Stock futures are lower this morning as investors monitor developments in the U.S.-Iran conflict, oil prices, and the latest U.S. inflation data. Oil prices rose again, with WTI and Brent crude each gaining roughly 4%, though expectations that the International Energy Agency could release emergency oil reserves helped ease some supply concerns. Investors are taking some comfort in the latest U.S. inflation numbers which showed inflation remaining stable (albeit before the recent energy shock), with the Bureau of Labor Statistics reporting that the consumer price index rose 0.3% in February and 2.4% over the past year, matching forecasts. Core inflation, excluding food and energy, increased 0.2% for the month and 2.5% annually. The figures remain above the Fed’s 2% target but has stabilized rather than accelerating. Shelter and services continued to post modest increases, while some goods categories, including used vehicles and auto insurance, declined. The report suggests inflation was mostly steady heading into the energy-driven uncertainty now affecting the economic outlook.
Energy shock response. Governments around the world are scrambling to shield their economies from the fallout of the Middle East conflict, which has sent energy and commodity prices higher and raised concerns of another inflation shock. With the Strait of Hormuz largely disrupted and oil briefly surging toward $120 per barrel before retreating, policymakers are considering a range of emergency measures including releasing strategic oil reserves, fuel price caps, subsidies, and tax relief to protect households and businesses. Countries such as South Korea, the Philippines, and India are already preparing contingency plans, while G7 finance ministers are discussing a coordinated response. Economists warn that if the energy disruption proves prolonged, the shock could slow global growth and revive stagflation risks, complicating the outlook for central banks.
Investment flows into emerging markets slowed in February but remained positive overall, with investors adding about $21.7 bln during the month, down significantly from January’s record $100.5 bln. Despite the decline, strategists have noted that there continues to be interest in the asset class. Most of the inflows went into debt markets, which attracted $14.3 bln as investors sought higher yields, while equity inflows slowed to $7.4 bln. Regional patterns were uneven, with strong equity inflows into China and Latin America offset by outflows from parts of Asia, particularly South Korea. Analysts said the slowdown mainly reflects normalization after an unusually strong January rather than a fundamental shift in sentiment, though worsening global risk conditions following the Iran conflict could pressure flows in the coming months.
Incoming Fed chair Kevin Warsh may face a difficult policy environment when he takes over in May, with a potential perfect storm of slowing job growth and persistent inflation. Rising energy prices linked to the Iran conflict have increased the risk of stagflation, forcing the Fed to balance its dual mandate of controlling inflation while supporting employment. Higher oil prices could push headline inflation above 3% even as signs emerge that consumer finances and the labour market are weakening. Warsh will also inherit a divided FOMC and political pressure from Trump, who has pushed for lower interest rates despite inflation concerns. Economists say the central bank could ultimately lean toward rate cuts if consumer demand weakens further, even though markets have recently scaled back expectations for easing due to inflation risks. The challenge for policymakers will be determining whether the energy shock is temporary or likely to produce longer-lasting inflation pressures.
India has begun easing restrictions on Chinese investments in selected sectors, signaling a shift by Modi’s government toward rebuilding economic ties with China after years of tension. Relations deteriorated in 2020 following a deadly border clash, prompting India to tighten scrutiny of investments from neighbouring countries, ban dozens of Chinese apps such as TikTok and WeChat, and block major investment proposals including a $1 bln plan by BYD. Over time, the restrictions disrupted industrial projects and created shortages of Chinese technicians and equipment in India. But it appears that time really does heal all wounds, with diplomatic ties gradually improving after a 2024 agreement to ease tensions along their disputed border, followed by steps to restore business visas, resume direct flights, and explore limited Chinese investment stakes in Indian firms. By early 2026, India had also begun allowing some imports of Chinese equipment for power and coal projects, reflecting economic pressures and a broader effort to normalize trade and investment flows between the two countries.
Housing stress test. Canada’s housing market appears more resilient than many expected, according to analysis highlighted by The Globe and Mail. One key indicator of financial stress, the mortgage arrears rate, currently sits at around 0.22%, with roughly one in 450 borrowers more than 90 days behind on payments. That level remains historically low despite mortgage rates being higher than at any point between 2009 and 2022. Structural factors such as Canada’s mortgage stress test, which requires borrowers to qualify at interest rates higher than their actual mortgage rate, and the country’s full-recourse lending rules help explain the stability. Regional trends are more mixed, however, with Ontario showing some rising pressure as home prices have declined and economic growth has softened. Still, the low national arrears rate suggests the risk of widespread distress or forced selling remains limited based on current data, reducing the likelihood of a sharp nationwide housing correction.
This is not a misprint. Bam Adebayo of the Miami Heat scored 83 points in a 150–129 win last night over the Washington Wizards, delivering the second-highest scoring game in NBA history, trailing only Wilt Chamberlain’s legendary 100-points performance in 1962. Adebayo shot 20 of 43 from the field and an astonishing 36 of 43 from the free-throw line, setting an NBA record for most free throws made and attempted in a single game. For longtime Raptors fans, the performance may bring back memories of Kobe Bryant, who torched the Raps for 81 points in 2006. Nearly two decades later, that historic night now moves to third on the all-time scoring list. Thanks Bam.
Diversion: Never give up
