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US equities trimmed their early Monday plunge but remained near their lowest this year, as escalation in the Iran war added to risks of an energy shock that can hit the global economy. The S&P 500 and the Dow were up to 0.7% lower, while gains for tech giants allowed the Nasdaq 100 to inch above the flatline. Saudi Arabia joined Kuwait, Bahrain, and the UAE in cutting oil production as the closure of the Strait of Hormuz by Iran filled storages across the GCC. This lifted energy prices and strengthened expectations that the Federal Reserve will maintain rates elevated. Most sectors declined sharply, with Banc of America, Wells Fargo, and Citigroup dropping more than 3% to extend the rout in the financial sector. Jefferies plummeted 5% amid its exposure to defaults by First Brands and MFS, echoing pessimism for the private credit sector. Still, chip producers gained and limited losses for indices, with Broadcom, AMD, and Micro adding more than 2%.

US Stocks Trim Losses, Hold Near YTD Low

Arabica coffee futures rose to around $2.95 per pound, the highest since mid-February, as traders weighed factors that could affect supply, including logistical risks from the Middle East crisis and a drop in Brazilian exports. The closure of the Strait of Hormuz has increased global shipping rates, insurance, and fuel costs, and raises costs for coffee importers and roasters. In the meantime, data released by the Secretariat of Foreign Trade (Secex) indicated a reduction in Brazilian coffee shipments in February compared to the same period last year, a scenario that could temporarily restrict the availability of the product in the international market. Meanwhile, the market continues to monitor production prospects in the coming cycles. Conab recently projected a record 66.2 million-bag 2026/27 harvest, while expectations have grown that 2027/28 output could exceed 80 million bags, provided there are no frosts or droughts.

Arabica Futures at Over 3-Week High

The yield on the US 10-year Treasury note was little changed at 4.13% on Monday, after rising to as much as 4.21% earlier in the session, as oil prices pared some gains and moved back below $100 per barrel. Despite the slight relief, concerns about an energy-driven surge in inflation that could prevent the Fed from cutting interest rates continue to weigh on investor sentiment. The conflict shows little sign of easing, with major Middle Eastern producers including Kuwait, Iran, the UAE, and Saudi Arabia, cutting output amid limited storage capacity and the continued closure of the Strait of Hormuz. Reflecting these pressures, traders now expect only one 25bps rate cut from the Fed this year, most likely in September, compared with two cuts expected just a week ago. Investors are also looking ahead to a busy week of economic data, including the CPI report, the PCE price index, and JOLTS job openings, which should provide further insight into the strength of the US economy.

Treasury Yields Little Changed

US natural gas futures slipped to around $3.12 per MMBtu due to rising domestic supply and softer export demand. Gas flows to the nine main US LNG export terminals averaged about 18.1 bcfd so far in March, down from a record 18.7 bcfd in February, partly due to an outage at Freeport LNG’s Texas facility caused by a feedgas issue. Global energy markets remain volatile after QatarEnergy halted LNG production and declared force majeure during the conflict involving Iran, removing roughly 20% of global LNG supply and driving international gas prices higher. However, US prices have risen much less because the country already produces enough gas for domestic needs and LNG export capacity is near its limit. Weather is also capping demand, with forecasts calling for warmer-than-normal conditions across the US through late March, reducing heating needs. Meanwhile, gas production in the Lower 48 states has increased to about 110 bcfd so far in March.

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