Dollar Gains Accelerate as WTI Crude Oil Rises Again
US Government Strikes Kharg Island, WTI Crude Oil Price Hits $99
The Trump administration has conducted an airstrike on Kharg Island in the northern Persian Gulf, which is Iran's crude oil export hub and is considered the "lifeline" of the country's economy. Kharg Island is connected by pipeline to oil fields across Iran and is home to massive storage facilities and an oil export terminal capable of loading over 6 million barrels of crude oil per day onto tankers. Ninety percent of Iranian crude oil is exported from Kharg Island. In other words, by striking this location, Iran's crude oil exports will be hindered, and the country will lose its means of earning foreign currency.
The WTI crude oil price rose to the $99 range over the weekend of Friday, March 13. Although the Trump administration launched the airstrike on Kharg Island after the NY market closed, it is believed that the market had already been pricing in that possibility.
Additionally, on Thursday, March 12, the Trump administration announced that it would ease sanctions on Russia and temporarily allow the purchase of Russian crude oil in an effort to curb rising oil prices, but no effect on suppressing oil prices was observed.
Brent crude futures closed at $103.14. This is the first time it has exceeded $100 since August 2022, when Russia invaded Ukraine.
US stocks appear to be falling across the board, and US interest rates continue to rise
The Dow Jones Industrial Average and the S&P 500 have finally fallen to levels approaching the 200 SMA (pink line). Have US stocks topped out? Or is this an excellent buying opportunity after a correction?
Bottom: NASDAQ, Russell 2000, Dow Transportation Average
It is also being reported that major hedge funds are seeing their losses swell in this market.
There are also suggestions that hedge funds are holding their highest level of short positions since 2022, so if a sudden end to the war were to occur, the possibility of a massive short squeeze cannot be ruled out.
JUST IN: Hedge funds are shorting stocks at the "highest level" since 2022
— Kalshi (@Kalshi) March 11, 2026
The rise in US interest rates also shows no signs of stopping. In other words, US Treasuries are being sold.
Ultra-long-term bonds (30-year bonds) have exceeded the levels seen at the time of President Trump's inauguration. Since the Trump administration is advocating policies that will expand the fiscal deficit, such as large-scale tax cuts, tariff policies, and increased defense spending, rising interest rates will lead to further deficit expansion due to increased interest payment burdens, thereby narrowing the administration's future policy room.
Whether US Treasuries are being sold because the US is being shunned, or because of concerns about future inflation risks due to high oil prices, in any case, if this rise in interest rates is not stopped, there is a high possibility that US stocks will be forced to fall further.
Dollar continues to rise alone, FOMC is this week, but...
High oil prices increase demand for the dollar, which is the currency used for oil settlement, so the dollar continues to rise. Since all other currencies are falling, the dollar is rising alone. There is also the aspect that the conversion of all risk assets into cash—in other words, buying the dollar in times of crisis—is taking place.
[March FOMC Forecast]
The FOMC is this week on Wednesday, March 18. Although the NFP (non-farm payrolls) in the February employment report was actually negative, there is a more than 90% expectation that interest rates will be kept on hold due to concerns about reignited inflation, such as high oil prices.
Fed Eyes 'Higher for Longer' as Sticky Inflation Collides with Cooling Labor Ahead of March FOMC | FinancialContent
~Inflation remains stubbornly 'sticky.' Core PCE (Personal Consumption Expenditures) is currently hovering around 2.8%, significantly above the Fed's 2% target. Furthermore, the new 15% global tariff regime introduced in February and the surge in crude oil prices, which have broken through $87 per barrel, are complicating the situation.
For this FOMC, the dot plot is the main event rather than a 'rate hold.' How many rate cuts will there be this year?
~The 10-year Treasury yield is hovering around 4.2%, reflecting market skepticism toward more aggressive rate cuts in 2026. If the 'dot plot' shifts from the median of one rate cut for the remainder of the year, as predicted in December, to zero cuts, it could trigger a significant repricing across all risk assets.
If the longer-run interest rate forecast, which serves as a proxy for the neutral rate in the SEP, rises, it confirms that the U.S. neutral rate itself has risen—meaning we will not return to an era of low interest rates—which could have a major impact on the market.
~The broader significance of the March 2026 FOMC meeting lies in the end of the '0-2% interest rate era.' If the 'neutral rate' (r-star) is raised in the Summary of Economic Projections, it will signal to the world that the era of ultra-low interest rates since 2008 has officially ended.
In the December 2025 SEP, the median longer-run interest rate forecast is 3.0%. If this has risen, there is a possibility of a further decline in U.S. stocks. And the dollar's appreciation will accelerate further.
Dollar-yen exchange rate hits new highs for this year, 2026; joint concern expressed with South Korea
Because the dollar is strong, the rise in the dollar-yen pair is unstoppable. The situation is the same for South Korea, but it is reported that both Japan and South Korea expressed concern over the weak yen and weak won after holding financial talks, and indicated a policy of taking appropriate measures.
Japan and South Korea held the 'Japan-Korea Financial Dialogue' in Tokyo on the 14th. In a joint press release issued after the meeting, they expressed serious concern over the recent rapid depreciation of the won and the yen. They indicated a policy of taking appropriate measures against excessive volatility and disorderly movements.
Unless the rise in crude oil prices subsides, the effect of intervention is unlikely to be high, and it seems that all that can be done is verbal intervention. Currency depreciation is not limited to Japan and South Korea, so for a while, we will be at the mercy of crude oil prices and the direction of the dollar. Even if unilateral intervention is carried out in such an emergency, the effect is considered to be limited. It is considered extremely unlikely that the U.S. will step in with coordinated intervention.
Will the Bank of Japan's Monetary Policy Meeting this week also be a non-event?
There is a Bank of Japan Monetary Policy Meeting this week from Tuesday, March 17th to Wednesday, March 18th. The market consensus is that the current policy interest rate of 0.75% will be held steady.
In the first place, with no strength in Japanese economic indicators, the inflation growth rate is clearly on a slowing trend. There will be no rate hike while the impact of high crude oil prices caused by the outbreak of an emergency on the Japanese economy cannot be assessed, but market expectations for an April rate hike remain. The view is that the Bank of Japan will raise rates based on the possibility that the 'wage-price' virtuous cycle, which the BOJ emphasizes, will continue, as high wage growth is expected in the 2026 spring wage negotiations, following the previous year. Some point out that the BOJ may be forced to raise rates to prevent the yen from weakening.
It is true that if the market is sent too dovish a message right now, there is a high risk that not only will the dollar strengthen, but the yen will also continue to be sold, so regardless of the timing of a rate hike, there is a view that the BOJ will continue to show a fighting pose in its statements, indicating that it is in a cycle where it can raise rates at any time.
Since no policy change is expected, attention is focused on Governor Ueda's press conference.
On the 18th, Prime Minister Takaichi visits the U.S.; what are the points of interest?
According to Chatham House, one of the world's most authoritative think tanks in the fields of international politics, diplomacy, and security, it is expected that Prime Minister Takaichi will show a stance of frankly telling President Trump that Japan's dependence on oil and the deterioration of the situation in the Middle East are having a serious impact on the Japanese economy.
📰Takaichi Challenges Trump | Chatham House – International Affairs Think Tank
President Trump is expected to want support for a 'hardline stance against Iran,' but Japan has a high degree of dependence on the Middle East, and a prolonged war would be fatal. How to reconcile the gap in positions between Japan and the U.S. is seen as the biggest focus.
Also, the relationship with China. Friction with China is occurring over Taiwan, and it is also important for President Trump to understand Japan's position, which requires strengthening cooperation with the U.S. A U.S.-China summit is scheduled for April, and Japan needs to clearly state its position.
In the first place, this visit to the U.S. and the summit meeting were intended to readjust the Japan-U.S. alliance, but with problems increasing regarding Iran and Taiwan, it looks like it will be a difficult meeting. It is also necessary to reaffirm the Japan-U.S. alliance on defense and security issues, but Japan cannot easily respond to requests to dispatch the Self-Defense Forces to the Middle East.
This week is Central Bank week, with meetings for the ECB (Europe), BOE (UK), and RBA (Australia) as well.
Before the US and Israel attacked Iran, the market saw an approximately 80% probability of the Bank of England cutting interest rates in March, but a hold is now expected.
Economists such as those at Goldman Sachs continue to forecast rate cuts within the year, but the market is beginning to price in the possibility of a rate hike instead.
Economic growth in the Eurozone is slightly more resilient than in the UK. The ECB is expected to keep policy rates unchanged at its meeting on the 19th, but there is a strong view in the market that it will eventually be forced to act, with one or two rate hikes priced in for the year. Meanwhile, according to a survey of economists conducted by Bloomberg, it was found that even with the threat of inflation resurfacing, the ECB is expected to keep policy rates on hold until 2027. Only 7% of respondents expected a rate hike by the end of the year.
The focus is on Australia and the RBA board meeting. Inflation is strong, and expectations for a rate hike are rising.
The probability of a 0.25% rate hike next week expected by the market has also risen to 75%. There are views that inflation risks are increasing due to higher crude oil prices following the heightened tensions in the Middle East.
The RBA implemented three rate cuts last year, but raised the policy rate to 3.85% last month due to the re-acceleration of inflation. The headline inflation rate in January rose to 3.8%, and the trimmed mean rose to 3.4%, both of which are above the target range (2-3%).
Main schedule for next week
◆3/16 (Mon)
China February Retail Sales (11:00)
China February Industrial Production Index (11:00)
China February Fixed Asset Investment (11:00)
US March New York Fed Manufacturing Index (21:30)
US February Industrial Production Index (22:15)
US February Capacity Utilization (22:15)
US March NAHB Housing Market Index (23:00)
NVIDIA GTC AI Conference (San Jose, California, until 3/19)
◆3/17 (Tue)
January Tertiary Industry Activity Index (13:30)
Germany March ZEW Economic Sentiment Index (19:00)
US February NAR Pending Home Sales Index (23:00)
Reserve Bank of Australia Meeting (12:30)
FOMC (until 3/18)
◆3/18 (Wed)
Bank of Japan Monetary Policy Meeting (until 3/19)
February Trade Statistics (8:50)
February New Condominium Sales in Tokyo Metropolitan Area (14:00)
Canada Policy Interest Rate Announcement (22:45)
US February Producer Price Index (PPI) (21:30)
Fed Chair Powell Press Conference (3/19 3:30)
[Earnings] Micron (3/19 5:00~)
◆3/19 (Thu)
January Machinery Orders (8:50)
Bank of Japan Monetary Policy Meeting, BOJ Governor Ueda Press Conference (15:30)
Swiss Policy Meeting Interest Rate Announcement (17:30)
ECB Governing Council Meeting Interest Rate Announcement (22:15: Press Conference 22:45)
BOE Policy Meeting Interest Rate Announcement (21:00)
US March Philadelphia Fed Manufacturing Business Outlook Survey (21:30)
US January New Home Sales (23:00)
Japan-US Summit Meeting Scheduled
◆3/20 (Fri)
Vernal Equinox Day, Japan markets closed
