Key Highlights

• European diesel futures hit $200/barrel as President Trump warns of “extremely hard” hits to Iran.
• South Korean President Lee Jae Myung urges country to save “every drop of fuel.”
• Australian government threatens restrictions on gas exports.

Chart of the Day

OMR leads flows as MENA currencies mitigate impact of conflict

^{Source: BNY; flows represent 65-day smoothed exponential smoothed average}

A month into the conflict, MENA FX flows have generally managed to avoid severe turbulence. Although export revenues for oil-linked names will face heavy downside pressure in the near term, pegs are not at risk and currencies have performed surprisingly well. Monthly averages are generally contained, although this masks some large one-off flows in both directions, especially in some of the bigger names. By contrast, these flows would have a far greater impact on smaller currencies, especially as general transaction levels have historically been soft. It is also important to stress that as currency pegs are prevalent in the region and capital accounts are highly managed, imposing heavy flow-driven losses is difficult. As long as currency board arrangements remain credible, there is no pressing need to add to USD exposure, especially if rates can move higher locally to compensate for short-term risks.

Of the names we track, the Omani riyal has been the strongest performer. OMR is not a currency we track actively in MENA because activity levels are generally low, and it is important to not over-interpret largely one-off flows. However, the current crisis is completely different: Oman finds itself at the center of global supply chain stress, and based on statements this week could also be part of the solution. Meanwhile, its location means that some trade is likely being re-routed locally. Despite the country being directly affected by the conflict, we should not rule out exceptional flows coming through, resulting in the currency being the strongest performer in the region across the month.

We can observe that the surge in flows occurred toward the end of March, hitting levels far above what we have seen historically. The currency’s cumulative holdings remain weak, but the flows have contributed to further consolidation, and for now it appears that these exceptional flows could continue well into Q2.

What's Changed?

Hopes for certainty regarding the duration and extent of the Iran conflict were dashed when President Trump delivered warnings of further escalation rather than news of a swift peace deal. The ongoing rise in oil prices has driven bond yields higher, stocks down and USD up. The uncertainty over the Strait of Hormuz remains a central concern, with Trump insisting allies would have to “take the lead” in its reopening. Markets are looking for a distraction, but even NASA’s launch of the Artemis II moon mission has not sufficed; neither are Passover or Easter a source of relief, leaving many rethinking correlations and risk.

• Damage done: ECB Board Member Fabio Panetta has noted that even if the Iran war ends, the damage to global supply chains and energy has been done. Production suspensions will follow. The ECB had two adverse macroeconomic projections in its forecasts from its rate decision, both of which are now seen as central probabilities. The outlook is for CPI of 3.5%+, lower growth and greater financial asset volatility.
• Gold: The 3% overnight drop in the yellow metal highlights the liquidity squeeze coming from higher commodity prices and ongoing dislocations from trade, as global supply chains fray from the closure of the Strait of Hormuz. Gold is down 15% since the start of the war, transitioning from a safe haven to an emergency liquidity tool. A case in point is EM countries intervening to hold their FX rates in line, using gold as the key tool. The focus is on TRY and INR.
• Rationing: Drive slower, work from home? Countries rationing energy are Sri Lanka, Myanmar, Cambodia, Slovenia, Bangladesh and Indonesia; countries using emergency energy measures are South Korea, Zambia, the Philippines, Egypt and China. Pushes to conserve energy are even wider, stretching from the EU to Australia. The OECD has cut its global GDP forecast for 2026 to 2.9% from 3.2%, but that could move even lower if energy prices remain elevated for longer.

Bottom line: The markets are thin as we head into Passover and Good Friday. Today’s focus in the U.S. will once again be on jobs, with Challenger layoffs and weekly jobless claims to come ahead of Friday’s full employment report. The story of resilience and ability to look through the current conflict was short-lived, and markets are back to pricing in escalation and a longer duration for the conflict, along with higher costs globally. Stagflation across assets brings investors back to the search for safe havens. The hit to bonds and to gold leaves cash as king again until central bankers cut rates, but that will restart currency debasement concerns. Rationing out pessimism along with energy might be the key task for policymakers into the holiday weekend ahead. 

What You Need to Know

The Reserve Bank of India (RBI) has imposed curbs banning banks from offering rupee non-deliverable forwards (NDFs) to resident and non-resident clients, in a bid to curb corporate arbitrage activity. This move complicates banks’ efforts to reduce arbitrage positions, increasing exit costs amid a widened spread between onshore and offshore markets. Despite earlier directives, only 50-60% of the estimated $30-$40bn arbitrage exposure was unwound by Monday, leaving significant risk. The RBI aims to support the rupee, which has come under pressure from by high oil prices linked to the Iran war, by tightening speculative activity and controlling rupee dynamics. The currency has been one of the worst-hit by the conflict and is also strongly underperforming in iFlow. SENSEX -0.68% to 72637, USDINR -2.001% to 92.935, 10y INGB +6.6bp to 7.101%.

South Korea’s President Lee Jae Myung has warned of a severe energy crisis as the Iran conflict disrupts global supply, urging citizens to “save every drop of fuel” and cut consumption through daily conservation measures. He described the shock as prolonged and significant, with rising oil prices straining households and businesses. In response, the government has proposed a ₩26.2tn supplementary budget to cushion the impact, including more than ₩10tn in energy subsidies and direct support, alongside aid for small firms and supply chains. Additional measures include fuel price caps, extended tax cuts and efforts to secure alternative supplies, while officials have also flagged longer-term plans to strengthen energy resilience. KOSPI -4.47% to 5234, USDKRW +0.139% to 1514.6, 10y KTB -18.7bp to 3.69%.

Australia’s government has threatened to restrict gas exports unless producers secure sufficient domestic supply for the winter, issuing a formal “notice of intent” under the gas security mechanism amid concerns over an East Coast shortfall. Exporters have 30 days to respond before potential controls are applied, with a decision expected by mid-May. The move follows warnings of a possible 12 petajoule deficit between July and September, as global disruptions linked to Middle East tensions push prices higher and incentivize exports. Authorities have stressed there is no shortage at present but have signaled their readiness to intervene, while tensions with the energy sector are rising over supply obligations and broader policy measures. ASX -0.31% to 5516, AUDUSD -0.751% to 0.6876, 10y ACGB +12.9bp to 5.038%.

Chinese authorities have told private refiners to maintain gasoline and diesel output at 2025 levels despite losses, as the month-long Middle East war disrupts global oil markets and raises concerns over domestic fuel supply. The National Development and Reform Commission has warned that refiners cutting production will risk reductions in future crude import quotas, reinforcing compliance. Independent “teapot” refiners are under pressure due to their reliance on discounted sanctioned crude from Iran, Russia and Venezuela, with access to cheaper supply diminishing after recent U.S. waivers. As conditions tighten, run rates have fallen to below 63% of capacity in the week to April 1, the lowest since August 2025, while margins have turned negative, marking the weakest performance since 2024. ASX -0.31% to 5516, AUDUSD -0.751% to 0.6876, 10y ACGB +12.9bp to 5.038%.

Vietnam is considering a range of measures to stabilize its stock market after sharp losses linked to the Iran war. These include a proposed government-backed stabilization fund to buy shares during heavy selloffs. Authorities are also evaluating incentives for corporate share buybacks, tighter daily trading bands of 3-5% from 7-10%, and potential temporary trading halts during extreme volatility. Additional proposals include using influencers and tighter media guidance to support market sentiment, alongside easing margin lending limits. The plans follow a 9.3% drop in the benchmark index in March and aim to prevent disruption that could delay a market reclassification, though it remains unclear how many of the measures will be implemented. VN-I -0.48% to 1695, USDVND 0% to 26337,10y VGB -0.1bp to 4.213%.

What We're Watching

U.S. Challenger total job cuts forecast to rise to 78,327 from 48,307.

U.S. February trade balance is expected to widen to -$60.6bn vs. -$54.5bn with imports forecast to rise to -0.2% m/m vs. -0.7% m/m and exports expected to fall to -2.3% m/m vs. 5.5% m/m.

U.S. initial jobless claims are forecast to rise to 212k vs. 210k the week prior.

Canada February international merchandise trade is expected to narrow to -CA$2.50bn vs. -CA$3.65bn.

Central bank speakers: Bank of France Governor François Villeroy de Galhau speaks on monetary policy and the French and euro area economies.

U.S. Treasury sells $80bn in 4-week bills and $75bn in 8-week bills

What iFlow is Showing Us

Mood: iFlow Mood has narrowed to -0.050, with equity selling outpacing demand for core sovereign bonds.

FX: Significant outflows in EUR, ZAR and TRY, offset by strong inflows into NOK, BRL, COP and HUF. Within the G10, USD and GBP saw light buying, while JPY and SGD were sold.

FI: Mixed flows across regions, with a clear selling bias in APAC led by Malaysia and the Philippines. In the G10, major sovereign bonds (U.S., Eurozone, U.K., Japan) attracted inflows.

Equities: Broad-based selling, except for continued demand in LatAm. The largest outflows were in Japan and South Korea, followed by Canada, Indonesia, the U.S. and China. In DM Americas, consumer discretionary and financials led selling, while communication services and industrials saw strong inflows.

Quotes of the Day

“The only books in our house were ration books.” – Michael Foreman

“If we are to keep our democracy, there must be one commandment: Thou shalt not ration justice.” – Learned Hand

Economic Details

France’s budget balance stood at -€32.1bn in February, an improvement on -€40.3bn a year earlier, driven by higher revenues and lower spending. General budget revenues reached €51.7bn, up from €44.6bn; this was supported by a surge in non-tax revenues to €8.2bn (from €1.1bn), largely reflecting exceptional receipts. Net tax revenues were broadly flat at €43.5bn. Expenditure fell to €65.0bn from €67.3bn, reflecting timing effects in social spending, while total spending including transfers fell 1.3%. EU-related transfers increased, contributing to higher overall deductions. The improvement in the fiscal position reflects one-off revenue factors alongside restrained expenditure dynamics early in the fiscal year. CAC 40 -1% to 7901, EURUSD -0.527% to 1.1528, 10y OAT +5.1bp to 3.723%.

Italy’s February retail sales were flat m/m in value terms and decreased by 0.2% m/m in volume terms, with food sales falling (-0.4% by value, -0.5% by volume) while non-food sales increased modestly (+0.2% by value, +0.1% by volume). On a three-month basis, sales rose 0.3% by value and fell 0.1% by volume. On a y/y basis, retail sales increased 1.6% in value terms but declined by 0.1% in volume terms, reflecting weaker food volumes (-0.5%) despite value gains (+1.8%), while non-food sales rose (+1.4% by value, +0.2% by volume). Growth was broad-based across distribution channels, with e-commerce rising strongly (+8.3% y/y). We expect softer demand to come through as economic uncertainty prevails across Europe. FTSE MIB -1.1% to 45212, EURUSD -0.527% to 1.1528, 10y BTP +7bp to 3.901%.

The BoE’s March Decision Maker Panel survey for the U.K. showed firms’ realized own-price growth easing to 3.7% in the three months to March, down 0.1 percentage points. Meanwhile, year-ahead own-price expectations rose 0.1 percentage points to 3.5%, with single-month data increasing to 3.7% on higher energy prices. Year-ahead CPI expectations were unchanged on a three-month basis but rose 0.5 percentage points to 3.5% in March, while three-year CPI expectations edged down 0.1 percentage points to 2.7%. Business uncertainty increased markedly, with 57% of firms reporting high or very high uncertainty, up 10 percentage points. Labor market signals weakened slightly, with realized employment growth at -0.3% and expectations unchanged at 0.1% over the year ahead. FTSE 100 -0.23% to 10341, GBPUSD -0.767% to 1.3203, 10y gilt +5bp to 4.88%.

Swiss CPI rose 0.2% m/m and 0.3% y/y in March, with the index level at 100.8. Higher prices for heating oil, petrol, diesel, air transport and international package holidays drove the m/m increase, partly offset by lower prices for hotels, supplementary accommodation, car rental and car sharing. Core inflation was flat m/m and 0.4% y/y, while domestic product prices fell 0.2% m/m and imported goods increased by 1.8% m/m. At component level, housing and energy rose by 0.5% m/m and transport by 0.7% m/m, while restaurants and hotels declined by 1.7% m/m. The harmonized CPI was up 0.1% m/m and 0.6% y/y, indicating slightly firmer inflation on a comparable European basis. SMI -0.47% to 12930, EURCHF +0.086% to 0.92129, 10y Swiss GB +1.8bp to 0.39%.

Australia’s seasonally adjusted trade balance on goods rose by AU$3.43bn to AU$5.69bn in February, driven by a 4.9% m/m, 8.9% y/y increase in exports to AU$45.65bn (from AU$43.52bn in January). Rural goods exports also grew 13.9% m/m, while non-rural goods declined by 1.9% m/m. Imports fell -3.2% m/m, 3.0% y/y to AU$39.96bn (from AU$41.27bn in January), led by a 41.3% m/m drop in non-monetary gold imports. Consumption goods imports increased by 3.4%, but capital goods imports decreased by 8.1%. The Middle East conflict had no impact on February data but may affect March figures. Exports to the U.S. rose 9.4% m/m to AU$2.04bn. Key export destinations included China at AU$13.16bn (down from January’s AU$14.13bn), Japan at AU$4.25bn (January: AU$5.19bn) and South Korea at AU$3.44bn (January: AU$3.21bn). ASX -0.31% to 5516, AUDUSD -0.751% to 0.6876, 10y ACGB +12.9bp to 5.038%.

South Korea’s CPI rose 0.3% m/m and 2.2% y/y in March, with the index level at 118.80, while core inflation (excluding food and energy) increased by 0.1% m/m and 2.2% y/y. Price gains were driven by transport (+3.4% m/m), furnishings (+0.4% m/m), health (+0.4% m/m) and housing-related categories (+0.2% m/m), while food and non-alcoholic beverages fell by 0.9% m/m and recreation and culture by 0.1% m/m. Clothing and footwear, and alcoholic beverages and tobacco were flat on the month. On a y/y basis, transport rose by 5.0% and miscellaneous goods and services by 4.6%, indicating continued underlying price pressures despite modest monthly headline gains. KOSPI -4.47% to 5234, USDKRW +0.139% to 1514.6, 10y KTB -18.7bp to 3.69%.

The Japanese portfolio update for the week to March 27, 2026, showed foreign investors accelerating their equity outflows to a record -¥4.448tn, in a third consecutive week of selling (total: -¥8.731tn). This fully reverses earlier strong inflows, turning record YTD positioning into net outflows (-¥1,987bn). Foreign selling of Japanese equities is more than explained by the seasonal pattern. Foreigners also sold Japanese bonds (-¥2.646tn) in the largest outflow since March 2024. Japanese outbound flows were mixed, with continued selling of foreign bonds (-¥945bn) reaching a record YTD pace of -¥5.143tn, alongside modest buying of foreign equities (¥141bn). Nikkei -2.38% to 52463, USDJPY +0.529% to 159.66, 10y JGB +7.6bp to 2.386%.

HSBC India Manufacturing PMI fell to 53.9 in March from 56.9 in February, marking the weakest improvement in nearly four years. India’s manufacturing sector saw slower growth in March, as cost inflation hit a 43-month high, driven by rising aluminum, chemicals, fuel and steel prices. Despite higher input costs, output price inflation eased to a two-year low due to competitive pressures. Factory orders and production growth slowed, but firms continued to create jobs and increased their input purchases, supporting inventory buildup. There were notable rises in export sales to Australia, Brazil, China, Europe and the Middle East. Backlogs shrank for the first time in 18 months. SENSEX -0.68% to 72637, USDINR -2.001% to 92.935, 10y INGB +6.6bp to 7.101%.