---
title: "A liquidation with no escape is unfolding! Soaring oil prices shatter interest rate cut fantasies as a cross-asset sell-off sweeps the globe"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/280004551.md"
description: "Global markets are facing liquidation due to soaring oil prices, and optimistic expectations have been shattered. Since the launch of the \"Epic Fury Operation,\" the market had hoped for a brief interruption in oil supply, with the Strait of Hormuz reopening and economic growth expectations warming. However, global stock and bond markets have fallen in tandem, with the three major U.S. stock indices suffering significant losses, and gold facing its worst week since 1983. The probability of a Federal Reserve interest rate hike has increased, the S&P 500 index continues its weekly decline, geopolitical tensions have intensified, and Brent crude oil prices remain around $110 per barrel, posing a persistent threat"
datetime: "2026-03-21T08:12:05.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/280004551.md)
  - [en](https://longbridge.com/en/news/280004551.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/280004551.md)
---

> Supported Languages: [简体中文](https://longbridge.com/zh-CN/news/280004551.md) | [繁體中文](https://longbridge.com/zh-HK/news/280004551.md)


# A liquidation with no escape is unfolding! Soaring oil prices shatter interest rate cut fantasies as a cross-asset sell-off sweeps the globe

Since the large-scale preemptive military operation launched by the United States and Israel against Iran on February 28—known as "Operation Epic Fury"—began nearly three weeks ago, the financial markets have generally maintained reassuring bullish bets during most periods: that the disruption of oil supply in the Middle East will be very short-lived, the Strait of Hormuz will reopen soon, international oil prices will quickly decline, boosting economic growth expectations, and the Federal Reserve's monetary policy easing cycle will rapidly resume. However, on Friday, these optimistic bets seemed to be on the verge of collapse.

On Friday, global stock and bond markets fell in sync, particularly with the three major U.S. stock indices suffering severe declines. The classic safe-haven asset—gold—is heading towards its worst week since 1983. **Bond market traders even priced the probability of the Fed's potential next policy action in the second half of the year as a rate hike rather than a rate cut at fifty-fifty, while the S&P 500 index continued its longest weekly losing streak in a year. In contrast, last month, the bond market had priced in the possibility of the Fed cutting rates 2-3 times, even pricing in the possibility of the Fed restarting the rate cut cycle as early as June.**

Since the outbreak of the new round of geopolitical conflict, the market has been under pressure testing. However, as Israel's bombing significantly impacts Iran's crucial gas fields and Qatar's gas production capacity is greatly reduced due to the war affecting Iran, this week marks an escalation of geopolitical tensions. Although Trump stated on social media that he is considering gradually "de-escalating" military actions against Iran, senior U.S. government officials indicated that **the White House is sending hundreds of Marines to the Middle East while weighing a plan to send ground troops to seize Iran's oil export hub on Kharg Island. Brent crude oil is hovering around $110 per barrel, no longer a brief wild surge—indicating that high oil prices could be a persistent major threat that investors, central bank policymakers, and business leaders must confront.**

The Federal Reserve maintained its benchmark interest rate as expected on Wednesday local time, but Fed Chairman Jerome Powell clearly expressed a hawkish stance at the press conference, emphasizing that the oil price shock makes the U.S. inflation outlook too uncertain to provide a timeline for easing. **Powell repeatedly stressed that the Fed may not return to a rate-cutting trajectory until inflation shows signs of cooling down—this has not even begun to consider the inflationary impacts that the Middle East war may bring, emphasizing that it is still too early to assess the war's effects.**

"What we really want to see this year, and it is very important, is progress on inflation," Powell stated at the press conference. "If we don't see that progress, then you won't see rate cuts."

The Fed chairman made these remarks after deciding to keep rates unchanged at two consecutive meetings. This statement reinforces the view that **due to persistent consumer price data, the Fed is still quite far from resuming a series of rate cuts that began at the end of 2025. This sticky inflation trend has also raised the possibility that the Fed's next action may ultimately turn into a rate hike.** Compared to the United States, which possesses vast oil and gas resources, Europe, which is heavily reliant on imported energy, seems to face more significant energy-driven inflationary pressures. The European Central Bank and the Bank of England are facing a more severe similar issue—namely, that despite the increasingly deteriorating economic growth outlook, they are forced to remain inactive or even possibly shift to a rate hike path starting in April due to energy-driven inflation severely hindering interest rate cuts. The interest rate futures market anticipates a 75% probability that the European Central Bank will initiate its first rate hike as early as April, and it has almost fully priced in three rate hikes of 25 basis points each this year.

**The Iran war is increasingly likely to turn into a "long-term tug-of-war."**

The Iranian military has effectively "quasi-blockaded" the Strait of Hormuz, meaning that about 20% of global energy flows are completely obstructed, accompanied by tanker attacks and shipping disruptions. A recent research report from the International Energy Agency (IEA) indicates that military actions by the United States and Israel against Iran at the end of February triggered the largest supply disruption in the history of the global oil market; meanwhile, the U.S. government is considering military means (including potential ground or quasi-ground control) to restore shipping routes and fully control the Strait of Hormuz.

However, the key point is that while blockades are easy to establish, maintaining a blockade or competing for control requires a sustained strong military presence, and reopening routes is even more difficult (involving mine clearance, escorting, air superiority, and port control). All of this suggests that once the U.S. and Israel enter into a "control of passageway game" with Iran, **this round of Middle Eastern conflict may shift from airstrikes and maritime blockades to a struggle for key points (such as Kharg Island), ultimately meaning that under prolonged confrontation, the forces of both sides could easily evolve into a long-term tug-of-war similar to the Iran-Iraq War of the 1980s.**

Therefore, the current international oil price benchmark—the Brent crude oil futures price structure has entered a "supply-side nonlinear shock range," and a $100 oil price no longer seems to be the upper limit but rather a redefined central point. Wall Street financial giant Goldman Sachs recently released a research report stating that **in the short term, oil prices are likely to continue rising, as the flow through the Strait of Hormuz remains at extremely low levels. If the sluggish flow causes the market to focus on the risk of prolonged disruptions, Brent crude oil futures prices may surpass the historical highs of 2008. The institution believes that considering the recent attacks on energy infrastructure, the Iran war will undoubtedly have a high probability of pushing oil prices to remain above $100 in the long term.**

Goldman Sachs' research report deeply analyzes the five largest supply shocks in history, showing that production is still impacted by 42% on average four years later, often reflecting damage to infrastructure and low investment. According to Goldman Sachs' statistics, Iran and seven other Gulf countries are expected to reach crude oil production of 3.5 million barrels per day and 21.8 million barrels per day by 2025, respectively, accounting for 30% of global crude oil supply. If there are sustained production cuts, it will exert long-term upward pressure on oil prices.

Goldman Sachs' scenario analysis indicates that **whether in the short term or by 2027, the risk of oil prices remains skewed to the upside.** The persistence of multiple large supply-side shocks in history, along with geopolitical conflicts that easily evolve into long-term tug-of-wars, highlights that under scenarios of prolonged disruptions and sustained significant supply losses, oil prices may remain above $100 per barrel for a longer period **The "Clearing Period" of Global Financial Markets**

"The past week has been a very typical clearing period, as every corner of the global financial markets finally began to face reality: this conflict will not only last longer than the market's previous optimistic expectations, with an unpredictable final outcome, but it also seems to be rapidly evolving into the worst-case scenario—a direct strike on all energy infrastructure in the region," said Mark Malek, Chief Investment Officer of Siebert Financial.

![1774056219(1).png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260321/1774056222661686.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

As shown in the above chart, market pressures are approaching the "liberation day" levels from early April 2025, when Trump launched an aggressive trade war globally—the global market risk indicators have surged to their highest levels since April.

According to a Bank of America index, **massive** **cross-market pressures are accumulating at the fastest pace since last year's tariff shocks. Stock and credit trades based on expectations of declining interest rates are being rapidly and synchronously unwound, while emerging markets are under constant pressure.**

These latest market sell-off dynamics highlight investors' anxiety over the prolonged Middle East war, which intensified on Friday, as U.S. President Donald Trump again criticized military allies for not joining the war or assisting in reopening the Strait of Hormuz. The strait is currently effectively under blockade by the Iranian military.

![1774056239(1).png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260321/1774056245567905.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

ETFs tracking the S&P 500 index, long-term U.S. Treasury bonds, and gold recorded their worst combined performance since the outbreak of the war. As shown in the above chart, geopolitical turmoil in the Middle East has triggered severe volatility across assets.

**As market volatility surged on Thursday, Société Générale downgraded its recommended global equity market allocation by 5 percentage points while raising commodity allocation by the same amount. BCA Research advised clients to increase cash allocation and reduce equity allocation. Goldman Sachs' Global Investment Research suggested adopting a defensive stance, adjusting the three-month tactical asset allocation to overweight cash, underweight credit, and maintain neutral allocation to other major asset classes.**

"Day by day, the market is gradually factoring in longer and broader chain reactions," said Garrett Melson, portfolio strategist at Natixis Investment Managers, who recently reduced exposure to small-cap stocks while increasing allocation to fundamentally strong large-cap growth and technology stocks.

The damage caused by persistently high energy prices will not manifest all at once. **It often transmits through specific channels—household budgets, corporate profit margins, financial market benchmark conditions, international exchange rate markets, and central bank credibility—these channel factors amplify each other, making the ultimate cost far exceed the levels implied by oil prices above $100.** \*\*

**The U.S. economy is beginning to feel the severe shockwaves brought on by rising oil prices**

Federal Reserve Governor Christopher Waller, who has permanent voting rights on the FOMC monetary policy during his term, stated on Friday that he remains cautious and continues to observe how high oil prices will affect inflation, despite weak employment potentially supporting expectations for interest rate cuts. He pointed out that geopolitical conflicts appear to have become more prolonged, thereby increasing the risk of oil prices remaining high for a longer period.

**“If this rate—energy shock continues or even intensifies, then the pricing for expansionary growth across various assets may need to adjust in a more pessimistic direction,”** said Christian Mueller-Glissmann, head of asset allocation research at Goldman Sachs Global Investment Research. **“The market has not priced in much economic growth risk, which partly explains why, at least in the U.S., the stock market has not yet experienced such a significant bear market-level correction.”**

In the U.S., consumers have already begun to bear the initial shocks of the Iran war. U.S. gasoline prices are nearing $4 per gallon, and Bank of America’s economic research department estimates that approximately $0.80 of the increase per gallon is primarily due to this geopolitical conflict. Data compiled by Bank of America from credit and debit card transactions shows that **as of the week ending March 14, U.S. gasoline spending increased by over 14% year-on-year—this spending must be squeezed from elsewhere. If the shock continues, consumer confidence will face significant downside risks.**

The pressure extends far beyond gas stations. Companies that based their 2026 investment plans on declining borrowing costs may be forced to reassess their future investment strategies in the U.S.; meanwhile, high-energy-consuming industries face cost shocks that they must either absorb or pass on to already pressured consumers.

As a fuel that is embedded in nearly all supply chains, diesel prices are rising even faster than gasoline, exacerbating the risk of broader drag on U.S. manufacturing and the real economy. **In financial markets, this adjustment may further widen—valuations and credit spreads built on overly strong expectations for interest rate cuts at the beginning of the year may still have significant downside potential, while investors in overseas economies may face capital outflows that domestic policies struggle to offset amid severe selling pressure.**

“**Risk premiums should be higher—this is the largest energy supply shock in history, and there are almost no simple fiscal, monetary, or energy supply-demand policies that can effectively respond, so recession risks should significantly rise,”** said Priya Misra, a portfolio manager at JP Morgan Asset Management. **“The stock market and credit spreads are behaving too resiliently because the market hopes that households and businesses can fully absorb this energy shock under the strong fundamentals driven by the long-term bull market in stocks in recent years.”**

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