Limits to the truce... High(er) inflation is coming back... What the airlines are doing about it... How high could oil go?... 'The skunk at the party'... What to do about it...
The world is waiting...
Day 2 of the "double-sided ceasefire" between the U.S. and Iran arrived today. And as we wait to see what happens during in-person negotiations about the war in the days ahead, we got at least one encouraging sign of progress...
Iranian leaders had said yesterday that the U.S.-Iran ceasefire was off unless Israel stopped bombing Lebanon, where the Iranian-aligned Hezbollah group operates. Today, Israeli Prime Minister Benjamin Netanyahu said direct negotiations with Lebanon could begin soon, before saying this afternoon that strikes would continue.
That's just one point of contention, though... And apparently, it wasn't an obstacle to the ceasefire that began on Tuesday night.
This fragile truce still has many unknowns – like, when exactly the hundreds of ships parked in and near the Persian Gulf will start moving "safely" again. Shipping traffic in the Strait of Hormuz was still well below 10% of its prewar rate, as of this morning.
Today, the CEO of the United Arab Emirates state-owned Abu Dhabi National Oil Company sought to clarify the situation, writing in a social media post: "The Strait of Hormuz is not open. Access is being restricted, conditioned and controlled" by Iran, he said.
But even with oil prices up today and nearing $100 per barrel amid these signals, the major U.S. stock indexes were higher too as optimism about an end to the war in Iran continued. We'll find out soon enough if it is warranted.
Either way, though, it might be wise to think about the "next thing" – high(er) inflation and the consequences of it...
To begin, we'll look at the last of the pre-Iran inflation data...
This morning, the Bureau of Economic Analysis released its Personal Consumption Expenditures ("PCE") data for February, showing that this gauge of inflation increased 2.8% year over year. And on a core basis, which strips out energy and food prices, PCE rose 3.0% from February 2025.
Both of those figures were in line with what Wall Street expected. And in the case of the "headline" PCE, it was the same increase we saw in January.
Markets didn't really react to these numbers. They're too old to include any impact from the surge in energy prices we've seen since strikes on Iran began on February 28.
The main focus when it comes to inflation in the market is still Iran – and whether the ceasefire announced Tuesday night holds. But the February inflation numbers set a useful baseline of prewar numbers to look back on.
Starting tomorrow, we'll begin to get a look at the real impacts of the war on inflation with consumer price index ("CPI") data for March. That will be the first data that includes the Iranian conflict, which began more than five weeks ago.
We don't need to wait until tomorrow to see inflation signals, though...
This week, Delta Air Lines (DAL) announced that it was raising fees for checked bags as part of an "ongoing review of pricing." Southwest Airlines (LUV) did the same, citing "an ongoing analysis of the business and against the evolving global backdrop."
We can read between the lines and say that these decisions come down to higher fuel costs. The conflict with Iran has caused jet fuel prices to double in a little more than a month, and the airlines are deciding to pass on the cost increases. (We have some more about this in our mailbag below.)
Don't expect those price hikes or policies to reverse when or if oil and fuel prices go back down. And meanwhile, we've seen shipping companies and logistics operations like United Parcel Service (UPS), Amazon (AMZN), and the U.S. Postal Service impose fuel surcharges for their deliveries.
Oil's impact...
In the March 11 Digest, we highlighted an estimate from Apollo Global Management Chief Economist Torsten Slok, who said that $100 oil would push headline inflation up by 0.7 percentage points.
We'll get our first clues about that in the March CPI report tomorrow. But Slok may have been underestimating the influence of oil on the data...
In a new 39-page report, the Dallas Federal Reserve studied the impact of the Strait of Hormuz blockade on oil prices and what it means for inflation. From the Dallas Fed...
For example, when the closure of the Strait of Hormuz is limited to one quarter [meaning three months], headline PCE inflation increases by an annualized 5.2 percentage points in March 2026 and by 3.5 percentage points in April. That increase is partially reversed in June and July 2026 when headline inflation drops by more than 2 percentage points each month, after which the effect is close to zero.
That scenario hinges on the immediate conflict ending by the end of the month.
Iran has limited the Strait of Hormuz's shipping for only about five weeks. For every week the "closure" drags on, higher energy prices will drive inflation that much more.
The Fed analysis evaluated the price of West Texas Intermediate ("WTI"), the U.S. oil benchmark, against various war...
We find that a cessation of oil exports from the Persian Gulf that only lasts one quarter would raise the average WTI price to $110 per barrel in April 2026. An outage lasting two quarters would cause the WTI price to peak at $132 per barrel in July 2026 and an outage lasting three quarters would cause the WTI price to peak at $167 in October of 2026.
Those prices are roughly 10%, 35%, and 70% higher, respectively, than even today's oil prices.
We don't think anybody wants the war to go on for another three or six months, but each day it continues can drive prices higher.
Based on what has happened already, if the Dallas Fed's prediction comes true, the annualized increase of 5.2% for PCE in March would be the highest monthly reading in more than three years.
That's bad news for stocks...
High(er) inflation coming back is a problem for markets. We don't have to look back very far (see 2021 and 2022) as an example of why. Higher costs – especially sudden, unpredicted changes – tend to ripple through the economy... both for businesses and consumers.
Higher inflation is typically followed by higher interest rates from the Federal Reserve as well, sooner or later.
The question will be what "this time" ends up looking like.
JPMorgan Chase CEO Jamie Dimon recently shared his thoughts, writing in his annual investor letter...
The skunk at the party – and it could happen in 2026 – would be inflation slowly going up, as opposed to slowly going down.
We've seen that play out so far... Over the past 12 months, PCE growth has risen from 2.5% in February 2025 to 2.8% in the latest release. That may not seem like a big difference... But it represents a drift away from the Fed's 2% target.
And as we expect, thanks to oil prices, inflation is only going to head higher in the next few reports. This likely means that the Fed will keep its benchmark interest rate "higher for longer"...
Markets are pricing in a 73% chance that the Fed doesn't change interest rates this year – no longer expecting a cut until September 2027. And the longer rates are high, the more of a headwind monetary policy will be for stocks.
Here's more from Jamie Dimon, channeling a famous Warren Buffett quote...
Interest rates are like gravity to almost all asset prices. And falling asset prices at one point can change sentiment rapidly and cause a flight to cash.
We haven't seen this type of capitulation yet. Stocks have bounced off their lows from last week, and yesterday's move brought the S&P 500 Index back above its 200-day moving average and 50-day moving average.
But rising inflation is back in the picture. It's something for investors to worry about over the longer run, and it's something you should be protecting against in your own portfolio.
It's easy to forget, but despite interest-rate risk for the stock market, owning high-quality stocks is a top way to beat inflation in the long term. And sectors like energy are especially appealing right now, as we wrote about yesterday.
"Hard assets" are another route. On that front, gold was up again today to nearly $4,800 per ounce... continuing a bounce higher that began a few weeks ago. Putting it all together, as the market remains volatile, staying diversified and being prepared for surprises is a wise move.
New 52-week highs (as of 4/8/26): BWX Technologies (BWXT), Ciena (CIEN), GE Vernova (GEV), iShares Convertible Bond Fund (ICVT), Lumentum (LITE), Invesco Oil & Gas Services Fund (PXJ), U.S. Global Sea to Sky Cargo Fund (SEA), Solstice Advanced Materials (SOLS), and SSR Mining (SSRM).
In today's mailbag, feedback on a piece of yesterday's mail about fuel hedging and why airlines shouldn't be passing on higher costs to consumers... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"Totally agree with Edward V. I was going to say the same thing, but he beat me to it. Was just watching the national news and apparently they have no clue about fuel hedging. Another opinion: The Iran ceasefire won't last more than a day or two... too many moving parts and too many unreliable parties." – Stansberry Alliance member G.F.
"In response to Edward V's comment yesterday about airlines hedging fuel prices, I recently heard that Southwest was the last of the U.S. airlines to stop hedging prices. Most stopped ~ 2010. Southwest stopped a few years later... Due to the prices of the contracts they'd rather pass the price onto the consumers..." – Subscriber Ryan S.
Corey McLaughlin comment: Thanks for the notes, both from Edward V. yesterday and these today.
Let me clear up the latest on the practice (or lack thereof) of fuel hedging in the airline industry...
Carriers can manage the risk of future price swings by buying contracts months or even years in advance for fuel at a predetermined price.
As Ryan notes, the major U.S. airlines have largely abandoned the strategy...
"No one hedges anymore, and even if you do, hedging the crack spread is really hard to do," United CEO Scott Kirby said just last month, referring to the difference between the price of crude oil and the fuel produced from it.
United, Delta, and American Airlines (AAL), stopped hedging about a decade ago. They cited moderating fuel prices and said the protection was getting too expensive to pay off even if prices rose.
Southwest kept hedging until last year. Talk about bad timing... and a head scratcher.
Hedging fuel contracts saved Southwest more than $1 billion during the financial crisis and, more recently, after Russia invaded Ukraine in 2022.
Now, amid this Iran war-related fuel cost spike (around 80%), Southwest and other U.S. airlines are looking to manage sudden, higher costs and a volatile environment in different ways... like cutting flights and adding new fees.
Delta also hedges some volatility by owning a refinery... But it's still projecting an additional $2 billion in fuel costs in 2026. Maybe U.S. carriers will get back to their old hedging, at least somewhat.
European and Asian carriers have continued to hedge fuel prices... But since they're more dependent on supplies that pass through the Strait of Hormuz, some of them had to cut flights anyway because not enough fuel was available. Sometimes, even hedging doesn't save the day.
All the best,
Corey McLaughlin and Nick Koziol
Baltimore, Maryland
April 9, 2026
