Lebanon strikes! Israeli military airstrikes on Iranian nuclear laboratories! Putin's latest statement, Europe plunges into a state of emergency

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Hezbollah in Lebanon issued a statement early on March 10th local time, stating that in response to Israeli attacks on dozens of Lebanese towns, they launched missiles at an Israeli military factory in Safed on the evening of March 9th.

According to CCTV International, Israel claims that in the early hours of today (March 10th), their military conducted an airstrike on Tehran, Iran’s capital, targeting a local nuclear laboratory.

On March 9th local time, Russian President Vladimir Putin held a meeting at the Kremlin, making a series of statements on energy transportation security, market trends, and Russia’s strategic adjustments. Putin emphasized that Russia is willing to cooperate with European countries on oil and gas supplies, but the EU needs to send clear signals indicating their willingness to provide stability for such cooperation.

Goldman Sachs stated that the Iran conflict could trigger historic energy risks, leading to a tactical neutral stance on stocks and an overweight position in cash. Meanwhile, Mohamed El-Erian, former CEO of PIMCO, predicted on Monday (the 9th) that the inflation rate by 2026 will average 3%, higher than last year’s average of 2.6%. Although U.S. stocks rebounded sharply last night, U.S. stock futures in the Asia-Pacific session today fell collectively.

Hezbollah Strikes Back

According to CCTV News, Hezbollah in Lebanon issued a statement early on March 10th, saying they launched missiles at an Israeli military factory in Safed on the evening of March 9th, in response to Israeli attacks on dozens of Lebanese towns.

Additionally, in response to Hezbollah’s warning to multiple settlements in northern Israel, Hezbollah launched missiles at the Misgav Am settlement. Early on March 10th local time, Hezbollah also attacked two Israeli military positions in Aitran and Malkaba towns in Lebanon, and fired missiles at an Israeli artillery position in Mardid.

The Israel Defense Forces (IDF) stated early on March 10th that they targeted positions in Lebanon that had previously launched missiles at northern Israel.

Data shows that Hezbollah in Lebanon was established in 1982 by Lebanon’s Shia community, supported by Iran, to resist Israeli invasion of southern Lebanon. It is now the country’s largest political party.

Putin Speaks Out

To partially address the current energy crisis, Russia may be key. CCTV News also reported that on March 9th, Russian President Vladimir Putin held a meeting at the Kremlin, making a series of statements on energy transportation security, market trends, and Russia’s strategic adjustments.

Putin said that oil production relying on transportation through the Strait of Hormuz could soon be completely halted. He warned that Russia has repeatedly warned that attempts to destabilize the Middle East will lead to rising oil and gas prices. The supply disruptions caused by Middle Eastern conflicts are impacting the entire international economic system.

Putin also stated that the price increases might be temporary. He said Russia should proactively adjust its direction, target new markets that need increased oil and gas supplies, and establish a foothold, rather than waiting for Europe to “demonstratively shut the door” on energy cooperation with Russia. Putin emphasized that Russia is willing to cooperate with European countries on oil and gas supplies, but the EU needs to send clear signals of their willingness to provide stability.

Meanwhile, Europe’s energy market is in an emergency state. Due to U.S. and Israeli airstrikes on Iran, Brent crude oil prices surged to $119.5 per barrel at one point, though they later retreated. European natural gas prices also fluctuated sharply, with the UK’s monthly natural gas prices approaching a 20% increase. Data shows that the UK’s natural gas storage is now less than two days’ worth of consumption. Despite government efforts to emphasize diversified supply channels, the supply chain remains under threat of disruption.

Are the Impacts Still Unfinished?

As the Iran conflict persists, Goldman Sachs’ cross-asset strategist recently adjusted their stock ratings to tactical neutral for the next three months, overweighting cash. The report states that the risk of energy shocks similar to those of the 1970s is intensifying. Energy disruptions could continue, putting pressure on risk appetite and related assets, with investors increasingly worried about a significant deterioration in global growth and inflation. The report warns that if oil flows through the Strait of Hormuz remain low throughout March, oil prices could surpass their peaks in 2008 and 2022.

Additionally, Mohamed El-Erian, former CEO of PIMCO, predicted on Monday (the 9th) that the inflation rate by 2026 will average 3%, higher than last year’s average of 2.6%, well above the Federal Reserve’s 2% target, limiting the Fed’s ability to provide a buffer to the labor market. As inflation continues to develop in the wrong direction, the Fed is expected to remain cautious, waiting for clearer economic signals.

Ethan Harris, chief economist at Bank of America Securities, said the Fed will closely monitor whether companies start passing higher energy costs to consumers, and will also watch for consumer confidence to decline sharply, similar to the early stages of the Gulf War in 1990. He believes both indicators are very fragile.

JPMorgan’s chief U.S. economist Michael Feroli said that if oil prices stay high, the Fed will eventually cut interest rates because the economy will slow significantly, with consumer purchasing power shrinking sharply as oil prices soar, leading to a demand slowdown that will put downward pressure on core prices. Given that inflation has been significantly above target for six consecutive years, the Fed may be more cautious than usual in shifting to a dovish stance this time. However, as long as long-term inflation expectations remain firmly anchored, there will likely be an eventual shift to easing.

Citigroup’s chief U.S. economist Andrew Hollenhorst told clients that their baseline scenario still expects a total of 75 basis points of rate cuts this year. Weak labor market data make this forecast increasingly plausible, but whether it materializes still depends on oil price trends.

JPMorgan’s chief U.S. economist Michael Gapen pointed out that U.S. actions against Iran and their impact on commodity prices could delay the Fed’s easing schedule beyond the currently expected rate cuts of 25 basis points in June and September.