“US forces successfully struck more than 90 Iranian military targets on Kharg Island, while preserving the oil infrastructure,” announced US Central Command on Saturday. Hegseth approved a CENTCOM request for an amphibious ready group and attached Marine Expeditionary Unit - the USS Tripoli has left the Philippines Sea to join forces in the Gulf. “The USA has beaten and completely decimated Iran, both Militarily, Economically, and in every other way, but the Countries of the World that receive Oil through the Hormuz Strait must take care of that passage, and we will help – A LOT!” posted Trump on Saturday afternoon.

Overall: “Forty-seven years it’s taken to do this, and no President had the guts to do it,” said America’s Commander-in-Chief. And neither friend nor foe, fan nor critic, could deny it. The enemies of western democracies exploit the fact that our politicians rarely subject themselves to near-term electoral risks in order to achieve longer-term national rewards. The source of nearly every major geopolitical catastrophe faced by the West - including Europe’s utter dependence on Russian energy, our collective dependence on Taiwan semiconductors, America’s dependence on China’s rare earths, and the world’s vulnerability to North Korea’s growing nuclear arsenal – can be traced back to this dynamic. “Forty-seven bad years we suffered with them, not only us, the rest of the world. And we’re doing our job. So, we had to take an excursion. But it’s doing well,” continued Trump, appearing to stake his entire legacy on an audacious, high stakes bet. Every president makes at least one, and plenty go wrong. Clinton bet that by inviting China into the WTO, the communists in Beijing would reluctantly but gradually become more like us. Bush bet that by imposing democracy on the Iraqis and Afghanis, we’d bring peace to the Middle East. Obama bet that by sending the Ayatollah pallets of cash in exchange for a 10yr nuclear agreement, that some future US President would figure out how to deal with the planet’s greatest sponsor of terror and sworn enemy of America. “The market’s holding up well. I figured we’d be hit a little bit, but we were hit probably less than I thought. And we'll be back on track in a pretty short while. Prices are coming down very substantially,” continued Trump. “Oil will be coming down. That’s just a matter of war that happens. You can almost predict it. I would say it went up a little bit less than we thought. It’s going to come down more than anybody understands,” said America’s forty-seventh president, betting everything that by tackling the intractable issues that others have pushed to their successors, he will go down as one of the greatest.

For Week-in-Review and Weekly & Year-to-Date market data, scroll to the bottom.

Hands: America began Operation Epic Fury on Sat Feb 28th. While the war did not come out of the blue, its timing surprised even the keenest observers, not least of which was the Ayatollah. Anytime a negative shock of this magnitude arrives (it is by no means over), positions change hands, from weak to strong. So how have the major markets behaved from the Fri Feb 27 close through this Friday? The S&P 500 has declined 3.6% (Nasdaq -2.5%, Russell 2000 -5.8%, DJIA -4.9%). The VIX index jumped +7.40 to +27.26 as nervous investors scrambled to buy hedges.

Hands II: In the 10 trading days since the excursion began, the MSCI World Equity Index has fallen 4.3%. The MSCI Emerging Index is down 7.4%. Nikkei 225 fell 8.5% and Euro Stoxx -6.0% - energy poor. Shanghai -1.6%, not bad, probably supported by intervention. Saudi Arabia +1.7% and Norway +1.5% - energy reserves. But Canada fell 5.2%. Brazil -5.9% and Mexico -8.1% - interesting. Turkey fell 4.6% - tough neighborhood, energy poor. India fell 8.1% - makes sense. South Korea -12.1%. South Africa -10.8%. Taiwan -5.7%. UAE -9.3%. Israel +1.1%.

Hands III: Every change in price tells a story. But equity indexes can sometimes mislead due to the composition of the companies in them, or unique circumstances. Israel’s rally since the war began has been supported by various interventions. Canada is a large energy producer, but energy is 19% of its index, while financials are 30% and they’ve gotten hammered. Plus, gold and silver have dumped, along with numerous commodity prices, which is one of those rather interesting stories that merit further investigation, like the Dollar Index which gained just 2.8%.

Hands IV: The USD rose 3.5% vs the Euro since the war began. It gained 4.3% vs Russia, +4.1% vs Mexico, +3.8% vs Brazil, +2.3% vs Yen, +2.0% vs Sterling, +1.9% vs Australia, +1.6% vs India, +1.0% vs Indonesia, +0.6% vs Canada, +0.6% vs China, and +0.6% vs Turkey. None of these moves stand out as being particularly interesting. But if on Feb 27th, you’d asked 1,000 of the world’s most knowledgeable traders, investors, strategists and policy makers, how much the Dollar Index would rally on this war, they’d have collectively guessed more than 2.8%.

Hands V: But if these knowledgeable market participants would’ve been surprised by the weak Dollar rally, the 4.2% fall in Gold would’ve shocked them. Silver is -13.8% and Copper -6.1%. Those stories are less surprising. In a dangerous world, demand rises for certain resources. But you must balance that with the risk of global recession or even depression. Corn prices in the US gained 4.1%, Soybeans +4.7%, and Wheat +12.8%. You can’t eat gold, so that story makes sense. Plus, food cannot be produced at scale without lots of oil. And energy prices surged.

Hands VI: US Oil (WTI) prices are +47.2% since Epic Fury kicked off. EU Oil (Brent) jumped 42.0%. US Natural Gas rose +9.7% which seems low, until you understand the US lacks capacity to export any more LNG. EU Natural Gas prices have surged 56.8%, and this, combined with German electricity futures leaping 22.6% is a real problem for Europe’s economy. It also helps tell the story of inflation markets. EU 10yr inflation jumped 39bps to 2.21%, the UK +34bps to 3.42%. While the US rose just 12bps to 2.38%, and Japan rose just 10bps to 1.81% - interesting.

Hands VII: If you’d asked those 1,000 participants where US bond yields would be 2wks after this war, maybe half would’ve guessed 2yr Note yields would jump 35bps to 3.73% and 10yr Note yields would pop 34bps to 4.28% (and that’s what happened). The others would’ve guessed that yields would’ve fallen, not risen. This is the most interesting story of the war so far, in terms of markets. And it’s also interesting that Bitcoin jumped 8.5% and Ethereum +9.3%. After five months of crypto moving from weak to strong hands, it’s high time for a twist in this story.

Anecdote: I got an economics degree. It was pretty easy. And looking back, I could’ve learned everything there was worth learning by reading a few books on summer vacation. A lot of what I learned was useless. Some of it was totally wrong, or at least not terribly helpful. I learned that markets are driven by fundamental forces. It’s not that this is wrong. Rather, at any given point in time you really have no way of knowing how those fundamental forces have already been priced into current valuations. It took me losing plenty of money getting the economics right and the market direction wrong to learn this. A lot of people study technical analysis because it allows you to analyze markets without knowing anything whatsoever about economic fundamentals. The theory is that all the world’s wisdom is contained in the current price of every market. If given the choice between (a) having to make decisions purely based on market prices, blind to economic fundamentals, or (b) putting capital at risk purely based on underlying fundamentals while being blind to market prices, I’d choose the former. I could imagine an economic textbook trying to frame a problem by presenting that sort of choice. But the real-world places no such constraints on investors. Anyhow, I’ve found that one of the most helpful things to do when trying to get a glimpse of the future is to (1) watch a material market event/shock unfold, (2) estimate how the consensus of a hypothetical group of 1,000 of the world’s most knowledgeable traders, investors, strategists and policy makers, would have expected market prices to have moved based on that event/shock, (3) look for significant discrepancies between how that group would have expected markets to move and how prices actually moved, and (4) dive into the most material discrepancies and do further analysis. Every change in price tells a story, and sometimes, when those stories appear as mysteries, it means that there is some new fundamental force emerging that very few people understand. And finding those early is where the real money is made.

Good luck out there,

Eric Peters

Chief Investment Officer

One River Asset Management

Week-in-Review: Mon: Mexico CPI 4.02% (3.94%e). Japan GDP ann. SA QoQ 1.3% (1.0%e). South Korea GDP 1.6% (1.5%e). Oil prices tumbled amid assurances form global leaders that policy interventions will blunt the impact of the Iran war on energy prices. Trump says the war in Iran will end “soon” but not this week. Anthropic sues US government over supply chain risk label. S&P +0.8%. Tue: US existing home sales 4.09m (3.88m e). Japan PPI 2.0% (2.2%e). International Energy Agency proposed release of emergency oil reserves to contain a spike in energy prices driven by Iran war. Trump warns Iran against laying mines in Strait of Hormuz. S&P -0.2%. Wed: US CPI 2.4% as exp, Core 2.5% as exp. Germany CPI 1.9% as exp. US starts trade probe into China, EU, as Trump seeks to rebuild tariffs. China moves to curb OpenClaw AI use at banks and state agencies. Oil tankers attacked off Iraq as Middle East crisis worsens. Japan set to release oil reserves as soon as Monday. S&P -0.1%. Thu: US init jobless claims 213k (215k e), housing starts 1487k (1341k e), trade balance -$54.5b (-$66.0b e). India CPI 3.21% (3.14%e). Iran’s new supreme leader, Ayatollah Mojtaba Khamenei, said the Strait of Hormuz should remain closed and signaled he won’t back down in the war. S&P -1.5%. Fri: US UMich sent 55.5 (54.8e), GDP ann QoQ 0.7% (1.4%e). Canada unemp rate 6.7% (6.6%e). China money supply M2 9.0% (8.9%e). US begins emergency oil reserve release of 86m barrels. S&P -0.6%. Sat: US hits military targets on Iran’s Kharg Island as war escalates. Trump calls on China and UK to send war ships to the Hormuz Strait.

Weekly Close: S&P 500 -1.6% and VIX -2.23 at +27.26. Nikkei -3.2%, Shanghai -0.7%, Euro Stoxx -0.5%, Bovespa -1.0%, MSCI World -1.0%, MSCI Emerging -0.5%, Bitcoin +4.6%, and Ethereum +6.3%. USD rose +3.3% vs Sweden, +2.4% vs South Africa, +2.0% vs Russia, +1.8% vs Euro, +1.6% vs Brazil, +1.5% vs Sterling, +1.2% vs Yen, +1.2% vs Canada, +0.9% vs Chile, +0.8% vs India, +0.7% vs Mexico, +0.7% vs Australia, +0.3% vs Turkey, and +0.2% vs Indonesia. USD flat vs China. Gold -2.6%, Silver -4.6%, Oil (WTI) +8.6%, Oil (Brent) +11.6%, NatGas (US) -1.6%, NatGas (EU) -6.1%, Power (EU) +3.4%, Copper -2.0%, Iron Ore +5.8%, Corn +1.4%. 10yr Inflation Breakevens (EU +15bps at 2.21%, US +3bps at 2.38%, JP +7bps at 1.81%, and UK +13bps at 3.42%). 2yr Notes +16bps at 3.73% and 10yr Notes +14bps at 4.28%.

YTD Equity Index Returns: Korea +25.1% priced in US dollars (+30.2% priced in won), Norway +22.5% priced in US dollars (+18.5% priced in krone), Brazil +14.3% in dollars (+10.3% in reais), Israel +14.2% (+12.4%), Taiwan +13.2% (+15.3%), Turkey +13% (+16.3%), Thailand +8.4% (+11.9%), Portugal +8.3% (+11.1%), Colombia +7.7% (+5.5%), Hungary +4.9% (+9.7%), Japan +4.7% (+6.9%), Singapore +4.5% (+4.2%), China +4.5% (+3.2%), Malaysia +4.1% (+1.1%), Australia +3.8% (-1.1%), Saudi Arabia +3.8% (+3.8%), Mexico +2.8% (+2.1%), Netherlands +2.7% (+5.3%), Canada +2.5% (+2.6%), Sweden +1.9% (+4.7%), UK +1.7% (+3.3%), Finland +1.2% (+4%), Russell 2000 -0.1%, HK -1.2% (-0.6%), Poland -1.3% (+2.7%), Philippines -1.5% (+0.1%), MSCI World -1.5% priced in US dollars, Belgium -1.9% (+0.6%), New Zealand -2% (-2.7%), Greece -2% (+0.6%), Chile -2.1% (-0.1%), South Africa -2.6% (-0.6%), Switzerland -3% (-3.2%), S&P 500 -3.1%, Euro Stoxx 50 -3.8% (-1.3%), Austria -3.8% (-1.2%), Spain -3.9% (-1.4%), Italy -4% (-1.4%), NASDAQ -4.9%, Vietnam -4.9% (-4.9%), UAE -5.1% (-5.1%), France -5.4% (-2.9%), Germany -6.8% (-4.3%), Ireland -7.8% (-5.4%), Czech Republic -9.8% (-6.3%), Argentina -10% (-13.4%), India -13.9% (-11.4%), Denmark -15.2% (-12.8%), Indonesia -18.7% (-17.5%).

Disclaimer: All characters and events contained herein are entirely fictional. Even those things that appear based on real people and actual events are products of the author’s imagination. Any similarity is merely coincidental. The numbers are unreliable. The statistics too. Consequently, this message does not contain any investment recommendation, advice, or solicitation of any sort for any product, fund or service. The views expressed are strictly those of the author, even if often times they are not actually views held by the author, or directly contradict those views genuinely held by the author. And the views may certainly differ from those of any firm or person that the author may advise, converse with, or otherwise be associated with. Lastly, any inappropriate language, innuendo or dark humor contained herein is not specifically intended to offend the reader. And besides, nothing could possibly be more offensive than the real-life actions of the inept policy makers, corrupt elected leaders and short, paranoid dictators who infest our little planet. Yet we suffer their indignities every day. Oh yeah, past performance is not indicative of future returns.