PMIs for February from the US and Europe. In the US there’s also the ISM services index and the ADP’s report of private payrolls for February, whilst in the Euro Area we’ll get the unemployment rate for January. From central banks, we’ll hear from ECB Vice President de Guindos, the ECB’s Muller, Cipollone and Villeroy, along with Bank of Canada Governor Macklem. Otherwise, the Fed will release their Beige Book.

Markets Snapshot

• S&P 500 mini +0.1%
• Nasdaq 100 mini +0.2%
• Russell 2000 mini +0.3%
• Stoxx Europe 600 +1.1%
• MSCI Asia Pacific Index fell 4%
• Japan’s Nikkei Index fell 3.6%
• China’s CSI 300 Index fell 1.1%
• Hong Kong’s Hang Seng Index fell 2%
• Taiwan’s Taiex Index fell 4.4%
• South Korea’s Kospi Index fell 12%
• Australia’s S&P/ASX 200 Index fell 1.9%
• New Zealand’s S&P/NZX 50 Gross Index fell 0.7%
• India’s NSE Nifty 50 Index fell 1.8%
• DAX +1.3%
• CAC 40 +0.9%
• 10-year Treasury yield +2 basis points at 4.08%
• VIX -0.6 points at 23.02
• Bloomberg Dollar Index -0.2% at 1200.93
• euro +0.2% at $1.1636
• WTI crude +1.6% at $75.79/barrel

Top Overnight News

• A day after the attacks began, operatives from Iran’s Ministry of intelligence reached out indirectly to the CIA with an offer to discuss terms for ending the conflict. US officials are skeptical – at least in the short term – that either the Trump administration or Iran is really ready for an offramp. NYT
• Oil edged higher near $83 a barrel, with traffic in the Strait of Hormuz all but halted. Donald Trump’s plan to protect vessels with insurance backstops and naval escorts is only a partial fix, shippers said. BBG
• The CIA is working to arm Kurdish forces with the aim of fomenting a popular uprising in Iran. The Trump administration has been in active discussions with Iranian opposition groups and Kurdish leaders in Iraq about providing them with military support. CNN
• The son of former Iranian Supreme Leader, Mojtaba Khamenei, has emerged as his most likely successor, suggesting the country is moving in a hardline direction. NYT
• China’s legislature signaled a desire for steady relations with the US as the countries prepare for a planned summit between Xi Jinping and Trump in the coming weeks. BBG
• US shale drillers cannot increase production quickly enough to solve an oil supply crisis caused by the war in Iran, industry bosses have warned, saying a big rise in output would take months to materialize. FT
• Gauges of China’s manufacturing and services activity sent mixed signals about the economy, showing pockets of weakness alongside improvement as markets wait for the country’s leaders to set growth targets for the year ahead.
• Bank of Japan Gov. Kazuo Ueda reaffirmed his commitment to further interest-rate increases amid deepening concerns over instability in the Middle East. WSJ
• Anthropic is on track to generate annual revenue of almost $20 billion, more than doubling its run rate from late last year, people familiar said. Separately, OpenAI CEO Sam Altman told employees that the company has no say over what the Pentagon does with its AI software. BBG

Trade/Tariffs

• Japan and the US are reportedly working to include nuclear power, copper smelting and refining facility projects in the second round of deals under the USD 500bln investment package.
• Japanese Trade Minister Akazawa is to travel to the US on Thursday to discuss Japan-US investment and will meet with US Commerce Secretary Lutnick.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks extended losses with markets roiled by the widening conflict in the Middle East, with the UAE considering taking military action to stop Iranian missile and drone strikes on the country, while it was also estimated that Saudi Arabia could attack Iran soon. ASX 200 slumped with the index dragged lower by underperformance in the commodity-related sectors, while better-than-expected Australian GDP data for Q4 failed to inspire a turnaround. Nikkei 225 dipped beneath the 54,000 level with mining and materials the worst performers amid disruption concerns. KOSPI saw a double-digit percentage drop and had triggered a circuit breaker with declines led by shipbuilders and shipping firms, while large exporters such as Samsung, SK Hynix and Hyundai Motor also suffered. Hang Seng and Shanghai Comp conformed to the bloodbath in the region as participants digested mixed Chinese PMI data in which the official NBS Manufacturing and Non-Manufacturing PMIs disappointed, but the private sector RatingDog PMI accelerated to multi-year highs, while attention is also on the Two Sessions, which began today in Beijing, while the focus will be on the Work Report on Thursday.

Top Asian News

• China NPC spokesperson said will continue to expand domestic demand this year. Will foster new growth points in services consumption. Will promote high-quality employment this year. To reduce residents’ concerns about expanding consumption. Will promote the allocation of more resources to areas related to people’s livelihood, enabling people to consume, dare to consume and be willing to consume.
• Chinese banks reportedly halt Abu Dhabi loans as creditors cut Middle East, Bloomberg reported; most Asian banks are currently adopting a wait-and-see approach but there are early signs some are mulling pausing deals.
• Abu Dhabi Ports confirms the continuation of all its operations in light of regional developments; expect a decrease in the number of arriving ships with the decline in shipping traffic in the Strait of Hormuz, Al Arabiya reported.
• Cosco Shipping (1919 HK) suspends new bookings on relevant routes amid escalating Middle East conflict.

European bourses (STOXX 600 +1.2%) have broadly rebounded following this week's selloff, with the IBEX 35 (+1.6%) and DAX 40 (+1.6%) outperforming this morning, which was boosted following the New York Times report (see below). On the data front, EZ and UK final composite PMIs failed to move indices. In addition, Swiss inflation for February came in hotter-than-expected but the SMI didn’t react much to the data on the open. Sectors display a positive picture. Technology (+2.5%) sits clearly at the top after ASM International (+6.5%) beat Q4 revenue and Q1 revenue outlook estimates. Regarding China, the Co. also anticipates a rise in sales, showing notable improvement from the earlier forecast of a double-digit decline. Energy (-0.6%) is the worst-performing sector. Consumer Products and Services (+0.8%) was initially softer, after being on by Adidas (-6.9%), but reversed higher on the broader risk tone. Adidas reported Q4 revenue that missed expectations, while an operating profit of "around" EUR 2.3bln in 2026 fell short of analyst estimates.

Top European News

• German VDMA Engineering Association said January orders -6% Y/Y (domestic -8% and foreign at -5%).
• French Finance Minister said they will hold a meeting of G7 Finance Ministers and Central Bankers early next week.

FX

• DXY is choppy within a 98.90-99.33 range and well within Tuesday's 98.44-99.68 parameters. Focus remains on the Middle Eastern conflict, which continues to expand across the region. Analysts at ING highlight that near-term drivers of risk will probably be whether energy prices can reverse lower if the Strait of Hormuz can somehow reopen, and also whether central banks will be able to cut rates to support activity, or at least not tighten policy. Elsewhere, the data calendar for the US is very light, although ISM Services is scheduled later, while there were recent Fed speakers, in which the main message was that policy was well-positioned, and it is too soon to gauge the impact of the war in Iran on inflation. USD eased on NYT reports that Iran reached out to the US a day after the war started, although US officials are reportedly sceptical that either the Trump administration or Iran is ready for an off-ramp in the short term at least.
• EUR is flat against the USD and trades on either side of 1.1600, with the single currency not helped by President Trump threatening to halt all trade with Spain, citing the country's refusal to allow American military forces to use joint air bases for operations against Iran. Meanwhile, no EUR move was seen on the final PMIs, which are outdated amid the geopolitical developments since the survey period.
• GBP holds above 1.3300 vs the USD following recent underperformance, not helped by President Trump publicly expressing frustration with UK PM Starmer, stating "I'm not happy with the UK" and "This is not Winston Churchill that we're dealing with," after Britain refused to join offensive strikes.
• CHF is off best levels in choppy trade, with USD/CHF recouping from intraday lows of 0.7790 in the aftermath of hotter-than-expected Swiss CPI and ahead of the SNB meeting on March 19th. On that note, SNB Vice Chair said they are ready to intervene in the FX market - echoing similar commentary on Monday.
• JPY outperforms amid the ongoing geopolitical woes. USD/JPY was choppy overnight amid a quiet calendar for Japan and ongoing uncertainty regarding the Iranian conflict and effects on inflation, as well as the ramifications for BoJ monetary policy. The pair is subdued within a 157.16-157.86 range vs yesterday's 157.15 low. USD/JPY saw some volatility following NYT reports that US officials are sceptical of either Iran's or the US' willingness to off-ramp in the short term, relating to Iran's Intelligence Ministry reportedly reaching out to the CIA indirectly a day after the conflict started with an offer to discuss terms.

Fixed Income

• Mixed trade at the time of writing, with USTs bearish while peers are firmer but only modestly. Benchmarks recouped some ground late US and during the early APAC session. However, they then faded again as energy prices continued to climb.
• USTs at the low end of 112-27 to 113-05+ parameters. Focus remains on the geopolitical front with the conflict still ongoing and showing no sign of letting up in the near-term at least. An event of focus is the funeral of Khamenei, after which we may get the formal appointment of his successor, widely expected to be Mojtaba Khamenei, the second eldest son. Elsewhere, the US day is headlined by ISM Services and then numerous mega-cap presentations at a Morgan Stanley conference.
• Bunds were in line with USTs late-US and into the early APAC session. Thereafter, the benchmark waned from best but remains just about in the green. Specifics for the space have been light, aside from geopols. No move to Final PMIs. For the most part, Europe is waiting for further clarity on the energy situation, Trump's displeasure with Spain and the Hungarian opposition to Ukraine amid the Druzhba closure. Currently, the benchmark holds just below the 129.00 mark in a 128.80 to 129.32 band.
• Gilts gapped higher by 37 ticks before climbing a handful more to a 91.91 peak. A bounce that wasn't too surprising, given the overnight moves in peers. However, one that leaves it shy of Tuesday's opening level/high of 92.47 and still a significant distance from the week’s 93.55 open. For the UK, focus is firmly on the above events. Note, Goldman Sachs has stuck to its BoE call of three 25bps cuts this year, but has pushed out the timing by one month; as such, they now expect the first move in April not March.
• Upside was seen across benchmarks as energy prices (namely nat gas) fell on reports that Operatives from Iran’s Ministry of Intelligence reached out indirectly to the CIA a day after the conflict began, with an offer to discuss terms for ending the conflict, New York Times reports citing sources. US officials are reportedly sceptical that either the Trump administration or Iran is ready for an off-ramp in the short term at least.
• Germany sold EUR 0.96bln vs exp. EUR 1.0bln 2.30% 2033 Green Bund: b/c 1.76x (prev. 3.57x), average yield 2.53% (prev. 2.39%), retention 4.0% (prev. 15.6%)
• Australia sold AUD 900mln October 2037 bonds, b/c 3.74, avg. yield 4.8573%.

Commodities

• Crude benchmarks are firmer this morning as geopolitical tension in the Middle East continues to underpin the complex, with WTI (+1.1%) and Brent (+1.6%) trading at the upper ranges of USD 74.37-77.23/bbl and USD 81.28-84.48/bbl, respectively. Saudi Arabia announced that there was an attempt to attack Ras Tanura refinery, however, there was no damage reported at the refinery.
• European Nat Gas has slipped some 7% following reports that Iran's Ministry of Intelligence reached out to the CIA indirectly a day after the conflict began with an offer to discuss terms for ending the conflict, although US officials are reportedly sceptical that either the Trump administration or Iran is ready for an off-ramp in the short term at least. Crude futures dipped modestly on these reports.
• Spot gold continued its rebound, shrugging off recent USD strength that hampered price action yesterday for the yellow metal, trading just below the USD 5,200/oz mark. Haven demand has underpinned gold prices as the conflict in the Middle East reaches its fifth day. Modest upside was seen on the aforementioned NYT reports as the USD eased.
• Copper prices are trading higher thus far in the European session, tracking mild tailwinds following China’s manufacturing PMI data, which showed the greatest improvement in manufacturing conditions in more than five years. At the time of writing, 3M LME copper trades at the upper range of 12.94-13.1k/t.
• Saudi Aramco's Ras Tanura refinery (550k BPD) was reportedly struck again by an unknown projectile, according to sources; no damage was reported.
• UKMTO receives report of an incident 10NM east of UAE's Fujairah, according to an advisory note; an oil tanker in the Gulf suffered an explosion and the wreckage of an unknown projectile was found on its deck and all crew members are fine.
• IRGC say they have complete control of the Strait of Hormuz, according to AFP.
• Russia's Deputy PM Novak said we are ready to increase oil supplies to China and India in case of additional demand.
• Shanghai Futures Exchange are to adjust price limits and margin ratios for FU2604 fuel oil futures contract.
• Goldman Sachs said Brent could reach USD 100/bbl if the Strait of Hormuz remains closed for 5 more weeks.
• Qatar Gulf International Services noted stoppage of certain operations and services related to energy sector activities.
• US Private Energy Inventories (bbls): Crude +5.6mln (exp. +2.3mln), Distillate +0.5mln (exp. -2.6mln), Gasoline -3.3mln (exp. -0.8mln), Cushing +1.5mln.

Central Banks

• Fed's Hammack (2026 voter) says it is too soon to determine the economic impact of the Middle East conflict, NY Times reports. Supports holding rates steady for "quite some time."
• Fed's Kashkari (2026 voter) said Fed can sit tight as war clouds the outlook, via WSJ interview; 1 or 2 cuts later this year could be appropriate if inflation cools, but war in the Middle East could also create conditions that would justify extended pause.
• BoJ Governor Ueda said wages are expected to rise for a broad range of sectors in this year's wage negotiations, and that annual real wages to gradually turn positive.
• BoJ Governor Ueda said the central bank communicates closely with the government. Added that wages need to increase significantly for Japan to sustainably achieve BoJ’s price target. Mechanism in which wages and prices rise in tandem becoming embedded in Japan’s economy. Exchange rate fluctuations are now more likely to influence corporate behaviour. The impact of FX movements on prices is being closely watched. If economic activity and inflation align with forecasts, interest rate increases will continue. A rate hike would be appropriate if the economic outlook evolves as expected. General views on the economy were exchanged with Takaichi last month. The BoJ will carefully assess how Middle East developments affect domestic and global economic conditions. Persistently high oil prices could lift underlying inflation by pushing up medium- and long-term household and corporate inflation expectations. The BoJ will closely monitor the economic implications of the Middle East conflict. Developments in the Middle East could significantly affect both the global and Japanese economy through energy prices and market channels. Higher energy prices may also influence inflation expectations. Elevated oil prices worsen Japan’s terms of trade, weighing on the economy and underlying inflation dynamics. Oil prices have been rising sharply.
• SNB Vice Chair said they are ready to intervene in the FX market.
• CNB's Deputy Governor Frait said the development over the past week may lower space to reduce interest rates and cannot say today how he will vote at next meeting.
• Bank of Korea Governor Rhee said to hold meeting to review markets, adds to closely monitor for excessive moves in FX and interest rates, will respond if needed on the forex market to prevent herd-like behaviour.
• Goldman Sachs expects the BoE to cut by 25bps in April, July and November 2026 (prev. forecast March, June and September 2026).

Geopolitics: Middle East

• US officials are sceptical of either Iran's or the US' willingness to off-ramp in the short term, relating to Iran's Intelligence Ministry reportedly reaching out to the CIA indirectly a day after the conflict started with an offer to discuss terms, NYT reports.
• A number of Iranian media reported that an explosion was heard in Karaj, Iran International reported.
• Former Iranian Supreme Leader's top aide said Iran has no intention of conducting negotiations with the US, Al Jazeera citing Iranian TV.
• Iran launched over 40 missiles at Israeli and US targets a few hours ago, according to Iranian press.
• Iran has hit more than 10 tankers that ignored warnings and warns ships against transiting the Strait of Hormuz, according to FARS.
• Heavy explosions heard in east Tehran, Iran, local media reported.
• Plume of smoke rising from the US Consulate in Dubai, Iran's IRNA reported.
• US and Israeli forces have targeted Tehran, Urmia, Isfahan, and Karaj with heavy air strikes.
• Israeli army advances further into Lebanese territory, Al Jazeera reported.
• Israeli Defence Minister Katz said that any leader appointed in Iran will be an explicit target.
• IDF identifies missiles fired by Iran towards Israel and is working to intercept them.
• IDF said it has started a wave of attacks against missile launch sites, defence systems, and infrastructure belonging to the Iranian regime.
• Defence executives are to meet at the White House on Friday as strikes on Iran reduce stockpiles, according to Reuters.
• US Central Command said they destroyed 17 Iranian ships and no Iranian ships sailing in the Gulf or Strait of Hormuz or Gulf of Oman today.
• CIA is working to arm Kurdish forces to spark uprising in Iran, according to sources cited by CNN.
• US and Israel are seeking to foment an armed uprising inside Iran using an armed Kurdish fighting force, according to ITV News citing sources. ITV News understands since last year, weapons have been smuggled into Western Iran to arm thousands of Kurdish volunteers. They are expected to begin a ground operation within days. ITV have been told by Kurdish sources that American and Israeli forces have been asked to provide air cover when any such ground operation begins. ITV sources do not know if that request has been approved.
• Iran's Assembly of Experts elected Ali Khamenei's son Mojtaba as the next Supreme Leader under pressure from the Revolutionary Guards, Iran International reported citing sources.
• Two drone attacks targeted a US military base and a hotel in Iraq's Erbil early on Wednesday.
• Suspected Iranian drone attack hits CIA station in Saudi, according to WaPo reporter.

Geopolitics: Ukraine

• Russian President Putin will hold a call with Hungary's Foreign Minister later today to discuss Ukraine, according to Russia's Kremlin.
• Russia's Deputy PM Novak said we are ready to increase oil supplies to China and India in case of additional demand.
• Russian gas tanker reportedly attacked in Mediterranean Sea; Ukrainian naval drones attacked Russian gas tankers from Libya's coast, according to the Russian Transport Ministry.

US Event Calendar

• 7:00 am: United States Feb 27 MBA Mortgage Applications, prior 0.4%
• 8:15 am: United States Feb ADP Employment Change, est. 50k, prior 22k
• 9:45 am: United States Feb F S&P Global US Services PMI, est. 52.3, prior 52.3
• 9:45 am: United States Feb F S&P Global US Composite PMI, est. 52.3, prior 52.3
• 10:00 am: United States Feb ISM Services Index, est. 53.5, prior 53.8

DB's Jim Reid concludes the overnight wrap

Timing is everything in financial markets and what I thought would be a fascinating pack and create a lot of interest when I finished it on Friday has been overtaken by events. However, I still had a few great meetings yesterday in New York on the "Innovation, Jobs and Inflation: Lessons from 250 Years of Disruption" pack. Lots of debate around it. See it here. Once the Iran situation calms (assuming it does) this will be the main topic in markets again. So feel free to delve in as you wait for the next Iran headlines.

Indeed, we are in the headline-watching business at the moment, with competing stories shifting market sentiment an hourly basis yesterday. Moreover, the selloff has yet to find a floor, as fears of a more protracted Middle East conflict have led to mounting concern about a serious energy shock. So overnight, South Korea’s KOSPI (-11.13%) is currently on track for its biggest one-day fall since 2001, and futures on the S&P 500 (-0.55%) are pointing to further declines as well. That all follows a highly volatile 24 hours in markets, with the VIX index up to a 3-month high of 23.57pts, whilst Europe’s STOXX 600 (-3.08%) saw its largest daily slump since the Liberation Day tariff turmoil last April. Elsewhere, an aggressive slump in bonds saw 10yr gilts post their worst 2-day move in two years, and the EM FX carry index (-1.64%) had its worst day since Russia’s February 2022 invasion of Ukraine.

Of course, oil prices have been the main focus given the direct impact, and yesterday saw Brent crude up another +4.71% to $81.40/bbl. So that now makes it the biggest 2-day jump for oil prices (+12.31%) since the pandemic recovery in 2020, and this morning they’re up another +1.51% to $82.63/bbl. However, prices did come off their intraday peak above $85/bbl in European hours, stabilising after Trump said that the US “will begin escorting tankers through the Strait of Hormuz, as soon as possible” if necessary and that it would provide political risk insurance for ships travelling through the Gulf to “ensure the FREE FLOW of ENERGY to the WORLD”.  That said, with little detail on the plan, the reversal in oil proved short-lived, with Brent falling back to $78.40/bbl before rising again, moving back above $82/bbl this morning. That came as Iran’s IRGC said in a statement that vessels sailing through the Strait of Hormuz “could be at risk from missiles or rogue drones”.

From a market perspective, the main issue is that there’s no sign of either side de-escalating, and if anything it looks as though things are still ratcheting up. For instance, the WSJ reported that Trump was open to supporting armed militias in Iran, although it said he hadn’t made a final decision. Meanwhile on the energy side, the supply issues continued to deteriorate, as Bloomberg reported that Iraq had started to shut down oil production that could halt 3mn barrels per day if the crisis persisted. And in addition to the renewed IRGC warning over the Strait of Hormuz, airstrikes have continued, with Israel carrying out a “broad wave of strikes” against Iran overnight, while we’ve seen reports of blasts in Doha and Dubai and missiles intercepted by Saudi Arabia.

This backdrop has meant energy prices have kept climbing across the board. In addition to the rise in oil, European natural gas futures soared yesterday, up another +21.98% to €54.29/MWh, building on their +39% gain on Monday. Interestingly though, if you look at the long-term history of oil prices, WTI is still a little below its 2024 average, and there’s still a long way to go before it compares to some of history’s bigger crises. So much as things are deteriorating, we’re still some distance from recessionary territory and a full-scale market correction. I looked at that in my chart of the day yesterday (link here), and Henry also put out a note (link here)  looking at the criteria that have traditionally led to meaningful selloffs when an oil shock happens, none of which have occurred yet. Indeed, for all the volatility, the S&P 500 is within 2.5% of its peak, and the STOXX 600 within 5%. So despite everything that’s happened, we haven’t got to correction territory yet, let alone a bear market.

For now at least, the most obvious impact has been in the rates space, where the conflict has led to growing concern about inflation and whether central banks will be forced back into rate hikes. So in Europe, investors have priced in a growing probability of an ECB hike this year, with the chance up to 34% by last night’s close. Similarly in the US, the amount of rate cuts priced by December came down another -5.4bps on the day to 46bps. So all that pushed sovereign bond yields higher on both sides of the Atlantic, with yields on 10yr bunds (+4.0bps), OATs (+8.5bps), BTPs (+10.1bps) all spiking, whilst 10yr Treasuries (+2.5bps) saw a smaller move up to 4.06%. That’s continued overnight too, with the 10yr Treasury yield up another +0.2bps.

Meanwhile for equities, the selloff accelerated yesterday, with the US and Europe seeing even deeper losses relative to Monday. So in the US, the S&P 500 (-0.94%) gave way after holding up on Monday, though it did partially recover from an intraday low of -2.49% shortly before Europe went home. Even so, all eleven major sector groups ended the day lower, including energy. Paradoxically, software & services stocks (+1.58%) were one of the few outperformers. Then in Europe, the STOXX 600 (-3.08%) posted its biggest daily decline since the Liberation Day turmoil last year, with even deeper losses for the DAX (-3.44%) and the CAC 40 (-3.46%). And unlike on Monday, even the energy and defence names weren’t immune, with the STOXX Aerospace & Defense index (-2.74%) posting its biggest decline so far this year.

One of the big themes in yesterday’s market turmoil were sharp reversals for several recent winning trades. For instance, 10yr gilts, which had rallied by -33bps in just over three weeks, have sold off by +24bps over the past two sessions (+9.7bps yesterday). Meanwhile, gold (-4.38%) and silver (-8.23%) plunged despite the risk-off mood. Indeed, the dollar (+0.68%) was one of very few assets other than oil that were in the green yesterday.

Likewise, another 2026 winner to see a sharp reversal has been the Kospi, which is down -11.13% this morning, which would be the index’s worst daily slump since markets returned after the 9/11 attacks in 2001. Indeed, trading was paused earlier after a circuit breaker was triggered, and only yesterday the index saw a -7.24% decline as well. It was only last Thursday that I’d noted in my CoTD (see here) how the Kospi had moved from cheap to expensive after a near +50% YTD gain. Remarkable how quickly things can turn in markets.

Those declines have been echoed across Asia, albeit not quite to the same extent. That said, the Nikkei (-3.76%) is currently on course for its biggest daily decline since the Liberation Day turmoil last April, right before Trump announced the 90-day tariff extension that sparked the market rebound. And other indices are also falling significantly, with declines for the Hang Seng (-2.90%), the CSI 300 (-1.16%) and the Shanghai Comp (-1.09%). The moves also come after the PMIs in China were a little weaker than expected, with the manufacturing PMI down to 49.0 (vs. 49.2 expected), whilst the non-manufacturing PMI only rose to 49.5 (vs. 49.7 expected).

Clearly the Middle East was totally dominating attention yesterday, but there were a few other stories to look out for. Notably in the Euro Area, the flash CPI print for February surprised on the upside, which exacerbated investors’ energy-driven inflation fears. So headline CPI was up to +1.9% (vs. +1.7% expected), whilst core CPI rose to +2.4% (vs. +2.2% expected), raising expectations that the ECB might still need to hike this year.

Separately in the UK, the government also announced their Spring Statement, including the OBR’s latest economic forecasts. According to those, it showed that the headroom against the fiscal rules now stood at £23.6bn, slightly higher than the November budget. However, the forecasts were made before the latest surge in energy prices, so clearly that will change the picture. See our UK economist’s recap here

Looking at the day ahead, data releases include the final services and composite PMIs for February from the US and Europe. In the US there’s also the ISM services index and the ADP’s report of private payrolls for February, whilst in the Euro Area we’ll get the unemployment rate for January. From central banks, we’ll hear from ECB Vice President de Guindos, the ECB’s Muller, Cipollone and Villeroy, along with Bank of Canada Governor Macklem. Otherwise, the Fed will release their Beige Book.

Tyler Durden Wed, 03/04/2026 - 08:45

ADP Private Payrolls Jump To 63K, Stronger Than Expected And Highest Since November

Amid the ongoing double whammy of geopolitical and private credit shocks, with a little AI disruption thrown in every other days courtesy of Anthropic's human-displacing agents and smashing capex-lite sectors like a chatbot avalanche, the last thing the market needed is a negative job print signaling a recession has effectively arrived. It didn't get that, at least not yet, because while the February jobs report is still to come on Friday, moments ago ADP reported that private payrolls rose in February by 63K, up sharply from the 11K in January (downward revised from 22K) and above the 50K median forecast.

The solid report comes just two before the the DOL is set to report February payrolls which are expected to grow by 58K, a drop from last month's 130K.

A detailed breakdown of the job changes shows broad based job gains, with modest declines in mnaufacturing, trade/transportation and a bigger drop in professional/business services.

Pay growth for job-stayers was unchanged in February at 4.5% year-over-year. For job-changers, annualized pay growth slowed to 6.3% from 6.6% the previous month.

Commenting on the report, ADP chief economist Nela Richardson said that “we've seen an increase in hiring and pay gains remain solid, especially for job-stayers. But with hiring concentrated in only a few sectors, our data shows no widespread pay benefit from changing jobs. In fact, the pay premium for switching employers hit a record low in February.” 

The question now is whether ADP - which is notoriously uncorrelated with the BLS jobs report - is a leading indicator for a labor market recovery or if, as has been the case in recent years, we are about to see a very disappointing labor print in two days, restarting fears that the US economy is sliding into recession. 

Tyler Durden Wed, 03/04/2026 - 08:43

"Unknown Projectile" Strikes Container Ship In Strait Of Hormuz As Maritime Crisis Explodes

This morning has been very active on the maritime security front. The latest incident involves a container ship that was struck by a projectile while transiting the Strait of Hormuz.

United Kingdom Maritime Trade Operations reports that a container ship about two nautical miles off Oman, transiting eastbound through the critical and narrow waterway, was "hit by an unknown projectile just above the waterline, causing a fire in the engine room."

"The crew have now abandoned the vessel and all crew are accounted for with no reported injuries," the maritime security center wrote in an update on X.

UKMTO's alert did not identify the container ship by name, but there are currently three transiting the paralyzed waterway. We suspect that the vessel hit was "Safeen Prestige," though there is no official confirmation.

Latest maritime incidents we are tracking:  

UBS analyst Cristian Nedelcu provided clients with a clearer picture of the logistical nightmare unfolding due to disruptions in the Strait of Hormuz:

Rising uncertainty, however a potential prolonged disruption could push rates up

We note that since the end of November, the EU logistics and shipping sector share prices were up on average ~18%, outperforming Stoxx 600 by ~5%. We believe this mainly reflects expectations for an improvement in the European and US economies in 2H 2026. In the context of the escalation in the Middle East, a potential prolonged and significant increase in oil prices could represent a headwind to demand raising question marks around global freight volume growth going forward.

Nevertheless, we believe a potential prolonged disruption could also bring upwards pressure on ocean and air freight rates on some routes. We believe a scenario of continuous disruption in the Strait of Hormuz and Middle Eastern air space would bring upwards pressure to ocean and air freight rates touching Middle East and Asia-Europe, with potential for temporary incremental profits for ocean carriers, dedicated freighters operators (DHL Express), and increased complexity that could lead to some benefits for freight forwarders operating on these routes.

A potential prolonged disruption could lead to upwards pressure on ocean rates

According to CTS c.3.5% of global container capacity is using the Strait of Hormuz. In particular, the large transshipment hub Jebel Ali could be affected. In a scenario of prolonged closure of the Strait of Hormuz or capacity restrictions it is likely that cargo would be moved via alternative transhipment hubs leading to potential congestion in other major transhipment hubs. The few services passing through the Red Sea have been directed back to Cape of Good Hope leading to further small declines in effective container capacity to reflect longer voyages. Altogether we expect this could lead to upwards pressure on ocean rates, mainly on: i) routes touching Middle East/Indian subcontinent (c.13.8% of global container according to Linerlytica); ii) on Asia-Europe (c.24.5% of global container movements). According to Linerlytica, Maersk and Hapag Lloyd deploy circa 15% of total container capacity to routes touching Middle East/Indian subcontinent and ~25% of capacity on Asia - Europe routes. Zim deploys circa 3% of capacity on routes touching the Middle East and 15% on Asia - Europe.

Prolonged potential constraints at Middle Eastern airports could push rates up

Air space closure during this weekend for Middle Eastern airports also brings disruption for air freight touching the Middle East or air freight transiting from Asia to Europe. According to IATA, Middle Eastern carriers operate circa 13% of global air freight capacity while Asia - Middle East represents 7.4% of cargo tonne km transported globally and Middle East - Europe 5.7% (in 2024). In a scenario of prolonged disruption, we expect to see upwards pressure on air freight rates for routes touching Middle East and Asia-Europe. In a scenario of capacity constraints for passenger/cargo flights at Middle Eastern airports, we expect constraints related to freedom of the skies agreements and longer distance journeys to lead to a reduction in effective capacity.

In particular, we believe owners of dedicated freighter capacity (DHL Express) are likely to benefit as cargo flows are redirected. Air cargo will also become an alternative for some of the ocean cargo impacted by the disruptions. Increased complexity of moving cargo may bring benefits for large freight forwarders that have access to capacity. Looking at direct exposure to Middle East we note - DSV recognised 7% of 2025 Group EBIT from MEA region and 36%/42% of air /ocean volumes on Asia-Europe; DHL recognised 5.3% of FY24 revenues in Middle East/Africa.

The latest and most critical maritime incidents and developments over the last 24 hours:

• Russia Says Ukrainian Drone Boat Blew Up Shadow LNG Tanker In Mediterranean

• World At War: Iranian Warship Reportedly Sunk Off Sri Lanka In Submarine Attack

• Trump Gives Assurances To Tankers Passing Through Hormuz

• Trump Announces US To Cover Insurance For All Ships Traveling Through Gulf, Will Provide US Navy Escorts

Expect more maritime attacks. Also, supply chain snarls could materialize.

Tyler Durden Wed, 03/04/2026 - 08:30

Germany's Corporate Tax Collapse Signals Economic Crisis

By Thomas Kolbe

The ten-minute applause of delegates at the CDU party congress still echoed when the Federal Ministry of Finance spoiled the festive mood in Stuttgart. Finance Minister Lars Klingbeil’s (SPD) department reported a nationwide collapse of corporate tax revenue by 79 percent in January 2026 compared to last year.

At the same time, revenue from assessed income tax fell by 14.2 percent, while wage tax revenue rose by 9.1 percent.

VAT revenue grew by two percent — a reflection of persistent inflationary tendencies in the country, to which the state itself contributes significantly through its taxation policies. While price increases may be slowed by continued economic weakness, cumulative inflation continues to weigh on consumers even if the annual rate declines. Inflation is always good for the state, which is why it persists.

Corporate tax burdens corporate profits at 15 percent plus a solidarity surcharge. Last year, revenue totaled roughly €40 billion, less than one percent of GDP. Even in 2025, revenue had fallen six percent, showing a long-term negative trend.

Its temporary collapse in January will likely have no immediate fiscal consequences. Corporate tax revenue is split — 50 percent to the federal government, 42 percent to the states, and eight percent to municipalities, which appear at least partially shielded at this tax level.

However, municipalities already suffered a fiscal blow last year, especially in the centers of the industrial crisis. Cities such as Wolfsburg and Stuttgart saw sharp declines in their key tax base, the trade tax.

It is undeniable: the situation is becoming serious, and the damage from political mismanagement is now visible. For the first time, fiscal effects appear in a country where policy had long relied on ever-growing tax revenues, postponing social issues with generous spending.

January’s alarming figures allow a troubling diagnosis: the companies that generate corporate tax revenue are largely from manufacturing — the classic industrial sectors of Germany’s automotive and chemical industries. Here, in what was once the pulsing heart of the German economy — source of much of the nation’s value creation — there must have been a first economic infarction last year.

The tax revenue decline cannot be explained otherwise. Last year was suspiciously quiet amid 24,000 corporate insolvencies, hundreds of thousands of lost industrial jobs, and ongoing capital flight from Germany’s regulatory and energy nightmare toward better locations.

The government’s response to this self-inflicted problem is to expand state activity, spinning the intervention spiral faster with ever-new debt to stabilize an industry that largely no longer exists.

Friedrich Merz acted knowingly last year when he secured a special fund with credit for coming years to temporarily stabilize the collapsing economic model. The hour was understood.

Yet now, despite billions flowing into the defense sector and green transformation projects, tax revenue still collapses — highlighting the dramatic state of the private sector. An economy that is largely unviable without perpetual subsidies has now become a problem for politics itself.

No matter how high the federal government’s economic straw fire burns, the Ministry of Finance’s numbers speak clearly. Germany’s economy, after years of restructuring under green transformation and the energy crisis, has suffered such heavy damage that it is now visible at the state level — confirming what practical experience has warned for years. The shift toward a green socialism has gone too far, productive forces are overextended, bureaucracy and the ever-expanding welfare state overstretched.

Germany faces difficult years ahead. It must negotiate how to proceed amid ever-scarcer public funds. The state quota now exceeds 50 percent and continues to rise under federal policy. The bureaucracy and welfare system expand five to six percent annually, demanding ever-greater contributions from society, further weakening productive forces — the poverty spiral accelerates.

A recalibration of the welfare state to match economic realities will soon be unavoidable. Until then, the illusion of prosperity is kept alive by credit.

What is to be expected now? The state will increasingly draw on citizens’ resources to close the growing budget gaps. The corporate tax collapse was likely no anomaly, and it will become ever more expensive to use sectors like defense to mask the collapse of German industry and protect the labor market.

Debates over raising inheritance tax, reintroducing wealth tax, and potential special levies on the rich last year were preparatory. Now, it is serious.

The dead-end German politics has led this country down is brittle. Beneath it yawns an abyss, now revealed in its full depth in Ministry of Finance numbers.

* * * 

About the author: Thomas Kolbe, a German graduate economist, has worked for over 25 years as a journalist and media producer for clients from various industries and business associations. As a publicist, he focuses on economic processes and observes geopolitical events from the perspective of the capital markets. His publications follow a philosophy that focuses on the individual and their right to self-determination.

Tyler Durden Wed, 03/04/2026 - 02:00

Asian Refiners Mull Slashing Crude Processing As Iran War Threatens Supply

By Michael Kern of OilPrice.com

Asian refiners, particularly state-held majors heavily dependent on Middle East oil supply, are considering slashing crude run rates by up to 30% amid the war in Iran that is holding up millions of barrels of Middle Eastern crude stuck near the Strait of Hormuz.  

The de facto halted shipments via the Strait of Hormuz threaten to delay key cargo deliveries that Asian refiners have contracted in recent weeks.

Just before the U.S.-Israel strikes on Iran this weekend, Asia, particularly China, planned for a major uptick in purchases of crude from the Middle East after Saudi Arabia, the world’s top crude exporter, slashed its official selling prices (OSPs) for Asia to the lowest level versus regional benchmarks in more than five years. Saudi Arabia set the price of its flagship Arab Light grade at parity versus the Oman/Dubai average, which is the lowest pricing versus the benchmark since December 2020, making its oil attractive for buyers in China and the wider Asian region.

However, the Strait of Hormuz is now effectively closed with companies and shippers diverting vessels or idling in waters near the vital oil and gas shipping lane. The logjam would delay, at best, the supply many refiners had planned to receive this month. 

As dozens of oil tankers are still stuck in the Persian Gulf without a way out of the Strait of Hormuz, for now, some of the big refiners in China and Japan are considering slashing crude processing rates by 20-30%, sources familiar with internal discussions at these refiners told Bloomberg on Tuesday. 

The immediate impact of the tanker traffic halt in the Middle East is high for crude oil supply, according to estimates by Kpler.  

Asian energy security would be affected as India and China are the dominant Asian buyers of Strait-transiting crude, the energy intelligence firm noted.

Refiners typically have at least two weeks of supply to cushion a short-lived disruption, but if the conflict and disarray near the Strait of Hormuz extend for more than three weeks, some Asian refiners could be indeed forced to slash processing rates, especially if they struggle to procure alternative supply quickly.  

Tyler Durden Tue, 03/03/2026 - 21:45

Senators Ask Treasury To Unilaterally Index Capital Gains, Bypassing Congress

Senators Ted Cruz and Tim Scott are asking Treasury Secretary Scott Bessent to unilaterally implement a major capital gains tax cut -- by letting taxpayers adjust their cost basis to account for the effects of inflation. In a letter they intended to send on Tuesday, the pair will argue that it's within Bessent's authority to make such a move, without the need for legislation,

“Using your executive authority to … eliminate an unfair inflation tax on everyday Americans is the single most pro-growth economic action the administration can take unilaterally, and it would boost savings, spur investment, and create jobs nationwide,” Cruz and Scott wrote in the letter reviewed by the Washington Post.

To appreciate the injustice of the status quo, consider an investor who paid $10,000 for a stock in January 2010, and sold it for $15,000 in January 2026. On a CPI inflation-adjusted basis, the investment has only grown by $10.22 in real terms. However, the investor is forced to pay tax on a supposed gain of $5,000. By some estimates, a third of all unrealized capital gains represent the effects of inflation. 

"American families and job creators should not have to pay taxes on phantom income," said a group of more than 30 conservative organizations and individuals in a letter to President Trump last month. "Our tax brackets are indexed to inflation for a reason—we don't think a worker who gets a raise that barely keeps pace with inflation should face a tax increase. The same principle should apply to savings. 

In their letter to Bessent, the two senators also argue that capital gains tax relief can also help ease the woes of America's pricy housing market, pointing to people who have large unrealized gains on their homes, making them reluctant to sell. Note that owner-occupied properties can currently use an exclusion of up to $250,000 in gains for singles, and $500,000 for married couples filing jointly. 

Back in the day, before all Democrats were Bolsheviks, here is Chuck Schumer praising the idea of indexing capital gains taxation to inflation so that the 30 million Americans who file a capital gain in their taxes each year are not taxed on phantom gains. https://t.co/uyU5g7ntjb pic.twitter.com/BrkPKvHlhk

— Grover Norquist (@GroverNorquist) March 3, 2026

Not everyone agrees about the legality of such a move by the Treasury Department. Last month, Americans for Tax Reform said, "The Treasury Department has the authority to redefine the calculation of capital gains taxes by excluding inflation from tax owed, based on several legal analyses going back several decades." Skeptics point to a 1992 conclusion of the Justice Department’s Office of Legal Counsel that said such a move would exceed the department's authority. 

As they are prone to do with most tax-cut proposals, leftists whine that most of the benefit of a capital gains indexing would accrue to the wealthiest taxpayers -- but that's because they're hardest hit by the current structure. For 2026, unmarried taxpayers with taxable income under $49,450, and married taxpayers with income under $98,900, have a 0% capital gains rate. The rate rises to 15% for those with taxable income under $545,500 for unmarrieds and $614,700 for married couples. Beyond that, the rate is 20%. Those with substantial net investment income are hit with another 3.8%.

Tyler Durden Tue, 03/03/2026 - 21:20

Nancy Mace And Ilhan Omar Go Full Jerry Springer Over Iran

Authored by Steve Watson via Modernity.news,

Rep. Nancy Mace obliterated Ilhan Omar on X after the Somali-born Democrat raged about U.S. strikes on Iran during Ramadan, escalating calls to expose Omar’s alleged immigration fraud and boot her back to Somalia.

The feud erupted over the weekend when Mace trolled Omar and fellow Squad member Rashida Tlaib, sending them “thoughts and prayers” over the confirmed death of Iran’s Ayatollah in the U.S. strikes.

My heart goes out to Ilhan Omar and Rashida Tlaib tonight. Sending them thoughts and prayers. pic.twitter.com/8CLlk18Q7D

— Rep. Nancy Mace (@RepNancyMace) March 1, 2026

Omar fired back, accusing Mace of being drunk: “I hope you aren’t drunk and took your staff’s advice, Rashida and I don’t know this man and feel confident he didn’t care about us. Please restrain from drinking too much as you have been warned from your staff and stay off social media when you are drunk. I pray in his holy month you find peace and respect for your self.”

I hope you aren’t drunk and took your staff’s advice, Rashida and I don’t know this man and feel confident he didn’t care about us. Please restrain from drinking too much as you have been warned from your staff and stay off social media when you are drunk. I pray in his holy… https://t.co/s4kpye5QVg

— Ilhan Omar (@IlhanMN) March 1, 2026

Mace then hit Omar with a direct reference to long-standing allegations of marrying her brother for immigration fraud.

So tell me, what was it like being married to your brother? https://t.co/N9pYmHEiAa

— Rep. Nancy Mace (@RepNancyMace) March 1, 2026

Mace doubled down Sunday on NewsMax with Ed Henry, dismissing Omar’s complaints about the timing of the strikes. “I don’t give a damn if it’s Ramadan. I don’t care if Muslims are fasting right now,” Mace said, adding “This was the right time with the right Intel, the right President, to go in there and do this.”

She then called for action: “I’m ready to denaturalize and deport her to Somalia.”

Rep. Nancy Mace (R-SC) says of Ilhan Omar, “I’m ready to denaturalize her and deport her to Somalia.”

Mace said this after lambasting Omar for marrying her own brother and whining about Iran being attacked during Ramadan.

Mace is ruthless and I love it.pic.twitter.com/wctfoVr8HY

— Paul A. Szypula ?? (@Bubblebathgirl) March 2, 2026

This isn’t the first time Mace has targeted Omar over immigration fraud claims. Just last week, Mace pushed the House Oversight Committee to subpoena records related to Omar, her former spouses, and family, aiming to prove allegations of marriage fraud to evade U.S. immigration laws. Federal marriage fraud carries penalties including prison, fines, denaturalization, and deportation.

The two have sparred since last year when Mace attempted to censure Omar over vile comments she made following the assassination of Charlie Kirk.

? BREAKING: Ilhan Omar is officially in DANGER of being kicked off her committees and CENSURED for justifying Charlie Kirk's assassination

Rep. Nancy Mace just filed filed the resolution to make it happen.

ALL REPUBLICANS SHOULD SUPPORT THIS!

Somali Rep. Omar has ZERO… pic.twitter.com/DZOFv0zrqM

— Nick Sortor (@nicksortor) September 16, 2025

The push follows a Justice Department probe into Omar’s finances and foreign ties that stalled under Biden but has been revived by Trump, who accused Omar of amassing up to $30 million in family wealth after arriving from Somalia with little.

Adding fuel, an investigation revealed Omar’s husband’s winery as a fake shell for alleged money laundering, with no license or operations despite revenue jumping to $5 million.

As Rashida Tlaib was caught chanting “KKK” during Republican “USA!” chants at Trump’s State of the Union, Omar also heckled Trump during the address, refusing to apologise and then bizarrely invoking racial slurs.

Your support is crucial in helping us defeat mass censorship. Please consider donating via Locals or check out our unique merch. Follow us on X @ModernityNews.

Tyler Durden Tue, 03/03/2026 - 20:55

Feds Told New Mexico To Back Off Epstein; Then They Did Nothing...

Authored by José Niño via Headline USA,

In September 2019, federal prosecutors asked New Mexico to shut down its active investigation into Jeffrey Epstein’s desert compound.

The state complied. The feds never held up their end of the deal.

According to a report by The Albuquerque Journal, former New Mexico Attorney General Hector Balderas revealed recently that prosecutors from the Southern District of New York pressured his office to cease its probe into sex trafficking at Epstein’s Zorro Ranch, a 7,500 acre estate south of Santa Fe that Epstein purchased from former Governor Bruce King’s family in 1993. 

The stated reason was that parallel investigations could produce conflicting witness statements that defense lawyers might exploit.

In exchange, the feds promised to share their own findings. That promise was never fulfilled.

On September 8, 2019, assistant U.S. Attorney Maurene Comey, the daughter of former FBI Director James Comey, confirmed in an email that Balderas’s office had agreed to halt its work and turn over all materials, per a report by Time.

Epstein had died in federal custody less than a month earlier. By September 17, New Mexico’s Chief Deputy Attorney General Clara Moran had sent police reports, recorded witness testimony, and documents about Epstein’s use of state lands to the SDNY.

By July 2020, having received nothing in return, Balderas sent a letter urging federal prosecutors to seize the ranch through civil forfeiture.

“We believe that this ranch was utilized by Epstein and others to facilitate and conceal the ongoing trafficking of children,” the letter stated. The New York Times reported that he received no response. An internal federal email from December 2019 later confirmed that agents had “not searched the New Mexico property,” as the Times reported. 

When the DOJ released over three million pages of Epstein files on January 30, 2026, none of New Mexico’s investigative records appeared among them, according to NPR. 

The fallout has been swift. Reuters reported that Attorney General Raúl Torrez reopened the criminal investigation into Zorro Ranch on February 18.

The state House unanimously created a bipartisan truth commission with subpoena power and a budget exceeding $2 million, per a report by the Albuquerque Journal.

U.S. Rep. Melanie Stansbury, who has reviewed unredacted federal files, confirmed that multiple prominent New Mexicans are named in the investigation.

Separately, Reuters New Mexico is now probing allegations from a redacted email claiming two foreign girls who died at the ranch were buried nearby at Epstein’s direction.

Comey, the prosecutor who brokered the original deal, was fired by the Trump DOJ in July 2025 without explanation.

The ranch itself was sold in 2023 to a Texas developer planning to convert it into a Christian retreat.

“The inquiry should have been expanded, not restricted,” Balderas said.

Tyler Durden Tue, 03/03/2026 - 20:05