Oil, War, and the Fragile Arteries of Global Trade

Last week, the market stopped looking at the Iran conflict as just another headline from the Middle East. It started seeing it for what it really is: a global problem. The war widened, oil facilities were hit, tanker traffic through the Strait of Hormuz collapsed, and Kuwait even declared force majeure and began cutting crude output as shipments were disrupted. That matters because Hormuz is not just a regional shipping lane — it is one of the most important energy arteries in the world. When that route is threatened, the impact does not stay in the Gulf. It spills into fuel costs, inflation expectations, currencies, stock markets, and overall risk sentiment everywhere.

By this morning, (Sunday, March 8), there was a small sign of possible easing after Iran’s temporary leadership council reportedly agreed to pause attacks on neighboring Gulf countries unless provoked. That gave regional markets a bit of breathing room. But the bigger problem has not disappeared. Oil flows are still badly disrupted, storage is filling up in parts of the region, and markets are still trading with the fear that any fresh escalation could quickly turn a logistics shock into a deeper global supply shock. In other words, traders are starting this week with one eye on diplomacy and the other on the Strait of Hormuz. 

🎙️ That is why this coming trading week, from March 9 to March 13, is not really about one chart or one economic number. It is about whether the world believes this conflict is starting to cool down; or whether last week was only the beginning. If the conflict stabilizes, markets may unwind some of the panic. If it escalates again, oil remains the main transmission channel, and from there the pressure spreads into gold, the dollar, equities, and the major FX pairs. 

If you want to understand the market right now, start with oil. Brent pushed above $90 and settled Friday (March 6) around $92.69, while WTI settled around $90.90, after one of its biggest one-day jumps since 2020. Earlier in the week, Reuters reported WTI at $81.01 and Brent at $85.41 on March 5, which shows just how aggressively the market repriced the risk as the week went on. The move was driven by disrupted shipping, halted exports, damaged energy infrastructure, and fear that more producers could be forced to reduce output if the disruption continues. 

📰 For this week, oil will likely remain the first asset to react to every new headline. If tensions cool and shipping risk eases, oil could pull back simply because so much panic premium has already been priced in. Reuters’ reporting on oil options suggests many traders still see this as a sharp but possibly temporary shock rather than a permanent structural shortage. But if the conflict spreads again or Hormuz stays effectively blocked, oil can stay elevated or squeeze even higher, and that would keep pressure on everything else. 

This confused a lot of people last week, and honestly, it is a very fair question: if there is a war, shouldn’t gold just keep going up? The simple answer is: not always. Gold is a safe haven, yes — but it is not the only one. Last week, gold was caught between two stories at the same time. On one side, the war increased fear and should have helped gold. On the other side, the conflict also pushed money into the U.S. dollar, and that stronger dollar worked against gold. The dollar was heading for its strongest weekly rise in over a year, and that made dollar-priced gold more expensive for overseas buyers. 

There is another layer to it. Rising oil prices do not just create fear — they also create inflation worries. And when inflation worries rise, traders begin to think central banks, especially the Fed, may keep interest rates higher for longer. That matters because gold does not pay yield. So when yields and the dollar rise together, gold can struggle even in a geopolitical crisis. 🎙️The Financial Times described exactly that mix last week: war headlines were supportive, but the stronger dollar and repricing of rate-cut expectations kept gains in check and contributed to gold’s first weekly decline in five weeks. 

There was also a positioning element. Gold had already run hard before and during the early part of the conflict, so some traders simply took profit. Reuters also noted comments from a metals trader saying algorithmic selling kicked in as the dollar strengthened, which likely added to the pressure. So the best way to understand last week is this: gold did react to the war, but then it ran into a wall called stronger dollar, higher yields, and profit-taking. That is why gold can still be a safe haven and still fall in the same week. 

📝 Going into this week, gold still matters a lot. If the conflict worsens again and risk sentiment breaks down further, gold can regain momentum quickly. But if the dollar stays firm and markets keep pushing back Fed cut expectations, gold may continue to act less like a straight-line panic trade and more like a tug-of-war between fear and higher-rate reality. Reuters reported spot gold at about $5,170 on Friday, still up sharply on the year, but down 2.4% on the week. 

From our side, the bigger picture hasn’t changed. Our swing position on gold remains open and our bias is still bullish 📈

The recent pullback does not necessarily invalidate the broader trend — if anything, it looks more like the market taking a breather after a strong run while macro forces continue to build in the background.

Of course, narratives are one thing, but price is what ultimately matters.

🔍 So let’s turn to the charts and see what the technicals are telling us.

If support holds, price may continue higher with All-Time Highs remaining the key upside target.

EURUSD is not just reacting to the dollar. It is also reacting to Europe’s vulnerability. Europe is far more exposed to imported energy costs than the United States, so when oil spikes and Middle East supply is threatened, the euro tends to feel that pain faster. Reuters reported that the euro fell to around 1.161 and was on track for a 1.7% weekly slide, as traders moved toward the dollar and worried about the inflation and growth hit that higher energy costs could bring to Europe. 

For the week ahead, EURUSD likely stays sensitive to the same two drivers: whether oil remains elevated, and whether the dollar keeps attracting safe-haven demand. If geopolitical stress remains high, the euro may continue to struggle because Europe wears more of the energy shock. A cleaner de-escalation story would help EURUSD breathe, but as long as war risk keeps oil elevated, the pair may remain heavy. 

🔍 Keeping that in mind, let’s take a closer look at the technical picture to see where the market may be heading next.

As long as price stays below this zone, the downside continuation remains the favored scenario.

Usually, when fear rises, traders expect the Japanese yen to strengthen. But this conflict has been different because Japan is also heavily exposed to imported energy. Both the euro and the yen came under pressure from energy import concerns, while the dollar benefited from safe-haven demand and the U.S.’s greater energy self-sufficiency, according to Reuters. USDJPY traded around 157.8 by the end of the week, with the yen also being hurt by rising import costs. 

So for this week, USDJPY is sitting in a very interesting spot. In a normal risk-off move, yen strength would be the obvious story. But right now, the oil shock is muddying that classic reaction. If oil stays high and the dollar stays supported, USDJPY can remain elevated. If tensions cool sharply and U.S. yields soften, then the pair could finally see more meaningful downside. For now, this is less of a clean “risk-off yen rally” environment and more of a battle between fear, yield, and energy exposure. 

🔍 So let’s now take a look at what the technical structure is telling us going into the week.

A daily close above 160.900 would signal potential upside continuation and open the door for further expansion higher.

Equity indices spent last week trying to digest an ugly combination: higher oil, inflation fears, and signs of economic cooling. On Friday the S&P 500 fell 1.33% and the Nasdaq fell 1.59%, with the S&P down 2.02% for the week and the Nasdaq down 1.24%. The reason is simple: when oil jumps, investors start worrying that inflation will stay sticky, rate cuts will be delayed, and companies will face more cost pressure. That is not a friendly backdrop for risk assets. 

For ES and especially NQ, this week is all about whether oil keeps tightening financial conditions through the back door. The Nasdaq is usually more sensitive because growth stocks do not love the combination of higher yields, slower growth, and rising uncertainty. If diplomacy holds and oil cools, equities could try to recover. But if crude stays near current levels or pushes higher again, index traders may continue treating rallies with caution rather than confidence. 

🔍 With that in mind, let’s take a look at the technicals.

Last week’s analysis played out largely as expected. We highlighted a bearish divergence forming across both indices, suggesting momentum was fading despite prices holding near highs. Since then, price has begun to roll over, with ES reaching our first downside level, confirming the weakening structure.

If the current pressure continues, we are now watching ~24,000 for NQ and ~6,600 for ES as the next key downside areas.

Zooming out for a moment, this situation is no longer just a military conflict in the Middle East. It has quickly become a global story. A story about shipping routes, energy security, inflation pressures, and political decisions happening across multiple continents. When a region responsible for such a large portion of the world’s oil supply becomes unstable, the ripple effects reach far beyond the battlefield. Governments are already reacting — Italy is discussing potential fuel-tax relief as energy costs rise, while countries across Asia are watching developments closely because so much of their energy imports travel through the Gulf.

That is why markets this week will not simply react to missiles or political speeches. What investors and traders are really watching is behavior: how shipping companies respond, how oil producers manage supply, how governments intervene, and how central banks interpret the inflation risks. Those reactions will ultimately tell us whether the world views this disruption as temporary — or the start of something more prolonged.

🗞️ For the trading week ahead, the map is relatively clear. Oil remains the heartbeat of the story. Gold remains caught between fear and a strong dollar. The dollar itself continues to attract safe-haven flows. EURUSD and USDJPY remain sensitive to energy exposure, while NQ and ES stay vulnerable to any renewed inflation fears coming from higher oil prices.

If tensions cool and supply routes stabilize, markets may gradually unwind some of the fear we saw last week. But if the conflict escalates again, capital may continue rotating away from risk and toward safety.

In moments like these, markets remind us of an important lesson:

The biggest moves often begin with events far beyond the charts.

Stay safe, stay patient, and as always — happy trading.

— The UE Market Letter Team 👁️‍🗨️

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_{The information shared in the UE Market Letter is intended solely for educational and informational purposes. It should not be interpreted as financial, investment, or trading advice. All views expressed reflect the author’s personal analysis and opinions and are not recommendations to buy, sell, or hold any financial instrument. Trading and investing carry inherent risks and may not be suitable for every investor. Market performance is uncertain — past results do not guarantee future outcomes. Readers are encouraged to conduct their own research and seek guidance from a licensed financial advisor before making any investment decisions. UE Market Letter and its authors accept no liability for any loss or damage arising from reliance on the content provided.}}