Stocks, Treasuries Get Slammed as Iran Vows to Keep Fighting: March 12, 2026

Wall Street is suffering sharp losses in stocks and Treasuries as Iran vows to keep fighting. Newly chosen Supreme Leader Khamenei declared that the Strait of Hormuz should remain closed to pressure adversaries and that he will open new fronts in the conflict if US and Israeli attacks don’t stop. The message is a substantial headwind to an investor community that was hoping that the battle would end promptly and has sent WTI crude oil prices near $100 per barrel once again. The negative impacts on corporate margins, inflation expectations, rate-cut prospects and yields are sparking market volatility, leaving participants with few places to hide. Indeed, sinking optimism for Fed reductions amidst strengthening cost forces are weighing on traditional safe havens such as silver, gold and government debt, although shares in the defensive consumer staples and utilities sectors along with energy stocks are catching bids. The yield curve is jumping in bear-flattening fashion led by the monetary policy sensitive short tenors, as fixed-income observers increasingly envision only a single 25-basis point trim this year that would occur towards the fourth quarter. Subdued unemployment claims reported this morning, which beat projections, alongside better-than-anticipated housing starts are also tightening financial conditions. Elsewhere, heavier domestic borrowing charges are lifting the greenback.

Apartment Building Starts Hit a 32-Month High

A 32-month high in groundbreaking for apartment projects drove a beat in this morning’s delayed housing starts report for January. Even as the pace of single-family projects declined 2.8% month over month (m/m), the headline figure jumped to a 13-month high of 1.487 million seasonally adjusted annualized units (SAAU), north of the 1.35 million expected and December’s 1.387 million. Growth of 47.4% and 11.4% m/m across the Northeast and South countered Midwest and West region declines of 10.8% and 7.5% during the period. Permits, released in the same print, fell 5.4% m/m to 1.376 million SAAU, missing the 1.41 million expected and coming in beneath the 1.455 million anticipated. In this category, multifamily was actually the largest headwind, dropping 13.4% m/m while single-unit filings sank 0.9%. From a regional perspective, the Midwest grew 9% m/m, but the West, Northeast and South sank 15.7%, 9.6% and 3.5% m/m.

Steady as She Goes

Labor conditions remain stable, according to this morning’s unemployment claims, which beat expectations overall as employers appear committed to maintaining existing headcounts. Initial filings sank to 213k from 215k and beat the estimated 214k for the week ended March 6, while continuing applications dropped to 1.850 million from 1.871 million for the prior 7-day interval, arriving in-line with the consensus projection. Four-week moving averages dropped modestly on both fronts to 212k and 1.851 million from 216k and 1.852 million.

Higher Yields Pressure Private Credit

The negative consequences of the Middle East war are hitting private markets, where loftier yields are pressuring firms and borrowers that are increasingly vulnerable to heavier borrowing costs. Indeed, new loans and existing floating rate debt must now be adjusted based on today’s rates and the longer the conflict persists, the greater the likelihood is that we’ll see subdued earnings performances as well as missed payments and defaults that together will weigh on cash distributions for both shareholders and creditors. Meanwhile, the chance that we’ll experience a 3-handle in March’s Consumer Price Index is rising by the day, and that would force the Fed’s hand, marking a substantial risk for portfolios of all kinds, as rate cuts were a significant motivation to be bullish on stocks, Treasuries and precious metals this year.

International Roundup

Canada’s Goods Trade Deficit Triples

Canada’s trade deficit ballooned in January, climbing from $1.3 billion in December to $3.65 billion. In addition to nearly tripling, the metric was much worse than the economist consensus expectation for imports to exceed shipments abroad by $1.1 billion. Exports sank by $3 billion to $62.48 billion while imports slowed by only $720 million to $66.13 billion.

Regarding products shipped to foreign lands, the following categories experienced the largest declines:

• Passenger cars, light trucks and automobile parts contracted by 32.5% m/m. Retooling facilities to accommodate the manufacturing of different vehicles caused extended factory shutdowns and a decline in the number of autos available for non-domestic customers.
• Metal and non-metallic mineral products slipped 8%. The softness was driven by unwrought gold demand falling 12.6%, driven primarily by fewer shipments to the UK.
• Aircraft plunged 22.7% and the aircraft engines, parts and other transportation equipment category was lower by 7.9%.

On a positive note, energy products sent beyond the country’s borders climbed 4.1%. Severe cold weather in the US caused exports of natural gas to jump 23.7%. Crude oil exports, furthermore, were up 1.8%. On the flip side, imports of motor vehicle engines and parts sank 4.5% with factory shutdowns trimming demand. A semiconductor shortage, furthermore, precipitated a 3.6% drop in electronics and electrical equipment. Also in January, Canada turned to China for equipment required for building a liquefied natural gas facility in British Columbia, which contributed to imports of industrial machinery, equipment and parts climbing 3.4%.

Services Trade Balance Turns Negative

Canada’s services trade balance fell from a December surplus of $400 million to a $100 million deficit during the first month of 2026. Stronger usage of Canadian financial services from non-domestic providers and travel services supported exports but weakness in the other services category more than offset the impact of those gains.

And Wholesaling Slips

The total value of wholesaling transactions dropped 1% m/m in Canada during January, exceeding the 0.6% contraction anticipated by a consensus of economists. In December, wholesaling activity was up 1.8% m/m.

Weaker automobile sales, a result of the factory shutdowns, were the largest headwinds. Minerals, ores and precious metals wholesaling also weakened.

Sentiment Weakens Among Large Japanese Manufacturers

The portion of large manufacturers that believe business conditions are improving in Japan exceeded companies with negative views by 3.8 percentage points during the first quarter, a decline from 4.7 percentage points in the October through December period, according to the BSI Large Manufacturing Conditions Index. Economists anticipated that optimists would outweigh pessimists by 5.3 percentage point gain.

The result is derived from a survey of businesses with capital of 1 billion yen or more and is calculated by determining the difference in the percentages for firms with positive or negative views. A few highlights include the following:

• The domestic economic conditions component strengthened from 4.4 to 6.1
• Regarding employment, the portion of employers that said labor was insufficient outweighed companies that said the availability of labor is excessive by 22.6 points, up from 21.3.
• Sales optimism for this fiscal year ascended from 1.8 to 2.3
• The outlook for fiscal year 2026 ordinary profits sank to negative 3.9
• The portion of businesses that believe spending on software, plants and equipment will be higher year over year outweighed the level of survey respondents that don’t anticipate increases by 5 percentage points, a decline from 7.6 in fiscal year 2025.