War has not spooked cash markets

March delivered an unusually volatile mix of geopolitics, central‑bank uncertainty, and commodity shocks. A war involving Iran, sharp swings in oil prices, leadership questions at the US Federal Reserve (Fed), and a surprisingly resilient money market made for a month that challenged market assumptions across asset classes.

Let’s not sugarcoat it: March was a mess. Between a war in Iran, oil prices doing backflips, a Fed Chair drama worthy of a Netflix mini-series, and a money market that somehow stayed chill through it all, it’s been a month that tested even the most seasoned caffeine-fueled bond nerds.

War, oil, and the Strait of Hormuz

The month kicked off with Iran shutting down the Strait of Hormuz—the artery through which 20% of the world’s oil flows—and the US and Israel launching strikes. Oil prices responded like a toddler on a sugar high: WTI surged from $70 to nearly $120 in a matter of days, then whipsawed back to the $80s on rumors of ceasefires, only to spike again when those talks predictably collapsed.

President Trump, never one to miss a headline, floated the idea of “taking over” the Strait. Markets briefly calmed and resumed panicking. By month-end, oil was hovering around $97, and analysts were tossing around $150–$200. Gasoline prices jumped 50 cents in a week and diesel nearly 90 cents.

Fed checks the vibe

In a rare moment of predictability, the Fed held rates steady at 3.5%–3.75%. The dot plot hinted at one cut later this year, but Powell made it clear those are more “vibes-based” than guaranteed. Inflation is easing—slowly—but rising energy prices are the new villain in the Fed’s “will-they-won’t-they” rate cut saga.

Powell, ever the central banker, refused to call the current environment “stagflation,” but admitted things are getting weird. Growth is slowing, inflation is sticky, and job creation is basically flatlining. But hey, at least we’re not in a recession. Yet.

A monetary soap opera

Speaking of Powell, he’s currently under DOJ investigation for … something. Details are fuzzy, but the timing is impeccable. President Trump has nominated Kevin Warsh to replace him, but Senator Thom Tillis is playing gatekeeper, refusing to confirm anyone until the investigation wraps up.

Powell, for his part, isn’t going quietly. He’s vowed to stay on until a successor is confirmed, which, given the Senate drama, could be sometime around the next solar eclipse. Warsh, meanwhile, is making the rounds on Capitol Hill, trying to convince lawmakers he’s not just Trump’s monetary puppet. So far, he’s got fans—including Tillis—but not enough to get a vote. Classic D.C.

Yields climb the wall of worry

While the Fed stood still, the bond market didn’t. The 2-year Treasury yield climbed by ~50 basis points over the month, thanks to inflation fears, war spending, and a general sense that things are spiraling. The yield curve (2y vs 10y) flattened a little as short-term yields rose more than long-term yields—a sign that markets are pricing in more near-term risk and fewer rate cuts than they were hoping for.

Calm in the eye of the storm

Amid the chaos, money markets were the picture of serenity. Secured Overnight Financing Rate ticked up to 3.70% mid-month—a minor blip—and quickly settled back down. The effective Fed funds rate barely moved, staying glued to the Fed’s 3.65% interest-on-reserves rate. Why? Because the Fed is flooding the system with cash via its new Reserve Management Purchases (RMP) program—$40 billion a month in T-bill buying to keep reserves “ample.” It’s not quantitative easing, they say.

Even the repo market, which should be sweating under the weight of massive Treasury supply, stayed cool. On March 27, with $108 billion in auctions settling, overnight repo rates actually fell. Too much cash chasing too much collateral. It’s a weird world when the repo market is more stable than the geopolitical landscape.

The economy is slowing, but not stopping (yet)

The February jobs report was a buzzkill: 92,000 jobs lost, the first monthly decline in years. The unemployment rate ticked up to 4.4%, and labor force participation fell. Inflation held steady at 2.4% year-over-year, but core Personal Consumption Expenditures—the Fed’s favorite—rose to 3.1%. Wages are finally outpacing inflation, but just barely. Consumer sentiment is in the dumps, and gross domestic product (GDP) growth is slowing. It’s not a recession, but it’s not great either.

Keep your seatbelt fastened

March was a masterclass in market chaos. War, oil shocks, central bank drama, and economic uncertainty collided in a perfect storm. The Fed is trying to stay the course, but the path ahead is anything but clear. If oil stays elevated and inflation reaccelerates, those rate cuts could vanish faster than a ceasefire tweet. If the war escalates, all bets are off. For now, stay nimble, stay liquid, and maybe keep a bottle of aspirin next to your keyboard. April’s not looking any calmer.