March 6, 2026
Iran
The U.S. and Israeli militaries began an extensive air campaign against Iran. The campaign has targeted Iran’s air defenses, ballistic missile and drone capabilities, the Iranian navy, the political and religious leadership, and the Islamic Revolutionary Guard Corps’ (IRGC) ability to suppress popular dissent. Supreme Leader Ayatollah Ali Khamanei and many other government leaders have been killed in these airstrikes. Iran has responded with drone and missile strikes against the energy, logistical and economic infrastructure of neighboring Gulf states. Commercial shipping traffic through the Strait of Hormuz has essentially ceased, and most Gulf states are significantly reducing oil and gas production as local storage fills and they have no way to transport energy products to their users. Crude prices are up over 35% since the start of the campaign and over 55% year to date. Equity markets are down a few percent, the dollar has rallied, and Treasury yields have retraced a large portion of February’s decline.
Our Take: Crude and natural gas prices are likely to remain elevated until the Iranian government is either unable to threaten energy production and shipments from the Gulf region or decides not to do so as part of a peace deal. Market reactions indicate a concern about the potential economic drag from higher energy prices and regional instability, as well as a concern that sustained higher energy costs could reignite inflation. So far, developed economy government bond markets are seeing concerns about inflation outweighing their status as a haven in times of geopolitical stress.
Employment
The economy unexpectedly lost 92,000 jobs in February, far below expectations of a 55,000 increase, while the unemployment rate rose from 4.3% to 4.4%. Average hourly earnings remained the same at 0.4% for the month and are up 3.8% year-over-year. The labor force participation rate fell from 62.1% to 62.0%.
Our Take: The February jobs report came in notably weaker than expected, reinforcing a negative trend after January’s report had hinted at a potential labor market turnaround. Revisions to the prior months also reduced previously reported job gains, suggesting the labor market had already been weaker than initially thought. The unemployment rate ticked up, pointing to a gradual weakening in labor market conditions. Overall, the report highlights ongoing labor market volatility, suggesting the Fed will require clearer signs of sustained cooling before changing course, especially with inflation still persistent.