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Here are the most critical developments unfolding in the US-Iran conflict: 

• Trump tries to articular war justification: says if we have a little high oil prices, could be for a little while, but they will drop, and could even be below the levels before, but that he 'had to' act or else Iran would have 'used nukes'. Claims Israel didn't force America's hand. Admits leadership vacuum.

• The Pentagon has released Operation Epic Fury's objectives; 1- Demilitarization of Iran: destruction of its missile forces, production facilities, and naval fleet 2- Elimination of the terrorist regime 3- Protection of the United States from current and future threats 4-  Ensuring that Iran does not possess nuclear weapons

• UAE mulling joining US-Israel attack on Iran, and the Saudis too, to stop Iranian missile and drone strikes on their countries.

• The American Embassy in Riyadh has been hit in another drone attack, with WSJ reporting it was struck twice Tuesday, resulting in damage to the roof. More embassies across region are shuttering, including the US Embassy in Beirut.

• President Trump mulling arming anti-Tehran militias. But he hasn't decided yet while urging Iranians to rise up and be Washington's 'boots on the ground.'

• The Israelis just struck the meeting of the Iranian Supreme Council where officials were gathering to choose a new Supreme Leader, a senior Israeli official told Fox News. "Israel struck while they were counting the votes for the appointment of the supreme leader."

• US-Israel bombing is expanding inside Iran. Explosions heard in the northwestern cities of Tabriz and Urmia, as the capital no longer the only focus.

• Iraq's crude oil output is being significantly curtailed. An update from Iraq specifies a shutdown of 460,000 bpd at West Qurna 2 and a cut of 700,000 bpd at Rumaila, while warning that more than 3 million bpd could be forced offline in the coming days if tanker access remains limited.

• Export crude bottlenecks are developing across Iraq. Storage at southern export terminals is nearing critical capacity because tanker traffic in the Strait of Hormuz has been paralyzed. Iraq has also halted most Kurdistan-to-Turkey exports via Ceyhan, leaving only about 50,000 bpd for domestic use.

• Iranian retaliation expanded on Tuesday, with Gulf states' energy infrastructure hit by multiple drones. This included a drone strike on Fujairah in the UAE, a key bunkering and crude-loading hub outside the Strait of Hormuz, as well as a drone strike at the Port of Salalah in Oman.

• The U.S.-Israeli operation against Iran is intensifying. Strikes are said to be hitting major targets, including state media, military command sites, and leadership compounds, with the reported Iranian death toll rising to 787 since the start of Operation Epic Fury.

• The war is spreading into a broader regional conflict. Israel has expanded attacks into Lebanon, including renewed strikes on Beirut and a ground move into the south, while regional actors such as Qatar and possibly Saudi Arabia are portrayed as being drawn more directly into the conflict.

*   *   * 

Update(12:45ET): To quote Rumsfeld there are many "unknowns" as the Iraq Iran war continues to go regional, but a Tuesday Oval Office press conference saw Trump try and articulate war justifications. A quick summary:

President Trump spoke at the White House alongside visiting German Chancellor Friedrich Merz, declaring the military campaign against Iran a decisive success. “We’re doing very well,” Trump said.

“They have no navy; it’s been knocked out. They have no air force; it’s been knocked out. They have no air detection — that’s been knocked out,” he stated, adding that Iran’s radar systems and “just about everything’s been knocked out.”

Pressed in the Oval Office on why there was no evacuation plan for Americans in the Middle East before Saturday’s strikes, Trump said, “Well, because it happened all very quickly.”

“I thought we were going to have a situation where we were going to be attacked. They were getting ready to attack Israel,” he said.

When asked whether Israel had “forced” his hand, Trump replied, “No, actually, I might have forced their hand.”

Addressing speculation about Iran’s future leadership, Trump referenced Reza Pahlavi. “He seems like a very nice person. But it seems to me that someone from within might be better” to take over, he said.

Trump acknowledged the risks of regime change. “I guess the worst case would be, we do this, and then somebody takes over who’s as bad as the previous person, right?” he said. “That could happen. We don’t want that to happen.”

Defending the timing of the strike, Trump said, “You see, we were having negotiations with these lunatics, and it was my opinion that they were going to attack first. They were going to attack. If we didn’t do it, they were going to attack first. I felt strongly about that.”

And finally: very GW Bush style...

If we hadn't attacked Iran, it would have already started a nuclear war with many countries, because "they are pure evil and sick in the head" - Trump.

If we hadn't attacked Iran, it would have already started a nuclear war with many countries, because "they are pure evil and sick in the head" - Trump. This stupid president touched the streets with hornets pic.twitter.com/FEIQ20Q0qX

— Ruslan P (@RyslanPetrenko) March 3, 2026

* * *

Update(11:15ET): American or regional officials have confirmed that the US Embassy in Riyadh has come under drone attack twice on Tuesday resulting in the roof suffering a partial collapse.

Part of the building is engulfed in smoke, with staff said to be sheltering in place. An earlier State Dept statement said: "Embassy Riyadh has been struck by two UAVs that hit the roof and the perimeter of the chancery." The cable added: "Post is sheltering in place and reported no injuries." Initial reports say no casualties, according to a person familiar with the incident. Meanwhile...

Saudi Arabia condemns ‘flagrant’ Iranian drone attack on US Embassy in Riyadh - Al Arabiya English

Riyadh, Saudi Arabia, of the smoke rising from the U.S. embassy after it was struck by 2 Iranian drones in the night. pic.twitter.com/AnXgd2gU71

— Avinash K S???? (@AvinashKS14) March 3, 2026

Scenes from on the ground in Tehran:

?? Tehran, the Iranian capital, a short while ago pic.twitter.com/WC4uc3BD98

— War Monitor (@WarMonitors) March 3, 2026

* * *

Update(0920ET): In a massive though not completely unexpected development, Iraq has shut down 460,000 barrels per day of production at the West Qurna 2 field, Iraqi oil officials told Reuters. Officials warned the country will be forced to cut more than 3 million barrels per day within days if oil tankers cannot move freely and access loading terminals, as confirmed in Bloomberg.

On Tuesday, Iraq reduced output at the Rumaila oil field by 700,000 barrels per day. Rumaila is the second-largest oil field in the world, and storage levels at southern export terminals have reached critical capacity due to disruptions and slowdowns in tanker traffic through the Strait of Hormuz, according to local officials.

Importantly, Iraq also halted crude exports from its semi-autonomous Kurdistan region through the key pipeline to Turkey’s port of Ceyhan, according to sources cited by Bloomberg. Roughly 200,000 barrels per day have been shut in as producers cut output amid escalating regional conflict. Only about 50,000 barrels per day are now being produced for domestic use.

Energy infrastructure in northern Kurdistan has faced repeated attacks during prior unrest. And now with major fields throttling output and exports constrained, oil prices are surging.

Targeting Gulf production from across water in Iran....

Thick black smoke pours Tuesday from the Port of Fujairah in the United Arab Emirates, located on the Gulf of Oman as one of the UAE’s only oil terminals south of the Strait of Hormuz, following a drone attack this morning on oil storage tanks and other infrastructure at the port… pic.twitter.com/WaU87tJsNA

— OSINTdefender (@sentdefender) March 3, 2026

Iran appears to have turned its sights on Fujairah in the UAE. The port is the the Middle East's largest bunkering terminal for tankers transiting the Strait of Hormuz and major loading point for Murban crude. Map from @EnergySPG shows scale of the facility. pic.twitter.com/SVjv0RPWJD

— Andy Critchlow (@baldersdale) March 3, 2026

* * *

Israeli and US forces pressed forward with their assault on Iran, striking targets across the country, including Iran's state broadcaster and central military command centers, as the official death toll has climbed to 787 Iranians killed since the start of the Trump-ordered Operation Epic Fury. The US has sustained at least six troop deaths and several more seriously wounded.

Fears that this could open to a broader multi-front war appear to be coming to reality, as at the same time Israel escalated operations on a second front, intensifying airstrikes on Lebanon and launching a new ground incursion into the south. Beirut is once again under Israeli bombs, after Israel accused Hezbollah of firing rockets on the north. What's more is that Kann News is citing a senior Israeli official as follows: We assess that Saudi Arabia will attack Iran soon after it was attacked yesterday. The war is expanding.

The conflict has continued to spread across the Gulf. Saudi authorities said two drones struck the US Embassy in Riyadh, igniting a small fire and causing minor damage. However, there's been surprisingly little information or video to come out of this major incident.

Qatar has formally joined the war on the US-Israeli side, having already said it took out a pair of Iranian jets. The tiny oil and gas rich GCC country Foreign Ministry stated that "the two Iranian planes shot down by Qatar yesterday were flying toward Doha and were warned before being shot down. Qatar is searching for the pilots."

Iran has continued its retaliation by targeting energy infrastructure across the Gulf, driving global oil and gas prices sharply higher. As we reported previously, Qatar's state-owned petroleum company suspended all LNG production after two of its facilities were hit.

The status of the vital Strait of Hormuz remains a big unknown, with Iran's Revolutionary Guard Corps (IRGC) announcing that the vital oil transit chokepoint for roughly one-fifth of global oil consumption is now "closed". While the consensus is that after the US blew up all or most of the Iranian Navy's vessels, it doesn't have the maritime power to effect a blockage, the IRGC can certainly wreak havoc through its drone and missile arsenal.

New Footage Shows US Base in Bahrain Under Iranian Missile Strike

New video has surfaced online showing US military base in Bahrain that were targeted in recent hours by heavy Iranian missiles. pic.twitter.com/LHC3iSD0Ws

— Tasnim News Agency (@Tasnimnews_EN) March 3, 2026

Iran has also continued missile attacks on Israel, with the Israeli military reporting interceptions over West Jerusalem, Tel Aviv, and Eilat. At least 10 people have been killed in Israel since Saturday. Many dozens, possibly in the hundreds, have been injured and wounded. Fox live shots and correspondent on the ground Trey Yingst have been offering proof that Israel's anti-air defenses are routinely being overwhelmed and significant impacts have resulted.

Costly interceptors are also being expended at a high rate across the Gulf, and these countries are urgently appealing for more from Washington, but they will soon be in short supply at this rate. The Wall Street Journal warns as follows:

Persian Gulf nations targeted by Iran have, so far, managed to limit the damage by deploying sophisticated U.S.-made air defenses against the hundreds of drones and missiles that have rained on their cities.

With costly interceptors and radar, all integrated with the U.S. military, the oil-rich Gulf Arab states have fielded some of the most advanced air defenses in the world, despite their small populations and militaries.

A crucial variable in this war, however, is whether these monarchies start running out of interceptors before the Iranian regime runs out of projectiles. At current burn rates, it could be very soon.

Alarmingly, initial White House talking points of a 'limited' campaign of mere days (and based on pre-war comments during the build-up) have now gone out the window as on Monday President Trump and Secretary Rubio indicated the operation could run for roughly four or five weeks. But they also admitted there's a basically open-ended timeline to "do whatever it takes" to eliminate Tehran’s missile and nuclear capabilities, and to destroy the country's missile arsenal.

??Massive explosion in Tehran pic.twitter.com/Tbeds9mviY

— War Monitor (@WarMonitors) March 3, 2026

But then here's what the Trump administration failed to take into account, or perhaps chose to completely ignore. Trita Parsi told The Economist:

"This is not a monarchy in which the shah is gone and you take out all of the male heirs." He explained: "This is a system—not a particularly popular system—but nevertheless one with a security establishment that is not dependent on a single person or a single family."

Pentagon brass doesn't seem to know what the plan is, how long it will last, or why they're there: "The hours, days, and perhaps weeks ahead will challenge you. There will be noise and confusion."

Adm. Brad Cooper, the top U.S. military officer at @CENTCOM, sent this message to the roughly 50,000 U.S. troops directly involved in operations against Iran, I'm told. pic.twitter.com/9VGvRSWtTW

— Dan Lamothe (@DanLamothe) March 2, 2026

There are reports that in the instance of the Ayatollah's death under US-Israeli bombs, which is the first thing that happened Saturday as he was apparently not in hiding, Iran put a strict emergency protocol in place. This reportedly involved plans for the IRGC and various military units across the country to begin acting autonomously within their respective chains of command, so that a state decapitation strike won't disrupt the ongoing retaliation. 

That retaliation has already killed at least six US service members stationed at Gulf bases:

The U.S. is facing increasing risks to its military forces and diplomatic presence in the Middle East as Iran is launching waves of missile and drone attacks across the region that are testing its ability to defend a swath of territory.

U.S. Central Command said that six servicemembers had been killed in the three-day-old campaign on Monday. The six died in a drone strike on a base in Kuwait, The Wall Street Journal reported. Separately, three American F-15 jets were downed by apparent friendly fire over Kuwait on Monday, in one of the most significant losses of equipment for the U.S. in the operation.

Bases that house U.S. forces have also come under attack in Iraq, Saudi Arabia and Bahrain.

In at least one instance troops were in a mobile trailer which served as a makeshift command center or office when an Iranian projectile hit.

The White House has meanwhile said it is not at all in diplomatic contact with the Iranians, who may want to impose a deeper cost before even starting a discussion for an offramp - and it's the same with the Gulf states - there doesn't seem to be any top-level contact.

Rubio and Hegseth have kept repeating that "this is not Iraq" and have insisted this is not another Neocon "endless war". They might be right in that what just opened up might prove far worse than the Iraq war. So far there's no US boots on the ground that we know of, but we're already at that admin talking point of 'we haven't ruled it out'. White House leadership has also been surprisingly open as to Israel's role in the US decision to attack Iran.

??STRUCK: The Iranian Regime’s Leadership Compound — the central headquarters have been dismantled

This command headquarters was one of the most heavily secured assets in Iran. The compound that housed the regime’s most senior forum was struck by the IAF overnight using precise… pic.twitter.com/4iW2xd71bC

— Israel Defense Forces (@IDF) March 3, 2026

More latest headlines via Newsquawk: 

• Israeli defence forces announce that they did not deploy ground troops in Iran, Israeli source report.

• The IDF announces that they have struck Iran's leadership compound in Tehran.

• IAEA confirms recent damage to entrance buildings of Iran's underground Natanz fuel enrichment plan.

• Israel's Home Front announce early warning after detection of rockets fired from Iran toward Israel, Al Jazeera reported.

• Israeli Military Spokesperson said it is not likely that Israel will deploy ground forces to Iran as it is not practical.

• IDF spokesperson said launches detected from Iran and alerts expected in the northern area from the Golan to northern Sharon.

• Iran's military said it targeted the Al Udeid base with missiles.

• Iran's IRCG said they targeted the aircraft carrier "Lincoln" with 4 cruise missiles; The aircraft carrier "Lincoln" headed towards the southeastern Indian Ocean , Al Arabiya reported.

• Member of Iran’s Assembly of Experts said choosing a successor to Supreme Leader Khamenei “won’t take long”, according to ISNA.

• Hezbollah said it targeted the Ramat David Air Base in northern Israel.

• US VP Vance said President Trump wants to make sure Iran never had nuclear weapons, adds the US has a lot of capacity in Iran.

• US President Trump held a call with Kurdish leaders in Iraq on Sunday to discuss the US-Israel war with Iran and what might come next, according to three sources with knowledge of the called cited by Axios.

• US is said to prepare for a 'pickup' of attacks in Iran during the next 24 hours, according to CNN.

For the first time in modern warfare, Iranian kamikaze drones struck commercial data centers in the Middle East operated by Amazon. This marks a major escalation in the targeting of civilian digital infrastructure.

Amazon wrote on its website that three Middle East data centers were hit by Iranian drones, causing widespread outages at Amazon Web Services facilities tied to the "ongoing conflict in the Middle East."

"These strikes have caused structural damage, disrupted power delivery to our infrastructure, and in some cases required fire suppression activities that resulted in additional water damage," the company said in a post on Monday on AWS's health dashboard. 

Operations in the Middle East remain "significantly impaired," AWS said, noting that "customers are experiencing elevated error rates and degraded availability for services."

The entire 'bomb the data center' incident led us to write a note on Monday morning titled, "Modern Warfare Sees First Drone Strike on a Commercial Data Center." This marks a first in a world where Morgan Stanley's Vishwanath Tirupattur recently forecasted that $3 trillion in global data center spending will occur through 2028. Translation: there's a massive security gap in defending data centers from aerial threats. 

We first outlined the theme in a late January note titled "Explosion in AI Data Center Buildouts Will Demand Next-Gen Counter-Drone Security."

Our view at the time was:

Wall Street analysts largely end their analysis at the financing and construction of next-generation data centers, with limited discussion regarding the modern security architecture required once these facilities are built and become instant high-value targets for non-state actors or foreign adversaries; traditional perimeter measures such as metal chainlink fencing and standard surveillance systems are rendered useless in the world of emerging AI threats, including coordinated autonomous drone or swarm-based attacks enabled by advances in AI and low-cost unmanned systems.

The key takeaway is that Wall Street analysts and data center developers have just received a major wake-up call: trillions of dollars in planned data center buildouts will require next-generation security, including high-tech counter-drone detection, tracking, and kinetic interception systems. This follows the Ukraine war and other recent modern battlefields, which have sparked the hyper-development of cheap, dual-use, consumer-grade drones that can be mass-produced at a fraction of the cost of traditional air-delivered munitions. We said weeks ago, this proliferation of drones and AI kill chains has given readers a glimpse of the 2030s battlefield.

Our view is that Wall Street will now begin searching for "war unicorns" specializing in counter-threat systems, whether in detection, electronic warfare, or kinetic defenses, as the world appears increasingly unstable and the need to harden critical data center infrastructure against FPV and other drone threats becomes a national security threat. 

This isn't the first time the world's attention has shifted away from the Ukraine war, but it certainly marks the biggest other conflict to erupt throughout the four-year long war in Eastern Europe.

Every time there is a 'distraction' - President Zelensky takes pains to try and refocus attention on Kiev's plight, quite naturally. At a moment the depth of American arms supplies and ammo stockpiles are in question given the rate of expenditure in the new Iran war, the Ukrainians are rather nervous to say the least.

Zelensky has freshly warned that deeper US involvement in the conflict with Iran could disrupt the steady flow of American weapons that Ukraine depends on in its war against Russia. Of course, Ukraine was issuing desperate pleas for more arms and ammo even long before Trump's Operation Epic Fury kicked off.

On slowed arms flows, he said as quoted in WSJ:

“We understand that a long war–if it is long–and the intensity of the military actions will affect the amount of air defense we receive," Zelensky told reporters on Monday, according to audio of his remarks published by Ukrainian media.

Zelensky said he spoke to German Chancellor Friedrich Merz about the issue of weapons supplies to Ukraine, and was in contact with other allies. So far, he added, there are no signs of any delays.

“Everyone understands that, for us, this is a matter of life,” Zelensky said of the arms Ukraine receives through the Prioritized Ukraine Requirements List, or PURL, a program European allies use to purchase weapons from the U.S. for Ukraine.

But then again America's Gulf allies, who are also desperate for anti-air replenishment, consider this moment a matter of life and death too.

WSJ notes further, "Ukraine has said it desperately needs PAC-3 interceptor missiles for the Patriot systems supplied by the U.S."

Further, "The U.S. has been using its own Patriot systems to protect U.S. military bases and the airspace of allied countries in the Middle East from Iranian retaliatory strikes."

So it seems like Zelensky's arms wish list will be further delayed - not for lack of money, but simply based on rate of slow replenishment, but mostly Washington's new conflict theatre priority: Iran and the Gulf. What's worse is that the war is already threatening expansion across the whole Mideast region, as the conflict spreads to Lebanon.

Still, Ukraine has come out in favor of Trump's strike on Iran, given especially that Russia uses Iranian suicide drones in the Ukraine conflict, and has from nearly the start.

JPMorgan Chase CEO Jamie Dimon said Monday that Donald Trump’s $5 billion lawsuit over the closure of his accounts “has no merit,” but added, “They have the right to be angry. I’d be angry, too.”

Trump claims JPMorgan and other banks shut his accounts for political reasons, according to CNBC. Dimon said banks are often “forced” to debank clients due to legal and regulatory pressures tied to reputational risk. “We debank people because it causes legal, regulatory risk for us,” he said, noting it’s easier for banks to avoid that risk.

Trump sued JPMorgan and Dimon in January, part of a broader legal campaign that also includes claims against Capital One, media outlets, and the IRS. JPMorgan has acknowledged closing dozens of Trump-related accounts after the Jan. 6, 2021, Capitol attack.

“But I agree with them,” Dimon said during an interview in Miami. “Like, why is a bank allowed to do that?”

CNBC writes that though no single law mandates dropping clients over reputational concerns, regulations make serving certain customers risky. The case puts Dimon in a delicate spot as banks begin benefiting from deregulation under Trump appointees.

“There are a lot of misunderstandings here,” Dimon said. “Hopefully the law will change, and hopefully it’ll get sorted out.”

Recall, President Donald Trump filed a lawsuit against JPMorgan Chase and its CEO Jamie Dimon, claiming the banking giant debanked him for political reasons. 

The lawsuit was filed in January in a Miami state court by his attorney, Alejandro Brito, on behalf of Trump and several of his hospitality companies. 

The complaint cites JPMorgan's code of conduct, which reads: "We set high expectations and hold ourselves accountable. We do the right thing—not necessarily the easy or expedient thing. We abide by the letter and spirit of the laws and regulations everywhere we do business and have zero tolerance for unethical behavior."

According to Brito, "Despite claiming to hold these principles dear, JPMC violated them by unilaterally—and without warning or remedy—terminating several of Plaintiff’s bank accounts."

Trump and his companies have "transacted hundreds of millions of dollars" through the bank, the lawsuit reads, adding that Feb. 19, 2021 was the day that "forever altered the dynamic of the parties’ relationship," when the bank allegedly "without warning or provocation," notified Trump and his companies that several of their bank accounts or were beneficiaries of, "would be closed just two months later, on April 19, 2021."

"JPMC did not provide plaintiffs with any recourse, remedy, or alternative—its decision was final and unequivocal," reads the suit. 

By Molly Schwartz, cross-asset macro strategist at Rabobank

My Circus! My Monkeys!

Europe was hit with the first strike to its energy supply chain after the Russian invasion of Ukraine and had to start diversifying its inflows from elsewhere. Now that Middle Eastern LNG is losing reliability, Europe might have to get involved just to keep the lights on.

While the EU and UK would probably be more than happy to spectate from the proverbial “monitoring chair,” they may not have a choice. TTF prices reached highs of - €48.95/MWh yesterday—the highest since February of 2025- and are up more than 20% today. 

QatarEnergy announced that it has ceased production of LNG and associated products due to the recent escalation. Our Energy Strategists, Florence Schmit and Joe DeLaura, note that we could see prices return to 2022 levels should Qatar be taken out of the LNG equation entirely (easily back to €100/MWh). Read more here.

This puts the entire European energy complex at risk and might be just the incentive needed for Europe to get out of the monitoring chair and into the ring.

France24 reports that “France, Germany, UK ready to take ‘defensive action’ against Iran.” As the EU touts commitments to increase defense spending and build up its military capabilities, Rabobank Global Strategist Michael Every has mused, “why have all these war planes sitting on the tarmac not doing anything?”

A little farther south, the Gulf Cooperation Council (GCC) is considering its own involvement. Omani foreign minister Badr Albusaidi said on X that “neither the interests of the United States nor the cause of global peace are well served by this. I urge the United States not to get sucked in further. This is not your war.” But the GCC has made it clear that they don’t want it to be their war either. Threats to the economies of the Gulf are not just about energy—this also impacts their budding tourism and hospitality industries as few want to vacation in an active warzone. The UAE and Qatar have reportedly been lobbying allies to end this war as soon as possible.

Meanwhile, in a statement, the Saudi Ministry of Foreign Affairs affirmed “its full solidarity with and unwavering support for the brotherly countries, and its readiness to place all its capabilities at their disposal in support of any measures they may undertake. It also warns of the grave consequence resulting from the continued violation of states’ sovereignty and the principles of international law.” As much as the GCC may want to stay out of it (or, at least as far out of it as they can when their territory is being striked by Iranian drones), the Saudis, at least, are prepared to escalate further.

Trump and Hegseth have not shown any signs of backing down just yet. Early yesterday morning, Hegseth affirmed that “Iran is not a regime change war, but the regime did change,” and that the war will be finished “on America-first conditions.” What those conditions are is still TBD. And the ambiguity of those conditions still leaves us with the question of what constitutes a win.

Hegseth and Rubio would tell you that the aim is the same as last time—to set back Iran’s nuclear proliferation program. But as we saw recently, it doesn’t take Iran very long before they can start to rebuild capacity. The best way to cut off nuclear proliferation is to cut off the head, and that necessitates regime change.

However, as noted in yesterday’s installment, regime change will not be easy. The goal of Tehran is to survive by any means necessary. Even if the regime is rendered a shell of what it once was, but manages to hang on by a thread, then the US has failed. While Trump has announced that this military operation could take weeks and Hegseth rejected the idea that this would be another endless war to echo Iraq and Afghanistan, this may still be a much longer ride than expected.

Yesterday’s stellar performance of USD also exemplified how calls of “Sell America” in recent months were shortsighted. While USD has not been behaving as a safe-haven traditionally would, given the dramatic USD sell-off in H1 2025, we have long argued that this was more about positioning—a repricing of EUR/USD in the aftermath of European announcement of defense spending, and rising USD hedge ratios from foreign investors—than it was a loss of USD’s safe haven status. Indeed, recent price action makes it clear that when the going gets rough, investors still flee  to the warm embrace of greenback liquidity.

Still, other US assets have not felt the love. The inflationary risks posed by an extensive war with Iran are at front of mind for investors, especially as analysts keep a watchful eye on the strait of Hormuz. Even though the Fed prefers to look at core inflation, which strips out direct energy costs, energy is an input into everything, including core goods and services. While inflation is already above the 2% target, and the lagged effects of tariffs are starting to put pressure on core goods, the additional price increases posed by turning the major oil exporter of the world into a warzone may put the Fed in a tricky position. US 2 year and 10 year Treasury yields moved in parallel, closing the day up 11bp, which is the greatest single day move since the US-Iranian skirmish last June.

Chinese Foreign Ministry spokeswoman Mao Ning said at Tuesday's regular press briefing in Beijing that all parties in the Iran conflict must ensure the safe transit of commercial shipping through the critical maritime energy chokepoint of the Strait of Hormuz.

"China urges all parties to immediately cease military operations, avoid escalating tensions, and safeguard the safety of navigation in the Strait of Hormuz," spokeswoman Ning said.

We've briefed readers that China is heavily exposed to cheap Iranian crude exports. About 80% of Iran's oil exports - about 1.6 million barrels per day - go to China.

While prices are fungible, the biggest loser from a Hormuz closure in terms of actual physical oil is China which is the main destination of the 13.1mm barrels of oil that passes through the Strait every day https://t.co/FwWVsHiwpZ pic.twitter.com/ozXwXpo2El

— zerohedge (@zerohedge) March 1, 2026

This means Beijing will do everything in its power to preserve this lifeline and remove any blockage in Hormuz.

And this. 

Chinese officials have reportedly been pressing Iran not to disrupt tanker traffic, damage Qatari gas exports, or hit major export hubs, according to Bloomberg.

The latest AIS shipping tracking data via Bloomberg shows the Strait of Hormuz remains paralyzed, with Iran's Revolutionary Guards commander threatening fire and destruction to any ship that transits the narrow waterway.

Our latest reporting shows that a day after a reported Iranian drone strike forced Saudi Arabia's largest oil refinery offline, there are numerous reports of drone strikes on critical Gulf energy infrastructure on Tuesday morning (read report).

We highly recommend that readers review a report titled "The Iran Question Is All About China" to better understand that this conflict extends well beyond Iran.

Looking ahead, top U.S. and Chinese trade negotiators are expected to meet in mid-March, according to Bloomberg, ahead of a planned Trump-Xi summit later this month. Trump's moves against Venezuela and now Iran can be viewed as an effort to tighten pressure on two of Beijing's cheap crude supplies before those talks (that's if those talks don't get canceled).