Oil Spirals Higher After Iran Strikes Energy Infrastructure
Qatar said early Thursday that Iranian ballistic missiles caused extensive damage at its Ras Laffan industrial area, which houses a major hub for liquefied-natural gas. Those strikes came in response to an Israeli attack on a large Iranian gas field, South Pars, which prompted Iran’s president to warn of “uncontrollable consequences, the scope of which could engulf the entire world.”
President Trump said Israel won’t launch further attacks against South Pars, but he threatened that the U.S. will “blow up the entirety” of the gas field if Qatari gas is attacked again.
Abu Dhabi authorities intercepted missiles targeting Habshan gas facilities and the Bab oil field. (…)
The sequence of events as they happened:
- Last Friday March 13, the US Air Force conducted a large bombing raid on Kharg Island, a key oil export hub off the Persian Gulf coast of Iran. The strikes targeted more than 90 Iranian military sites but deliberately spared oil and gas infrastructure. Kharg Island handles roughly 90% of Iran’s crude oil exports, making it a critical economic hub.
- Trump stated he chose not to destroy the oil infrastructure “for reasons of decency” but warned it would be “next” if Iran continued to block the Strait of Hormuz.
- Iran’s Foreign Minister, Abbas Araghchi, vowed to retaliate if energy infrastructure was targeted, specifically threatening American companies and their shareholders in the region. Tehran claimed the attack was launched from the United Arab Emirates (UAE), specifically alleging the use of HIMARS from Ras Al Khaimah. Iran urged residents and workers to evacuate several major ports in the UAE, declaring them “legitimate targets”.
- David Sacks, Trump’s White House AI and crypto czar, urged the U.S. to end the conflict during a podcast released on Friday, March 13. This was the first time a senior administration official publicly broke with the Trump’s stance on the war. Sacks argued that because the US and Israel had already “massively degraded” Iran’s military and air defenses since the start of the conflict on February 28, the US should claim success and exit. He noted that global financial markets were desperate for an “off-ramp” and that ending the war would stabilize the economy. He warned that a prolonged war could lead to “horrifying” scenarios. He speculated that if Israel’s air defenses were depleted and the country faced destruction, it might contemplate using nuclear weapons. He described Iran as holding a “dead man’s switch” over the economic fate of Gulf states through potential strikes on energy infrastructure.
- Despite Trump’s calls for a “team effort” to secure the Strait of Hormuz, key allies rebuffed Trump’s requests to send warships for tanker escorts, fearing further escalation.
- EU Foreign Policy Chief Kaja Kallas discussed a potential “wartime arrangement” with the UN, modeled after the Black Sea grain deal, to reopen energy transport without further military strikes.
- Congressional Democrats and some non-partisan groups denounced the strikes as unconstitutional, arguing that Trump bypassed the required Congressional approval to initiate war.
- Leading figures within the MAGA media sphere have been some of the sharpest critics of the escalation, arguing that the U.S. is being drawn into another “endless war.”
- Joe Kent, the director of the National Counterterrorism Center and a handpicked Trump loyalist, resigned in protest on March 17, 2026. In his resignation letter, he stated he could not support a war that he felt was launched despite no imminent threat to the U.S. Kent claimed the U.S. started the war due to intense pressure from Israel and its “powerful American lobby“. He alleged that high-ranking Israeli officials led a “misinformation campaign” to trick Trump into believing Iran was an imminent threat. He argued this was the same tactic used by Israel to draw the U.S. into the “disastrous” Iraq War. In an interview with Tucker Carlson, he stated that “the Israelis drove the decision” to strike, knowing it would trigger Iranian retaliation and force U.S. involvement.
- On March 17, Israel killed Ali Larijani, the Secretary of Iran’s Supreme National Security Council. Larijani was seen as a strategist willing to engage in “strategic compromises” with the West to ensure the regime’s survival. He was a key architect of the 2015 Nuclear Deal (JCPOA) and had been engaged in indirect talks with the US just weeks before the current war began.
- On March 18, Trump said the war could end “soon,” though he simultaneously claimed the U.S. was “not ready to leave yet”.
- On the same day, the Israel Defense Forces (IDF) hit production facilities, gas tanks, and parts of a refinery at Iran’s South Pars field which accounts for roughly 70% of Iran’s gas production and provides fuel for 80% of its power generation. Initial assessments suggest the strikes affected about 12% of Iran’s total output, threatening widespread domestic electricity and heating shortages. This marked the first time during the conflict that core Iranian energy production infrastructure was directly targeted.
- Iran retaliated by launching missile and drone strikes against major energy hubs of its neighbours, including QatarEnergy’s Ras Laffan LNG facility and the Habshan and Bab oil and gas fields in the United Arab Emirates.
- The Wall Street Journal reported that Trump was not only aware of the plan but had approved it. Two Israeli officials told CNN that the strike was carried out in direct coordination with the U.S..
- In a Truth Social post, Trump said Israel had “violently lashed out” at the South Pars gas field “out of anger”, but hit only a small portion of the area. “The United States knew nothing about this particular attack, and the country of Qatar was in no way, shape, or form, involved with it, nor did it have any idea that it was going to happen,” Trump wrote. He then said that “NO MORE ATTACKS WILL BE MADE BY ISRAEL” on the South Pars Field “unless Iran unwisely decides to attack . . . Qatar”.
The comments reveal an emerging split between Trump and Israel over targeting Iran’s energy infrastructure and, increasingly, over that war.
Trump asserted that the Iranian Navy and Air Force have been “essentially wiped out“ or “decimated” in just two weeks of conflict.
Trump suggested that “certain very important sites” related to Iran’s nuclear program had been hit and “will not be coming back for a long, long time.”
He claimed that “all of their missile factories“ and underground storage bunkers had been targeted to ensure Iran could not replenish its stockpile.
In a call with Axios, Trump suggested the war would end soon because there is “practically nothing left to target“.
Then Israel bombed South Pars, knowing that would escalate the conflict and potentially anger other Gulf states.
Saudi Arabia’s foreign minister Prince Faisal bin Farhan said what little trust existed with Iran before the war had been “shattered” and was now “broken”.
My sense is that Trump is starting to feel it in his bones… and so is Israel …
Ed Yardeni:
The Bull/Bear Ratio we monitor fell to 1.94 this past week. That’s increasingly bullish from a contrarian perspective. However, it has worked best in the past when it fell below 1.00 because such bearish sentiment typically triggered a Fed Put. This time around, the Fed may be trapped between Iran and a hard place. BBR readings around here or lower could signal a compelling buying opportunity if foreign policy succeeds in lifting the fog of war sooner rather than later.
The S&P 500 Index yesterday closed on its 200dma (6615). Today’s preopening is at 6596.
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Prices Paid to US Producers Increase by More Than Forecast
The producer price index rose 0.7% after a 0.5% gain in the prior month, according to Bureau of Labor Statistics data out Wednesday. An underlying gauge of wholesale inflation that excludes food and energy increased 0.5%.
“The large upside surprise to the PPI in February confirms that stronger inflationary pressures were already making their way through supply chains even prior to the surge in oil prices,” Thomas Ryan, North America economist at Capital Economics, said in a note.
More than half of the increase in the PPI last month was due to a 0.5% advance in services costs, according to the BLS. That includes rising costs for traveler accommodation, food wholesaling and investment services. (…)
A less-volatile PPI measure that excludes food, energy and trade services rose 0.5%, the most in four months. (…)
Wolfstreet.com has the meaty stuff:
The Producer Price Index final demand for services jumped by 0.54% (+6.7% annualized) in February from January, seasonally adjusted, after spiking by 0.82% (+10.3% annualized) in January, and by 0.59% (+7.3% annualized) in December, which pushed the six-month average to +5.8% annualized, the worst since August 2022.
Year-over-year, the services PPI accelerated to 3.8%, the fourth month in a row of acceleration.
Year-over-year, the core goods PPI jumped by 4.2%, same increase as in January,
Core PPI Final Demand, which includes all goods and services except food and energy, jumped by 0.49% in February from January (6.1% annualized) seasonally adjusted, after spiking by 0.81% (+10.2% annualized) in January, and by 0.53% (+6.6% annualized) in December.
The six-month average accelerated to +5.6% annualized, the worst since August 2022.
Prepare for bad surprises as Ed Yardeni illustrates. Note that nothing from the war with Iran is in these numbers.
BTW, the FOMC’s SEP sees core inflation slowing from 2.9% in 2025 to 2.7% in 2026. It was 3.1% in January.
From yesterday’s FOMC:
- Economic activity is still seen as expanding at a “solid pace” and inflation remains “somewhat elevated”.
- Risks continued to be skewed to higher unemployment, and more participants deemed uncertainty around these forecasts to be higher.
- Both headline and core PCE projections were revised up in this SEP. 2026 headline inflation was seen three ticks hotter (2.7%), while 2027 was revised up by one tick (2.2%). Core PCE inflation was revised up by two ticks in 2026 (2.7%) and one tick in 2027 (2.2%).
- 17 of 19 participants saw risks to these projections as weighted to the upside, while uncertainty was deemed to be higher still.
- Powell sees a big chunk of current inflation (0.5%-pts to 0.75%-pts) stemming from tariffs so if this fades as expected, they’ll be able to make progress toward 2%.
- Fed is looking for progress on inflation in mid-2026, and that “if we don’t see that progress, then you won’t see that rate cut.”
- Powell expressed greater confidence about higher productivity.
(…) The Internal Revenue Service has data on tax refunds through Feb. 27. They’re up, on average, by 11%, which is a benefit of $360 per filer compared with the same period of 2025. Outside estimates expect the average tax refund when all is said and done to be even higher. Morgan Stanley says $534 higher and the Tax Foundation says $748.
Neale Mahoney, Jared Bernstein, Caleb Brobst and Ryan Cummings use the highest number, $748, to compare with what is likely to happen at the pump over the course of the year. Bernstein was the chair of the Council of Economic Advisers in the Biden administration, and Cummings was an economist at the White House between 2021 and 2023.
They use two estimates from Goldman Sachs on the direction of Brent oil futures, one taken before the war and one taken after. The key thing here is that even the new Goldman Sachs estimate forecasts a three-week Strait of Hormuz closure. Given that Thursday marks the 20th day of the conflict, that means the war basically needs to end right now for even the newer Goldman forecast to hold true. The rest of the Goldman forecast is for prices to retreat halfway to the prewar baseline by April and 85% of the way back by June.
Using a simple model of the pass-through of crude oil to retail gasoline prices, the Stanford economists conclude that households will pay an extra $740 in gas costs this year. (…)