•Meanwhile in markets, it’s going to be a winding and bumpy road towards a ceasefire in the Iran war (notice that I don’t mention long winding and bumpy road). Yesterday’s relief rally on President Trump stepping back from the brink is a case in point;

•Roughly speaking, US Treasury yields have erased roughly half of yesterday’s decline. Asian equities are up a percent or two, but that isn’t enough to compensate for Monday’s losses. Brent crude futures are trading a couple of dollars above the $100 mark, down from yesterday’s highs of around $114 a barrel. Dutch natgas futures have also fallen and are trading around – wait for it – last Wednesday’s levels. The broad dollar is down this morning, and in the greater scheme of things, its war-induced gains are nothing to write home about;

•So, what to make of the latest twists and turns in the war? Clearly, Trump is looking for the exit. If you have followed my market commentaries, you may remember that I had expected Trump’s self-preservation instincts to kick in. And for him to declare victory one way or the other. We’re not there yet, but it’s clear that strong US attempts are made either directly or through intermediaries to end the conflict – or at least the shooting phase. According to reports in US media, the White House is trying to reach out to the Parliament speaker of Iran Mohammad-Bagher Ghalibaf. So far, the Iranians haven’t taken the bait so to say. But I think that is part bluster. Yes, the Iranians are squeezing Trump successfully by manipulating oil prices – and thus broader markets. But the Iranians are hurting too. Closing the Strait of Hormuz is not like closing a one-way street. The Iranians may be able to get their oil out with the blessings of the US (clear sign that détente is possible), but they also need to get stuff in: essential imports. Long story short: the Iranians are hurting too. But real or perceived, Tehran has more endurance at this stage;

•Trump’s deadline for Iran to fold or else (obliterate the nation’s energy infrastructure) is Friday. But it’s very unlikely he will cross the Rubicon in this regard. His escalation tool is the Marine contingent that is supposed to arrive in the region on Friday, coincidentally. Meanwhile, the Iranians could try to squeeze more concessions out of Trump, but with the risk that he will lash out, and that the conflict will flare up. However, I think that phase will be short-lived. Trump hasn’t got the nerve or the stomach for a lasting war;

•For punters, the question is if the bond and rates market can undo the yield spike and central bank hike pricing if the war quiets down in the next few weeks. Take the ECB, which is now basically guiding for a hike next month. Will they still pull the trigger if there’s a deal? I still haven’t penciled in hikes;

•Looking ahead, besides the usual Iran headline watching, eyes will be on a host of ECB-speakers plus a few SNB-speakers thrown in for good measure. The main event are the March PMIs, and their takeaways on firms’ pricing response to the war and demand outlook. If ECB President Lagarde’s guidance from the March ECB still holds, the ECB would need to see pricing pressures building up in the real economy to consider hikes.

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