ORLANDO, Florida, March 10 - Oil sank by over 10% on Tuesday, marking the steepest one-day decline since 2022, as market participants priced in hopes that tensions in the Middle East could ease. The rout in crude accompanied a strong rally across Asian and European equities, while U.S. markets notably underperformed and recorded only mild losses.
In a separate column published today, I examine parallels between strains now appearing in private credit markets and the U.S. subprime mortgage market of 2007. That analysis does not assert that a global financial collapse will follow, but it is intended as a caution to investors to be mindful of potential vulnerabilities beneath the surface.
For readers seeking additional context on the day’s developments, the following items are recommended reading:
- Heaviest day of strikes yet on Iran despite market bets that war will end soon
- G7 energy ministers stop short of oil reserves release, ask IEA to study options
- Aramco sees 'catastrophic consequences' for oil markets if Hormuz strait remains blocked
- How oil shock and financial stress can feed each other: Mike Dolan
- China’s exports turbocharge into 2026 after record-breaking year
Key market moves
- Stocks: Asian markets delivered broad gains, with South Korea up about 6%. European benchmark indices climbed as much as 3%. In contrast, U.S. equities lagged - the S&P 500 slipped 0.2%, while the Nasdaq and the Dow closed essentially flat.
- Sectors and shares: Only two U.S. sectors finished higher - communications services and technology. The energy sector fell 1.3%. On the Dow, 3M, Cisco, and Caterpillar were the top three gainers; Boeing, Salesforce, and Chevron were among the largest decliners. Oracle surged 8% after the bell.
- FX: The U.S. dollar eased as safety-driven demand softened. The Australian dollar was the top performer among G10 currencies, and the Chilean peso was the best-performing currency globally, rising 2%.
- Bonds: U.S. Treasury yields reversed earlier declines and ended slightly higher at the long end of the curve. The yield curve steepened by as much as 4 basis points. A three-year Treasury auction was judged soft by market participants.
- Commodities and metals: Oil plunged approximately 11% in another volatile trading session. Gold fell about 2%.
What drove the moves
Timing and volatility - The last 24 hours highlighted how critical timing is for market participants. Oil experienced some of the largest intraday swings on record, with Monday’s price action spanning a $36 intraday range. Such rapid moves can create outsized gains or losses in a matter of minutes, and positions that rely on leverage are particularly vulnerable. It would not be surprising if reports later surface that some hedge funds or other leveraged investors incurred significant losses as a result.
Headline sensitivity and a deleted post - Markets showed an acute sensitivity to headlines on Tuesday. Oil extended steep losses after a post on X by U.S. Energy Secretary Chris Wright stating that the U.S. navy had escorted a tanker through the Strait of Hormuz, implying a potential easing of supply constraints. That post was deleted minutes later, and oil subsequently rebounded by roughly $10. The rebound received an additional push after a CBS report that U.S. intelligence had detected indications Iran might be considering steps to deploy mines in the Strait of Hormuz. These episodes underscore how quickly market impressions can change in response to breaking and sometimes conflicting information.
Shifting trade patterns - China’s export engine showed renewed momentum. Exports in January and February rose 22% from a year earlier, more than triple the growth rate recorded in December and well above the Reuters poll forecast. The January-February trade surplus totaled $213 billion. With tariffs limiting shipments to the United States, China’s trade with other economies is expanding rapidly. The record $1.2 trillion trade surplus posted last year could be at risk of being exceeded this year if current trends continue. At the same time, German data released on Tuesday indicated that exports in January contracted at their fastest pace since May 2024.
Risks and uncertainties
- Further sudden moves in energy headlines - energy sector and commodity markets are vulnerable to abrupt swings driven by evolving developments in the Middle East and public reports about naval or military activity.
- Leverage-related losses - volatile intraday moves, particularly in oil, raise the risk that leveraged funds or traders could face outsized losses, which could affect broader financial market liquidity.
- Trade imbalances and export dynamics - rapid changes in China’s export growth and large trade surpluses could influence currency flows and trade-related sectors while German export weakness may depress European manufacturing exposure.
What to watch next
- Further developments in the Middle East
- Energy market activity and price dynamics
- Japan wholesale inflation for February
- Germany final CPI inflation for February
- Speeches from European Central Bank board members Pedro Machado and Isabel Schnabel at separate events
- U.S. Treasury sale of $39 billion of 10-year notes at auction
- U.S. CPI inflation for February
- Remarks from U.S. Federal Reserve Vice Chair for Supervision Michelle Bowman on supervision and regulation
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