Morning Bid: Gas field grief

By Mike Dolan

March 19 -

What matters in U.S. and global markets today

By Mike Dolan, Editor-At-Large, Finance and Markets

The energy shock has kicked up a notch, with Brent crude rising above $115 a barrel this morning. Prices started shooting up on Wednesday after Israel targeted Iran’s South Pars natural gas field - the largest in the world - sparking retaliatory attacks by Tehran on gas facilities throughout the region, including against Qatar’s Ras Laffan energy complex.

Meanwhile, markets read Wednesday’s Federal Reserve’s policy decision as hawkish even as it kept rates on hold. Chair Jerome Powell acknowledged the war had injected considerable uncertainty as the Fed lifted its full-year inflation forecast, with futures markets now no longer priced for a rate cut in 2026. Powell’s sentiment is likely to be echoed in the communications of the other central banks meeting today.

I’ll get into that and more below.

But first, check out my latest column on what global investors should do amid the Iran conflict - and the factors potentially beyond their control.

And listen to today’s episode of the Morning Bid podcast, where I discuss how the latest energy ructions in the Middle East are testing central banks. Subscribe to hear Reuters journalists discuss the biggest news in markets and finance seven days a week.

GAS FIELD GRIEF

Energy prices surged on the latest escalation in the Gulf. Not only has crude jumped, but European gas prices also soared by around 25%. WTI continues to trade at a wide discount to Brent, partly due to the releases from U.S. strategic reserves, with the U.S. benchmark now around $97 a barrel.

Stocks tumbled around the world on Wednesday as traders digested the latest oil price spike and hawkish signals from central banks. All major U.S. indexes closed down more than 1% after the Federal Reserve held rates steady and projected only a single rate cut for the year.

The Bank of Canada and Bank of Japan also stayed put, with both signalling willingness to raise rates if higher energy prices led to elevated inflation. For the U.S., the energy shock comes as inflation already looks to be running hotter, with producer prices rising by the most in seven months in February - 3.4% - well above consensus forecasts.

The dollar firmed on the Fed’s hawkish signals while the yen wilted, approaching its weakest level in two years. Meantime, gold fell on the stronger dollar, touching its lowest level since February 6.

The mood in equities was dour early on Thursday too, with Asian stocks falling on soaring oil prices. Japan’s Nikkei shed more than 3% and South Korea’s KOSPI fell by 2.8%, while European stocks were also down. Wall Street futures were up slightly ahead of the bell, however.

Further interest rate decisions will come later today from the European Central Bank and Bank of England, which find themselves in the same watch-and-wait boat on the Iran war’s economic impacts. As Fed Chair Jerome Powell put it on Wednesday, nobody really knows “how big this will be and how long it lasts”.

That’s especially true as the parameters of the conflict remain up in the air, with the Trump administration reportedly weighing deploying ground troops to the Middle East, according to a Reuters exclusive.

Away from geopolitics, the AI boom kept humming as Micron Technology posted a sharp second-quarter revenue jump on strong demand for AI memory chips and forecast third-quarter revenue above expectations. Still, its shares dropped 5% after hours as it flagged a $5 billion capex increase for 2026 - spending that investors remain uneasy about.

Chart of the day

Natural gas prices soared again on Thursday amid the tit-for-tat gas field attacks in the Middle East, with European benchmark natural gas prices now up 107% since late February.

Today’s events to watch

* European Central Bank interest rate decision (9:15 AM EDT), Bank of England interest rate decision (8:00 AM EDT)

* U.S. weekly jobless claims (8:30 AM EDT), Philadelphia Fed March business surveys (8:30 AM EDT)

* U.S. 10-year TIPS auction (1:00 PM EDT)

* U.S. corporate earnings: Accenture, FedEx

* Japanese Prime Minister Sanae Takaichi meets with U.S. President Donald Trump

(By Mike Dolan)