Middle East War Not Going As Well As Anticipated But the Dollar’s Doing Fine
March 6, 2026
The military conflict against Iran was supposed to be different from others like those involving Venezuela, Ukraine, Gaza, Iraq, Afghanistan, or to go back 60 years Vietnam. Most importantly, no ground troops would be needed, so U.S. casualties would be way down, and the risks were limited of it becoming endless, causing domestic economic pain, and becoming a major political story. Almost immediately, rumors arose that Iran wants a ceasefire, but those were denied today by the country’s foreign minister. Neither side is flinching, and more countries are being drawn into the war. Scenes on the nightly news of Tehran and Beirut are starting to look like Gaza. The price of WTI oil shot up overnight by another 6% and is up 50% compared to its value on the first trading day of this year just nine weeks ago. If taking on Iran had been the plan all along, one has to wonder why President Trump harassed the Federal Reserve so relentlessly throughout 2025, insisting that inflation had been defeated and its interest rates ought to be percentage points lower.
Investors are worried. Equity markets aren’t waiting for definitive answers. The hour should have been one of marking time ahead of the release of the U.S. Labor Department’s employment situation report for February due shortly. Major indices in the euro area are down 1.1%, and U.S. futures have extended yesterday’s losses. Ten-year sovereign debt yields rose overnight by an additional nine basis points in Great Britain, five bps in Italy, four bps in France, Spain and Switzerland, three bps in the United States and a basis point in Germany and Japan.
But gold, silver and Bitcoin have barely moved, and the dollar is doing dandy, with fresh overnight advances of 0.7% versus the peso, 0.5% relative to the won, 0.4% against the euro, 0.6% vis-a-vis the kiwi, and 03% against the Australian dollar and sterling.
The third and final estimate of fourth-quarter GDP growth in Euroland shows a slight downward revision to 0.2% quarterly and not annualized and 1.2% compared to the final quarter of 2024. With calendar year growth of 0.4% in 2023, 0.9% in 2024 and 1.4% in 2025, euro area growth has cracked the low bar of 1.5% since 3.5% in 2022. Employment grew 0.2% last quarter and 0.7% versus a year earlier.
There were positive growth contributions to GDP last quarter from personal consumption government spending and business investment that totaled 0.4 percentage points, but drags from inventories and net foreign demand split that boost in half. Compared to the final quarter of 2024, net exports exerted a 0.5 percentage point impact on the GDP growth. America’s confrontational use of tariffs hasn’t helped the U.S. economy but is hurting other economies even more.
Within Euroland’s largest economies, GDP last quarter grew 0.8% in Spain, 0.3% in Germany and Italy and 0.2% in France. Among other members of the bloc, GDP climbed 1.7% in Lithuania, 0.8% in Greece, 1.4% in Cyprus, and 0.9% in Portugal but fell 0.1% in Estonia and 3.8% in Ireland.
Price data reported this Friday around the world show
- An acceleration of Austrian wholesale price inflation to a 5-month high in February of 1.1%.
- Chilean consumer price inflation of 2.4% last month, down from 2.8% in January and at its slowest pace in 68 months.
- Taiwanese CPI inflation of 1.75% in February, a 10-month high.
- Estonian CPI inflation falling to a 17-month low in February of 3.1% after 3.7% in January and 6.1% in December.
- Vietnamese consumer price inflation rebounding to a 2-month high last month of 3.35%.
- South Korean CPI inflation matched January’s 2.0% reading.
Japanese international reserves jumped almost $16 billion last month. The Ministry of Finance revealed that no currency market intervention had been done last quarter.
The Swedish current account surplus last quarter was its smallest in three years, and the surplus was 29% narrower in 2025 than in 2024.
Britain’s Halifax house price index posted a 4-month high last month but only of 1.3%.
The National Bank of Kazakhstan‘s base rate was kept at 18.0% after the latest scheduled review of monetary policy. It’s been at that level since a trio of increases totaling 375 basis points administered in November 2024 and March and October of last year. Kazakhstani consumer price inflation has slowed from 12.9% last September to a 0-month low but still double-digit 11.7% in February. The bank targets inflation at 5%, so there is still a pressing need for policy restraint. Officials are hoping to curb inflation to perhaps as low as 9.5% this year and a range next year of 5.5-7.5%. If disinflation continues along such lines, sometime in the second half of 2026 is seen as the first likely possibility for the next interest rate reduction.
The U.S. labor market figures from February are considerably weaker than anticipated:
- 92k fewer jobs than in January versus an expected rise of around 60k. Most of the loss (86k) were in the private sector (healthcare down 28k and other private jobs down 58k).
- Downward revisions to December-January jobs totaling 69k, meaning that the February level of employment is about 220k less than had been assumed.
- The jobless rate was expected to stay at 4.3% but instead rose 0.1 percentage point to a 2-month high of 4.4%.
- Average hourly earnings posted a 0.4% monthly rise for the third time in four months, lifting their 12-month rate of increase to a 3-month high of 3.8%.
- Both labor market participation of 62.0% and the ratio of jobs to population (59.4%) were lower than in January.
Another U.S. data release today involved retail sales which dropped 0.2% in January and rose 3.2% compared to a year earlier. In the wake of these releases, the dollar climbed more, U.S. share price futures fell further, and the price of oil rose even higher.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Euroland GDP and employment, National Bank of Kazakhstan, U.S. labor situation report and retail sales
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