• Meanwhile in markets, while President Trump suggested that a Middle East conflict could last weeks, there are tentative signs that the U.S. and its allies are already seeking an earlier exit;

• In an overnight interview, Vice President JD Vance outlined an off ramp for the Iranians: the primary condition for ending the conflict is for Iran to credibly abandon its nuclear pathways, suggesting President Trump would be happy with that outcome. This message comes as regional partners face mounting pressure from Iranian strikes. Bloomie reported that the UAE and Qatar are less than a week away from exhausting their air defense ammunition. While both governments have since refuted those specific claims, they have notably stopped short of denying reports that they are privately urging Washington to seek quick end to the conflict;

• The endgame for the US looks more like a Venezuela-style outcome: new leadership, pragmatism and oil deals. With Midterms looming, a forever war in the Middle East is political suicide for the Republicans. Rising oil prices are risk dragging down polls further with the threat of reigniting inflation, which would kill President Trump’s hope for rate cuts;

• Brent crude trades just above the $80 mark, still shy of yesterday’s $81.50 high despite more strikes on oil infrastructure across GCC states.  For now, Fed funds futures have only shifted marginally, reflecting limited concern that the conflict will materially derail the disinflation trend. Year-end pricing still implies roughly 50bps of easing from the Federal Reserve;

• The picture looks notably different in Europe. ESTR forwards have flattened sharply, erasing almost the entire 8bps of rate cuts that had been priced as recently as last week. The repricing reflects the fear over natural gas driven inflation, rather than just crude. Dutch TTF natural gas futures – the Eurozone’s benchmark – surged 35% yesterday. Prices are up again this morning, and we’re now trading more than 60% above Friday’s pre-war close;

• In broader markets commentary, UST yields are up 1-3bps in a bear steepening pattern, returning to their highest level since mid-February. In our neck of the woods Bund yields are holding steady. Safe-haven darlings gold and the Swiss franc of off yesterday’s highs, though in case of the latter that is a result of intervention threats from the SNB. EURCHF is back above the 0.91 mark, after trading at 0.902 yesterday. The broad dollar is up another 0.3% against major currencies today, with its move less pronounced against emerging markets;

• Shifting to equities, US futures are under renewed pressure after the S&P 500 index was able to close flat yesterday. Despite the strong comeback yesterday, S&P 500 futures are down around one percent today. Larger declines in can be found in Asia this morning, with the Nikkei is down roughly three percent for the day;

• Looking ahead, we have Eurozone inflation data for February on tap today, alongside plenty of ECB- and Fed-speakers and the interest rate decision of the Bank of Poland – consensus calls for a 25bps cut.

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