Economic Pulse: March 2026
Executive Summary
So, we now live in a a world where two consecutive months have each produced a legitimate "once in a generation" macro shock. I hoped I would not need to keep using superlatives, but it's hard these days. March was defined entirely by the economic aftershocks of the February 28th strikes on Iran and the resulting closure of the Strait of Hormuz.
The headline numbers were almost comical in contradiction. Manufacturing hit expansion highs not seen since 2022 both in the EU and the US, Services stayed in growth mode and the US jobs print tripled expectations. (!?)
And yet, Eurozone inflation blew back through the ECB's 2% target in a single month, Europe's gas storage is getting dangerously thin heading into summer refill season, the ECB paddled back on its 2026 growth forecast. (The latest Fed decision signals somewhat of a stalemate.) The word "stagflation" has now appeared in official ECB communications, which is something I have never seen in my adult life.
Big Picture: One Central Shock
The trigger is unchanged from February: the US-Israeli strikes on Iran on February 28th, followed by Iran's near-total closure of the Strait of Hormuz stopped the flow of roughly 20% of the world's oil and a significant share of global LNG flows. While affecting everyone, the consequences are not playing out evenly around the world, which matters enormously for someone living in Europe.
Brent crude moved from ~$65 in early January to over $100 by mid-March, peaking around $110 by month end, despite a coordinated release of 400 million barrels from IEA strategic reserves. Saudi Arabia and the UAE have been working to try and reroute oil through overland pipelines, but can only partially compensate. Oil executives and analysts are warning that the strait needs to normalise by mid-April or the disruption escalates sharply. (A timeline reached by the time I'm writing this.)
QatarEnergy declared force majeure on its LNG supply contracts in early March, which is the detail that hits Europe hardest. Qatar is a primary LNG supplier that many EU countries have been leaning on after trying to diversify away from Russion energy in the recent years. Dutch TTF gas benchmarks almost doubled to over €60/MWh by mid-March, similar to the post-Ukraine invasion shock in 2022.
Europe is Caught in the Worst Position
Europe did not start this war, has little influence over how it ends, but is arguably more exposed to it than the other major economic regions. The ECB's own chief economist has said publicly that the central bank is no longer in a "good place" with respect to growth and inflation, which is a big change from 2025's story.
The ECB's March projections rewrote the outlook completely. Eurozone GDP down to just 0.9% (from 1.2% in December) and EUR inflation up to 2.6% (from 1.9% in December). So in one single revision cycle, the ECB went from "inflation returning to target" to "inflation materially above target with growth collapsing."
Eurozone flash CPI for March came in at 2.5% YoY, up from 1.9% in February, making it the fastest monthly acceleration in the headline rate in years, (almost) entirely driven by energy.
Germany and Italy face the highest recession risk with both running energy-intensive manufacturing economies and with significant exposure to natural gas prices. The UK is expected to see inflation breach 5% in 2026 (!?).
The Eurozone's Manufacturing PMI jumped to 51.6 in March, Services PMI flash at 50.1. This sits barely above contraction, down from 51.9 in February and below consensus. New orders fell, price pressures is increasing, and employment growth was the weakest since September 2025. If this falls through 50 in April, the recession risk for Germany and Italy will likely start to affect our portfolio.
United States: Resilient but Distorted?
The Fed held at 3.50–3.75% on March 18th in an 11-1 vote. GDP forecast for 2026 nudged up to 2.4%, but the 2026 inflation forecast was revised up to 2.7%. Seven of 19 members now expect no cuts at all this year. Powell's take: the oil spike is a one-time price level adjustment, and the Fed is "well positioned to navigate this uncertainty."
While February CPI held at 2.4% YoY, March CPI came in at 3.3% YoY, one full percentage point of disinflation progress erased in a single month. The ISM Manufacturing Prices Paid index at a four-year high of 78.3 signals the transmission into goods prices is only beginning.
March nonfarm payrolls came in at +178,000, more than tripling the consensus of ~+57,000. But then you notice that 76,000 of those jobs came from healthcare alone, due to the resolution of a Kaiser Permanente physicians' strike. So when taking roughly +102,000 without it, and subtracting the February revision (down to -133,000 from -92,000), the four-month rolling average sits at approximately +47,000 per month.
Asia: Even more Exposure
Apart from the US-Europe story, the Hormuz disruption hits Asia hardest in pure energy import terms. China, India, Japan, and South Korea account for 75% of oil and 59% of LNG exports from the Gulf region. India has already resorted to fuel rationing in some states, Sri Lanka introduced a four-day working week and the Philippines declared a state of emergency. These economies don't have the strategic reserves or fiscal space that Western governments have deployed.
What Does It Mean for Us?
I went flat at the end of February while stress-testing the engine, and March made that look prescient by accident. I wish I could say it was deliberate.
The Sector Navigator is now navigating a world where energy surged roughly 38% in Q1 2026 and upstream oil producers averaged 45% gains. The broader S&P 500 declined and European indices came under pressure from the growth downgrade.
The Momentum Chaser the AI infrastructure trade that drove momentum through late 2025 is now competing for capital with an energy and materials cycle that appeared almost overnight. Two strong momentum signals in opposite directions of the economy.
I have rewritten the engine in many aspects over the last month and will publish individual articles about the impact and changes. These will be an attempt to put in measures to help us navigate these uncertain times.
Uncharted territory remains the right description.
Data Sources:
BLS. Employment Situation (March 2026, released April 4, 2026)
ISM. Manufacturing PMI® (March 2026, released April 1, 2026)
ISM. Services PMI® (March 2026, released April 6, 2026)
S&P Global / HCOB. Eurozone Flash PMI® (March 2026, released March 24, 2026)
S&P Global / HCOB. Eurozone Manufacturing & Services PMI® Final (March 2026)
Federal Reserve. FOMC Statement & Summary of Economic Projections (March 18, 2026)
ECB. Monetary Policy Decision & Staff Macroeconomic Projections (March 19, 2026)
ECB. Economic Bulletin Issue 2, 2026
Eurostat. Flash CPI Estimate, Eurozone (March 2026)
Bloomberg Economics. Big Data CPI Tracker — US March 2026
IEA. Oil Market Report & Strategic Reserve Release Statement (March 2026)
IRU World Road Transport Organisation. Fuel Price & Hormuz Analysis (March 2026)
Wikipedia / House of Commons Library. Economic Impact of the 2026 Iran War
QatarEnergy. Force Majeure Notice (March 3, 2026)