Sat, Mar 14, 2026|Corey McLaughlin

This Volatility Isn't Settling Down Anytime Soon

The Weekend Edition is pulled from the daily Stansberry Digest.

Updates from the Middle East keep coming fast...

This week, we've read reports about Iranian drone attacks continuing, with reported strikes on tankers near the Strait of Hormuz and at Dubai's airport... And on Wednesday, we woke up to news about Iran threatening to "target economic centers and banks" linked to the U.S. and Israel.

Meanwhile, President Donald Trump gave another interview on Wednesday, saying the war would end "soon" because there was "practically nothing left to target."

He's talking about the military infrastructure, most likely.

But, clearly, with Iranian attacks ongoing across the Persian Gulf, it now looks like a regional war is underway... And nobody seems sure what Iranian leadership will look like tomorrow or weeks from now.

Some 500 oil tankers are stuck in the Persian Gulf, according to MarineTraffic.com... And a statement purported to be from new Iranian Supreme Leader Ayatollah Mojtaba Khamenei released on Thursday tells the Iranian military to keep the pressure on.

"The lever of blocking the Strait of Hormuz must undoubtedly continue to be used," he said, according to an English transcript on a website run by the Iranian Revolutionary Guard.

The situation remains volatile. And investors still don't expect things to settle down anytime soon.

Cause for Concern in the Oil Market

When it comes to market impact, it's all about oil (and gas)...

Roughly a quarter of the world's typical seaborne oil supply has stopped. Energy production has stopped in many cases, too, including at Qatar's key natural gas facility.

Wednesday morning brought some hope from the International Energy Agency ("IEA"), which coordinates oil reserve policy among 32 nations, including the U.S. The IEA announced plans for the release of 400 million barrels of oil reserves, which is about a third of all the members' emergency stockpiles.

That may sound like a lot. But before the war, that much oil passed through the Strait of Hormuz every three weeks... And we're two weeks into the conflict already.

Also, details about the IEA's plan are hazy.

Its announcement said that "the emergency stocks will be made available to the market over a timeframe that is appropriate to the national circumstances of each Member country and will be supplemented by additional emergency measures by some countries."

Sounds to an objective observer like "everyone for themselves." In any case, the news didn't ease market concerns and arguably heightened them. Both West Texas Intermediate and Brent crude shot up about 5% on Wednesday – and then remained elevated.

Oil prices are about 40% higher than they were before the start of the war, with West Texas Intermediate and Brent crude prices close to $100 per barrel as of Friday.

What's Next for the Inflation Situation

At least inflation hasn't been a surprise (yet)...

Also on Wednesday, the Bureau of Labor Statistics showed the consumer price index ("CPI") rose 0.3% in February from the prior month and 2.4% year over year. On a core basis, stripping out energy and fuel prices, the CPI rose 0.2% month over month and 2.5% year over year.

All four of those readings were in line with what Wall Street expected. At a 2.4% headline increase, February's reading matches January's for the lowest reading since last May.

So, on first glance, the inflation data was exactly what the market would want. Lower inflation would bolster the case for the Federal Reserve to cut interest rates, as investors have been craving. But stocks remained lower on the news...

A big reason is that while February's inflation reading appeared fine, it also marks a baseline for a likely worse-off report next month. And investors are already looking ahead to what may come next.

The recent surge in oil prices means more inflation...

In February, the CPI's energy component rose 0.6% from the prior month and 0.5% from February 2025. That's already about a 6% annualized pace. And next month, higher energy costs will show up even more in CPI numbers.

Already, the Cleveland Fed – which runs an inflation "nowcast" – projects the CPI will climb back up to near 2.9% year over year for March's reading.

One estimate from Apollo Global Management Chief Economist Torsten Slok is that $100 oil would boost headline inflation by 0.7 percentage points. That would put it closer to 4% than 3%, to say nothing of the Fed's supposed 2% target... which wouldn't be good news for the broader economy.

And if the war with Iran pushes oil prices even higher in the next couple of weeks, energy prices could drive further inflation.

That puts the Fed in a tough spot...

The Fed's typical solutions to the problem of stagflation – the term for high inflation and high unemployment – are contradictory...

To combat rising unemployment, the Fed would typically lower rates. And as we've seen in the past couple of years, the Fed has raised rates with the intention of bringing inflation lower.

But right now, the Fed is worried about both higher inflation and higher unemployment. It has been in "wait and see" mode to figure out how or if it should act.

The market expects this "do nothing" stance to continue at the Fed's policy meeting next Wednesday. Federal-funds futures traders see a 99% chance that the Fed will keep the fed-funds rate the same, according to CME's FedWatch tool.

The Fed's quarterly Summary of Economic Projections is due to be released as well. This is where the Fed gives its estimates for inflation, unemployment, and economic growth.

Jerome Powell's term as Fed chair winds down in May. Still, these projections will be important as they could provide clarity for what the Fed may or may not do before Powell hands over the reins.

Trump has nominated Kevin Warsh, who still needs to be confirmed by the Senate. Barring any surprises with Warsh's nomination, next week's meeting is one of just two chances (along with April's meeting) for Powell's decisions and words to have an impact.

Our bet is that Powell signals no moves coming over the next few months while the Fed continues to wait and see what happens with inflation and employment.

But the breakout of the war in Iran sets up an interesting situation come June... and the market's next problem...

The market has been expecting lower interest rates once a new Fed chair is installed in May. But the case for cutting rates in a few months likely won't be justified as it once was.

So prepare for more volatility ahead.