From a Quick-Win Operation to...
- Marc Bentin
- Mar 9
- 8 min read
BentinPartner Weekly
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Please find below our latest Weekly Trend Report.
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Marc Bentin,
Bentinpartner GmbH
What was supposed to be quick-win operation of killing Iran’s Supreme Leader followed by some form of induced insurrection and regime change morphed into an operation that would last just a couple weeks, then be expanded for a few months then as long D. Trump would want until he receiving Iran’s “full and unconditional surrender”.
Time will tell if history unwinds that way or not but, in the meantime, besides the rapidly rising human toll (especially for Iran at this stage), the world economy and financial markets are now facing an oil shock (with the strait of Ormuz de facto closed to non-Chinese vessels) that could wreak havoc with a world economy that was already facing serious challenges of another but equally threatening nature, namely the unwind of the private credit and AI overinvestment bubbles and the rapid “destructive” destruction associated with the AI implementation.
History will judge President D. Trump and Prime Minister B. Netanyahu’s decision to start a war in violation of international laws (without UN or Congressional approval), the former to create a diversion from a rapidly approaching Epstein files compromission (and also “power drunk” by the belief that Iran would fall as easily as Venezuela) and the latter to accomplish what he admitted last week “was a 40-year old dream” to control the entire Middle East (from the “Nile to the Euphrates”) with no clear mandate to do so and the pressure of the Israeli justice equally eager to place him behind bars, once thrown out of office.
If this is a quick win, the political fallout will be positive for both of them. Otherwise, it will seal their political fate…at best and the start of major global confrontation (to call it that) at worse.
Over the week end, Russia made clear that it not neutral in this conflict, firmly taking side with Iran. China did not say it loudly but started to send maritime assets in the region as well (with some of them already present).
The attacks on US embassies and US military bases conducted with precision in the region also suggested that Iran held the necessary guidance and information.
Last week, financial markets were hit by the trifecta of soaring oil prices (oil rose +35%), rapidly mounting private credit concerns (Blue Owl slumped another -6.3% last week, -33.8% YTD, although KKR (-28.4% YTD) and Apollo (-25% YTD) recovered some) and building evidence that the US economy, including its job market (US February non-farm payrolls dropped -92k vs. +55k expected with the unemployment rate also ticking higher to 4.4% from 4.3%), was losing momentum before the war against Iran had actually started.
This led global financial markets further into risk aversion, with equity markets falling sharply, especially so far Asia and Europe, accompanied by widening credit spreads, rising US Treasury (and foreign government bonds) yields, and even lower precious metals to a lesser extent, leaving investors with no place to hide and no other choice than to de-gross and deleverage and above all manage risks.
While US stocks dropped -2%, the KOSPI dropped 10 times as much (from the previous week) with Japan shedding -5.5% and Taiwan -8%. European markets also settled sharply lower with the DAX and CAC40 shedding nearly -7% with weakness most pronounced in the banking sector.
German bund yields rose 22bps with BTP’s climbing 37bps on the week. Treasuries were heavily liquidated as well with 10Y Treasury yields climbing 20bps.
Bond markets were caught between the hammer of higher oil prices and inflation expectations), concerns about excessive supply (which an oil shock will likely exacerbate) and safe haven bids from falling risk assets, with the net result still being sharply higher bond yields for the week.
To make matters worse for D. Trump, the Supreme court has placed his trade policy in jeopardy, compromising whatever source of additional funds he was counting on from this other disruptive policy.
Credit markets followed equity markets lower as well with HY spreads climbing 5bps on the week and European crossover climbing by as much as 28bps as Europe’s vulnerability to an oil shock is way higher than for the US economy, now that it has severed economic links with Russia. In a fairly dramatic development over the week end as the US rushed to re-authorize India to source oil from Russia, V. Putin said that he was considering to divert whatever Europe reluctantly still purchases from Russia for a few more months to other “more promising” markets that are now opening up (read China and the rest of the world) with the exception of Hungary and Estonia.
Soaring costs of fertilizers also drove soft commodities such as wheat and corn sharply higher. The Bloomberg commodities index (heavily weighed by oil and gas) rose 8% on the week.
The dollar rallied across the board on risk aversion and deleveraging from overextended dollar short positions.
Precious metals were not immune to last week’s correction as the dollar rallied and traders locked in some profits in precious metals to cover losses elsewhere. Talks that the Central Bank of Poland was envisaging to sell (and buy back realizing a large profit in between) some gold and spend those profits on military expenses also motivated the correction.
US CPI data are due out on Wednesday (2.4% yoy expected, unchanged from last month) and before that on Tuesday existing home sales and the ADP weekly job change.
Over the past week, the S&P500 dropped -2,0% (-1,4% YTD, Z-score -2,6) while the Nasdaq100 dropped -1,2% (-2,4% YTD). The US small cap index sold off by -4,0% (1,9% YTD, Z-score -3,2). AAPL sold off by -2,5% (-5,3%).
The Equally Weighed SP500 sold off by -3,3% (3,4% YTD, Z-score -3,0), underperforming the S&P500 by-1,3%. The median SP500 YTD return closed the week at 3,4%.
Cboe Volatility Index rallied 48,5% (97,3% YTD, Z-score 3,3) to 29,49.
The Eurostoxx50 sold off by -6,8% (-1,2%, Z-score -2,3), underperforming the S&P500 by -4,8%.
Diversified EM equities (VWO) sold off by -6,2% (1,3%, Z-score -2,3), underperforming the S&P500 by-4,3%.
The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies gained 1,4% (1,6%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) dropped -1,5% (0,1% ).
10Y US Treasuries underperformed with yields rising 20bps (-3bps) to 4,14%. 10Y Bunds climbed 22bps (1bps, Z-score 2,0) to 2,86%. 10Y Italian BTPs underperformed rising 35bps (7bps, Z-score 2,8) to 3,62%, underperforming Bunds by 13bps.
10Y French OAT's underperformed rising 29bps (-5bps, Z-score 2,3) to 3,51%, underperforming Bunds by 7bps.
US High Yield (HY) Average Spread over Treasuries climbed 5bps (30bps) to 2,96%. US Investment Grade Average OAS dropped -2bps (6bps) to 0,90%.
In European credit markets, EUR 5Y Senior Financial Spread climbed 6bps (11bps, Z-score 2,6) to 0,65%.
Gold sold off by -2,0% (19,7%) while Silver sold off by -9,9% (18,0%). Major Gold Mines (GDX) sold off by -12,5% (18,2%).
Goldman Sachs Commodity Index rallied 9,6% (23,0%, Z-score 2,7). WTI Crude rallied 35,6% (58,3%, Z-score 3,3).
Overnight in Asia…
Ø S&P future -135 points; Hong Kong -3.2%; Nikkei -6.9%; China -1.9%
Ø Iran named the son of the late Ayatollah Ali Khamenei as its new supreme leader and President Donald Trump called $100 (actually now 110$) oil a “small price to pay,” with neither side showing any sign of deescalating and after the US State Department ordered American employees and diplomats in Saudi Arabia to leave the country. Trump said short term oil prices (hike) are “very small price to pay”.
Ø The dollar rallied across the board, including vs. currencies of oil producing countries (such as Norway). EURUSD dropped to 1.1522 (from 1.1618) with USDJPY also flirting with January’s highs (at 158.69). JGB yields rose 9bps overnight.
Ø Defense Secretary Pete Hegseth predicted more American service members will be killed in the escalating war with Iran. “Things like this don’t happen without casualties,” he told 60 Minutes in a broadcast on Sunday. “There will be more casualties.” His remarks come one day after he accompanied D. Trump to a dignified transfer of the remains of six service members at Dover Air Force Base in Delaware.
Ø “Iran was going to destroy Israel and everything else around it,” D. Trump told the newspaper in an interview published earlier Monday. “We’ve worked together. We’ve destroyed a country that wanted to destroy Israel.” It’s important to watch the reaction from the US -- particularly the president’s Republican allies -- about his remarks that concluding the strikes would be a joint decision with Israel. That is likely to raise alarm bells on Capitol Hill, and even within the administration, that Trump is seeking buy-in from Netanyahu rather than making decisions on US interests alone, Bloomberg reported.
Ø Chancellor Friedrich Merz suffered a setback in the wealthy southwestern region of Baden-Wuerttemberg after his conservatives lost a crucial state election to the Greens on Sunday, a stinging blow for the German leader as he struggles to gain traction at home, Bloomberg also reported. The loss in the home of carmakers Mercedes-Benz Group AG and Porsche AG is ominous for Merz, whose authority will be tested in four more regional elections this year as his personal approval ratings founder. The Greens won 30.3% of the vote vs. 29.7% for the CDU in the contest for the state legislature, according to a projection by broadcaster ARD on Sunday. Support for the AfD nearly doubled to 18.7% from five years ago, while the Social Democrats saw their support halve to 5.6%, their worst-ever result in the region, Bloomberg also commented.
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