For the week 3/2-3/6

[Posted 4:30 PM ET, Friday]

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Edition 1,402

Kenneth S. Rogoff, a former chief economist at the International Monetary Fund and a professor at Harvard observed this week: “We’re in a very precarious period.”

A chess grandmaster and a student of history, Rogoff was skeptical of the consensus that the conflict in the Middle East will be short-lived.  He cited the assassination of the presumptive heir to the throne of the Austro-Hungarian Empire more than a century ago – an episode that set off a global conflagration.

“It’s a little bit like asking, when the Archduke Ferdinand got killed, what the macroeconomic consequences would be, and having no idea what was next,” Rogoff said.  “When World War I started, everyone thought it would end in a month.” [New York Times]

Yes, my adage of “wait 24 hours” was never more applicable than today.

This is no doubt one of the ten longest WIRs I’ve ever done (and most difficult to put together), and for good reason.  I do my best to capture the full week, day by day.

But I can’t help but do a little victory lap.

I posted last week’s column exactly 10 hours before President Trump’s video announcement at 2:30 AM ET, Saturday, that the war in Iran had begun.

Yet I opened last week talking about oil and, specifically, the importance of the price of diesel.  And boy, look at the developments on that front.

Last Friday, per AAA, the price of regular gas, nationwide, was $2.98 and diesel $3.75.

Today, regular gasoline at the pump is $3.32, diesel a whopping $4.33.  A year ago, the two were priced at $3.11 and $3.65.

Wait until you see Monday’s prices.

Last week, I reemphasized that the price of diesel “has everything to do with the cost of the goods you pick up at your grocery and drug stores.”

The Wall Street Journal had an editorial poo-poohing the impact of rising energy prices on inflation.

As the Journal opined, as usual citing Milton Friedman and his doctrine that “inflation is a monetary phenomenon,” they also said, “High oil prices don’t cause inflation, though they can be a symptom of it.”

Well, here’s what we know.  The cost of goods for you and me, and for many producers (think rising input costs) is going up…just how much remains to be seen, but in a week or so we’ll all see it in the cost of some of the goods we buy.  That’s just a fact.  I have a bit on the farm economy down below and you’ll see one example, fertilizer, which is already soaring.

Lastly, it was Sept. 27, 2012, that Israeli Prime Minister Benjamin Netanyahu claimed Iran was 90% on its way to having enough material to make a nuclear bomb.  I remember that speech to the United Nations vividly, as Netanyahu brought a cartoon to make his point.  Yup, nearly 14 years ago.

I’ve written for years that of course Iran, until last June’s Israeli-U.S. operation, was one quick step from taking its 60% enriched uranium up to bomb-grade levels*.  They could then detonate a crude device to show the world they have entered the nuclear club, but there isn’t a single expert in the field who has said they were close to being able to weaponize their nuclear material.

*With zero inspectors for the International Atomic Energy Agency on the ground in Iran, we have no idea where Tehran put its enriched uranium prior to last June, and whether or not it was in one of the three nuclear sites we hit.  Evidence gathered thus far says it wasn’t.

Today, however, I worry more about Vladimir Putin.  Recall, he has nukes next door to Ukraine in Belarus.

—

When I turned on my computer very early Saturday morning and saw 40 messages in my inbox when I would normally have about eight (this is at 5:00 a.m. on weekends, 4:00 a.m. weekdays), I have to admit I thought, “what happened….”

Of course, 35 of them concerned what President Trump had announced about 2 ½ hours earlier…that the U.S. and Israel had launched a major attack on targets across Iran.

Trump, in an 8-minute video that he posted on Truth Social, urged Iranians to take cover during the strikes, but then: “When we are finished, take over your government. It will be yours to take.”

Trump claimed Iran has continued to develop its nuclear program and plans to develop missiles to reach the U.S.

The first strikes of the attack appeared to target the compound home to Iran’s 86-year-old Supreme Leader Ayatollah Ali Khamenei in downtown Tehran.  Smoke could be seen rising from the Iranian capital.

Iran’s paramilitary Revolutionary Guard responded by launching a “first wave” of drones and missiles targeting Israel, but also its Gulf neighbors, which seemed to be a big mistake.

Trump’s address on Truth Social, in part:

“A short time ago, the United States military began major combat operations in Iran.  Our objective is to defend the American people by eliminating imminent threats from the Iranian regime. A vicious group of very hard, terrible people.  Its menacing activities directly endanger the United States, our troops, our bases overseas, and our allies throughout the world.

“For 47 years, the Iranian regime has chanted Death to America and waged an unending campaign of bloodshed and mass murder, targeting the United States, our troops and the innocent people in many, many countries.  Among the regime’s very first acts was to back a violent takeover of the U.S. Embassy in Tehran, holding dozens of American hostages for 444 days. In 1983, Iran’s proxies carried out the marine barracks bombing in Beirut that killed 241 American military personnel….

“Iran is the world’s number one state sponsor of terror, and just recently killed tens of thousands of its own citizens on the street as they protested.  It has always been the policy of the United States, in particular my administration, that this terrorist regime can never have a nuclear weapon… That is why in Operation Midnight Hammer last June, we obliterated the regime’s nuclear program at Fordo, Natanz and Isfahan. After that attack, we warned them never to resume their malicious pursuit of nuclear weapons, and we sought repeatedly to make a deal. We tried.  They wanted to do it. They didn’t want to do it. Again they wanted to do it. They didn’t want to do it.  They didn’t know what was happening.  They just wanted to practice evil. But Iran refused, just as it has for decades and decades.

“They’ve rejected every opportunity to renounce their nuclear ambitions, and we can’t take it anymore.  Instead, they attempted to rebuild their nuclear program and to continue developing the long range missiles that can now threaten our very good friends and allies in Europe, our troops stationed overseas, and could soon reach the American homeland. Just imagine how emboldened this regime would be if they ever had, and actually were armed with nuclear weapons as a means to deliver their message.

“For these reasons, the United States military is undertaking a massive and ongoing operation to prevent this very wicked, radical dictatorship from threatening America and our core national security interests.  We’re going to destroy their missiles and raze their missile industry to the ground.  It will be totally again obliterated. We’re going to annihilate their navy. We’re going to ensure that the region’s terrorist proxies can no longer destabilize the region or the world and attack our forces, and no longer use their IEDs, or roadside bombs as they are sometimes called, to so gravely wound and kill thousands and thousands of people, including many Americans. And we will ensure that Iran does not obtain a nuclear weapon.  It’s a very simple message. They will have a nuclear weapon.

“This regime will soon learn that no one should challenge the strength and might of the United States Armed Forces.  I built and rebuilt our military in my first administration and there is no military on earth even close to its power, strength of sophistication.  My administration is taking every possible step to minimize the risk to U.S. personnel in the region. Even so, and I do not make this statement lightly, the Iranian regime seeks to kill. The lives of courageous American heroes may be lost, and we may have casualties. That often happens in war.  But we’re doing this not for now. We’re doing this for the future. And it is a noble mission….

“To the members of the Islamic Revolutionary Guard, the armed forces and all of the police, I say tonight that you must lay down your weapons and have complete immunity. Or in the alternative, face certain death.  So, lay down your arms. You will be treated fairly with total immunity, or you will face certain death. Finally, to the great people of Iran, I say tonight that the hour of your freedom is at hand. Stay sheltered.  Don’t leave your homes. It’s very dangerous outside. Bombs will be dropping everywhere. When we are finished, take over your government. It will be yours to take. This will be probably your only chance for generations.

“For many years, you have asked for America’s help. But you never got it.  No president was willing to do what I am willing to do tonight. Now you have a president who is giving you what you want.  So let’s see how you respond.  America is backing you with overwhelming strength and devastating force.  Now is the time to seize control of your destiny, and to unleash the prosperous and glorious future that is close within your reach. This is the moment for action.  Do not let it pass.”

Israeli Prime Minister Netanyahu echoed the call for Iranians to overthrow the government, saying on Saturday that the time had come for the Iranian people “to cast off the yoke of tyranny and bring about a free and peace-seeking Iran.”

Hours later Saturday, Israel began reporting it had evidence that Khamenei and as many as 40 other military and political leaders had been killed in the initial strikes, which were designed to take advantage of CIA and Israeli-based intelligence that allowed the targeting of gatherings of leadership, thus the attacks in broad daylight.  Khamenei’s compound was obliterated.

President Trump, in a phone interview with NBC News, was asked about reports that Khamenei was killed in the airstrikes.

Trump responded: “We feel that that this a correct story.”

Trump said, “a large amount of leadership” of Iran had been killed, noting, “I don’t mean like two people.”

He also said “most” of Iran’s senior leadership is “gone,” including many people who make decisions.

Brig. Gen. Effie Defrin, an Israeli military spokesperson, said the strikes also killed other senior Iranian officials, including the commander of the Islamic Revolutionary Guard Corps, the defense minister, the head of Ayatollah Khamenei’s military bureau and the secretary of Iran’s Supreme National Security Council.

Defrin said Israel had struck targets where senior officials were believed to be gathered and would continue strikes in cooperation with the United States.

[President Trump said Sunday that 48 Iranian leaders had been killed.]

Trump on Truth Social…Feb. 28, 4:37 PM

“Khamenei, one of the most evil people in History, is dead. This is not only Justice for the people of Iran, but for all Great Americans, and those people from many Countries throughout the World, that have been killed or mutilated by Khamenei and his gang of bloodthirsty THUGS.  He was unable to avoid our Intelligence and Highly Sophisticated Tracking Systems and, working closely with Israel, there was not a thing he, or the other leaders that have been killed along with him, could do.  This is the single greatest chance for the Iranian people to take back their Country.  We are hearing that many of their IRGC, Military, and other Security and Police Forces, no longer want to fight, and are looking for Immunity from us.  As I said last night, ‘Now they can have Immunity, later they only get Death!’ Hopefully, the IRGC and Police will peacefully merge with the Iranian Patriots, and work together as a unit to bring back the Country to the Greatness it deserves.  That process should soon be starting in that, not only the death of Khamenei but the Country has been, in only one day, very much destroyed and, even, obliterated. The heavy and pinpoint bombing, however, will continue, uninterrupted throughout the week or, as long as necessary to achieve our objective of PEACE THROUGHOUT THE MIDDLE EAST AND, INDEED, THE WORLD!”

Trump on Truth Social…March 1, 12:25 AM

“Iran just stated that they are going to hit very hard today, harder than they have ever hit before.  THEY BETTER NOT DO THAT, HOWEVER, BECAUSE IF THEY DO, WE WILL HIT THEM WITH A FORCE THAT HAS NEVER BEEN SEEN BEFORE!”

The decimated Iranian regime warned earlier Sunday that it was preparing to launch “the most devastating offensive operation in the history of the Islamic Republic of Iran’s armed forces” against U.S. bases at any moment, state media announced.

The Islamic Revolutionary Guard Corps claimed it had targeted additional retaliatory strikes at U.S. bases in the Middle East on Sunday morning.

“The Armed Forces Will Execute a Different and Tough Step of Revenge,” the outlet quoted the IRGC.

The “sixth wave” of its “Operation True Promise 4” was reportedly delivering extensive missiles and drones on occupied bases in the region.

The Washington Post reported that President Trump launched Saturday’s wide-ranging attack after a weeks-long lobbying effort by both Israel and Saudi Arabia.

Saudi Crown Prince Mohammed bin Salman (MBS) made multiple private phone calls to Trump over the past month advocating a U.S. attack, despite his public support for a diplomatic solution, four sources told the Post.  Prime Minister Netanyahu continued his long-running public campaign for U.S. strikes against what he views as an existential enemy of his country.

The attack came despite U.S. intelligence assessments that Iran’s forces were unlikely to pose an immediate threat to the U.S. mainland within the next decade.

MBS, however, warned that Iran would come away stronger and more dangerous if the United States did not strike now, after amassing the largest military presence in the Middle East since the 2003 invasion of Iraq.

As the Post reported: “The Saudi leader’s complicated position reflected his desire to avoid Iranian retaliation against his country’s vulnerable oil infrastructure, weighed against his view of Tehran as Riyadh’s ultimate foe in the region, said those familiar with his thinking.  Iran, dominated by Shiite Muslims, and Saudi Arabia, led by Sunnis, have long had an intense rivalry that has generated proxy wars in the region.

Reaction…both in the U.S. and abroad….

Oman’s Foreign Minister Badr Albusaidi – who had been mediating this week’s U.S.-Iran nuclear talks – said he was “dismayed.”

“Active and serious negotiations have yet again been undermined,” he wrote on X, telling the U.S. that the strikes don’t serve their interests or that of global peace.  “I urge the United States not to get sucked in further.  This is not your war.”

Iran’s Foreign Minister Abbas Araghchi blasted the joint U.S. and Israel strikes as “wholly unprovoked, illegal, and illegitimate.”

In a post on X, he said that Trump has turned “America First into Israel First – which always means America Last.”

A joint statement by French President Emmanuel Macron, German Chancellor Friedrich Merz and UK Prime Minister Sir Keir Starmer also urged Iran to “seek a negotiated solution.”

The statement, posted on X by the German Embassy in London, said the countries had consistently urged the Iranian regime to end its nuclear and missile programs, refrain from “destabilizing activity,” and to stop the “appalling violence and repression against its own people.”

“We did not participate in these strikes,” the three leaders said, adding they are in contact with international partners, including the U.S., Israel and others in the region.

“We urge the Iranian leadership to seek a negotiated solution.  Ultimately, the Iranian people must be allowed to determine their future,” they said.

Saudi Arabia also condemned the retaliatory attacks on Bahrain, the UAE, Qatar, Jordan and Kuwait as it denounced in the “strongest terms blatant Iranian aggression.”

“The Kingdom [of Saudi Arabia] affirms its full solidarity with and unwavering support for the brotherly countries, and its readiness to place all its capabilities at their disposal in support of any measures they may undertake,” the foreign ministry said in a statement.

Russia condemned the U.S.-Israeli strikes on Iran, saying it was a “reckless move.”

“The attacks are once again being carried out under the guise of a renewed negotiation process,” its foreign ministry said, referring to the U.S.-Iran nuclear talks.

The Kremlin’s statement also called on the international community to assess what it called “irresponsible actions aimed at undermining peace, stability, and security” in the region.

Although the UK said it was not involved in the U.S.-Israeli strikes, Prime Minister Starmer said Saturday British planes “are in the sky today” in the Middle East as part of “coordinated regional defensive operations to protect our people, our interests and our allies.”

Previously, President Macron said the “outbreak” carries “grave consequences for international peace and security,” and warned that ongoing escalation is “dangerous for all.”

“France also stands ready to deploy the necessary resources to protect its closest partners at their request,” he added.

Kaja Kallas, the European Union’s top diplomat, called the latest developments “perilous.”

Australian Prime Minister Anthony Albanese said his country backed the U.S. “acting to prevent Iran from obtaining a nuclear weapon and to prevent Iran continuing to threaten international peace and security.”

Thanking Trump, Israeli Prime Minister Netanyahu reiterated his message that Iran “must not be armed with nuclear weapons that would allow it to threaten all of humanity.”

“Our joint action will create the conditions for the courageous Iranian people to take their destiny into their own hands.”

Hakeem Jefferies (D-N.Y.), House Minority leader, decried Iran strikes without the approval from Congress.  “Iran is a bad actor and must be aggressively confronted for its human rights violations, nuclear ambitions, support of terrorism and the threat it poses to our allies like Israel and Jordan in the region.”

But Jeffries said in a statement that outside “exigent circumstances,” the president “must seek authorization for the preemptive use of military force that constitutes an act of war.”

A senior Democratic lawmaker, Rep. Jim Himes of Connecticut, the top Democrat on the House Intelligence Committee said, “Everything I have heard from the administration before and after these strikes on Iran confirms this is a war of choice with no strategic endgame.”

He also expressed his concerns to U.S. Secretary of State Marco Rubio directly that military action in the region “almost never ends well for the United States.”

“It does not appear that Donald Trump has learned the lessons of history,” Himes said.

Ukrainian President Volodymyr Zelensky voiced support for the strikes on Iran, calling the country “an accomplice of Putin” for supplying Shahed drones and the technology for Moscow to produce them and other weapons to Russia during its four-year war against Ukraine.

Zelensky posted on X that the emphasis now should be to save as many lives as possible and prevent any expansion of the war.

“It is important that the United States is acting decisively. Whenever there is American resolve, global criminals weaken. This understanding must also come to the Russians,” he said.

Editorial / Wall Street Journal

“The U.S.-Israeli attack on Iran that began Saturday morning is a necessary act of deterrence against a regime that is the world’s foremost promoter of terrorism. It carries risks as all wars do, but it also has the potential to reshape the Middle East for the better and lead to a safer world.

“In his eight-minute video in the wee hours Saturday, President Trump laid out war aims that suggest a campaign of several days or weeks. He said he wants to ‘raze their missile industry to the ground’ and ‘annihilate their navy.’  He will destroy what’s left of Iran’s nuclear program and ‘ensure that the region’s terrorist proxies can no longer destabilize the region or the world and attack our forces.’

“Crucially, he called on the people of Iran to rise up and depose the theocratic regime that has terrorized and murdered them for 47 years.  ‘When we are finished’ bombing, Mr. Trump said, ‘take over your government. It will be yours to take. This will be, probably, your only chance for generations.’

“These war aims mean that Mr. Trump is enforcing the red lines he drew when the regime slaughtered its people as they protested in January.  He said he’d come to their aid, and now he has.  He also gave Iran’s Supreme Leader, Ayatollah Ali Khamenei, ample chance to strike a deal on nuclear weapons and its missile force, but the ayatollah refused and now he is reportedly dead.

“Mr. Trump has unduly criticized his predecessors for ‘forever wars’ in the Middle East, but he understands deterrence.  In Yemen, Iran in June, Venezuela and now in Iran again, he has taken action against manifest threats in his second term that Barack Obama and Joe Biden refused to take.  U.S. deterrence collapsed, and the world’s rogues took advantage.

“The scale of the military action means that the campaign can succeed even if the regime survives. Destroying Iran’s missiles and navy will make the region safer. The nuclear program will be difficult and expensive to rebuild, especially if the U.S. also continues to block Iran’s oil exports, its main revenue source.

“The larger gamble is regime change, and no one knows if this will happen.  Air campaigns alone rarely topple a dictatorship.  But if the U.S. and Israel take long enough to kill enough regime leaders, basij militia and Islamic Revolutionary Guard Corps, the chance for an internal coup or popular revolt might open up.  Even if the result is that less radical members of the IRGC take over, they are likely to be better than the ayatollahs.  Let’s hope the Mossad and CIA are on the ground trying to help the opposition.

“The biggest challenge to the military campaign may be at home more than in Iran.  Critics in the U.S. are already out in force, and they will exploit any American casualties.

“One cliché is that this is a ‘war of choice’ and there was no urgent threat to address.  But the regime and its proxies are weaker now than they have been since the end of the Iran-Iraq war in the 1980s. Would the critics prefer to wait until Iran has rebuilt its air defenses and missile stockpiles with the help of Russia and China?  Then more Americans would probably die….

“Another common alarm is that toppling the regime could lead to civil war in Iran and new conflicts among other powers in the region, such as Turkey and the Saudis. Events are impossible to predict, but it’s hard to imagine instability greater than what the revolutionary regime has promoted for nearly five decades.

“The most glib criticism is that the President who claims to be a peacemaker has contradicted himself by using force against adversaries four times in 13 months.  But Mr. Trump inherited a world in which an axis of U.S. adversaries had formed and was on the march. He is pressuring that axis at its weakest links – in Iran, Venezuela, and Cuba.  In doing so he is sending a message to China and Russia that the costs of testing Mr. Trump militarily are considerable.

“Our main concern is that Mr. Trump may stop too soon.  He will face political pressure from the Tucker Carlson right and perhaps Mr. Carlson’s allies in the Vice President’s circle, as well as from Democrats and most of the press.  This is especially true if there are U.S. casualties, which at some point there are likely to be. Mr. Trump was wise to warn about this in his video remarks, but he will have to keep making the case for his war aims and that achieving them takes time.

“Mr. Trump didn’t begin a war on Saturday. He is fighting back against an Iranian regime that has been waging war against the U.S., Israel and the West for decades.  The threat is the regime itself, and let’s hope it falls.”

Editorial / New York Times

“In his 2024 presidential campaign, Donald Trump promised voters that he would end wars, not start them.  Over the past year, he has instead ordered military strikes in seven nations.  His appetite for military intervention grows with the eating.

“Now he has ordered a new attack against the Islamic Republic of Iran, in cooperation Israel, and U.S. officials say they expect this attack to be much more extensive than the targeted bombing of nuclear facilities in June.  Yet he has offered no credible explanation for why he is risking the lives of our service members and inviting a major reprisal from Iran. Nor has he involved Congress, which the Constitution grants the sole power to declare war. He has issued a series of shifting partial justifications, including his sporadic support for the heroic Iranian people protesting their tyrannical government and his demand that Iran forswear its pursuit of a nuclear weapon.

“That Mr. Trump declared the Iranian nuclear program ‘obliterated’ by the strike in June – a claim belied by both U.S. intelligence and this new attack – underscores how little regard Mr. Trump has for his duty to tell the truth when committing American armed forces to battle.  It also shows how little faith American citizens should place in his assurances about the goals and results of his growing list of military adventures.

“Mr. Trump’s approach to Iran is reckless. His goals are ill-defined. He has failed to line up the international and domestic support that would be necessary to maximize the chances of a successful outcome.  He has disregarded both domestic and international law for warfare.

“The Iranian regime, to be clear, deserves no sympathy. It has wrought misery since its revolution 47 years ago: on its own people, on its neighbors and around the world. It massacred thousands of protesters this year. It imprisons and executes political dissidents.  It oppresses women, L.G.B.T.Q. people and religious minorities. Its leaders have impoverished their own citizens while corruptly enriching themselves. The have proclaimed ‘Death to America’ since coming to power and killed hundreds of U.S. service members in the region, as well as bankrolled terrorism that has killed civilians in the Middle East and as far away as Argentina.

“Iran’s government presents a distinct threat because it combines this murderous ideology with nuclear ambitions. Iran has repeatedly defied international inspectors over the years. Since the June attack, the government has shown signs of restarting its pursuit of nuclear weapons technology. American presidents of both parties have rightly made a commitment to preventing Tehran from getting a bomb….

“Iran, as David Sanger of The Times recently explained, ‘is going through a period of remarkable military, economic and political weakness.’  Since the Oct. 7, 2023, attacks, Israel has reduced the threats from Hamas and Hezbollah (two of Iran’s terrorist proxies), attacked Iran directly and, with help from allies, mostly repelled its response. The new recognition of Iran’s limitations helped give rebels in Syria the confidence to march on Damascus and oust the horrific Assad regime, a longtime Iranian ally. Iran’s government did almost nothing to intervene. This recent history demonstrates that military action, for all its awful costs, can have positive consequences.

“A responsible American president could make a plausible argument for further action against Iran. The core of this argument would need to be a clear explanation of the goals – whether they were limited to denying Iran a nuclear weapon or extended to more ambitious aims, like ending its support for terrorist groups – as well as the justification for attacking now.  This strategy would involve a promise to seek approval from Congress and to collaborate with international allies….

“Mr. Trump is not even attempting this approach.  He is telling the American people and the world that he expects their blind trust.  He has not earned that trust.

“He instead treats allies with disdain. He lies constantly, including about the results of the June attack on Iran.  He has failed to live up to his own promises for solving other crises in Ukraine, Gaza and Venezuela.  He has fired senior military leaders for failing to show fealty to his political whims.  When his appointees make outrageous mistakes – such as Defense Secretary Pete Hegseth sharing advanced details of a military attack on the Houthis, an Iranian-backed group, on an unsecured group chat – Mr. Trump shields them from accountability….

“Mr. Trump’s failure to articulate either goals or a strategy for a potential military intervention has created shocking levels of uncertainty about this attack. Americans do not know whether the president has ordered an attack in their name mostly to set back Iran’s nuclear program – or to go so far as toppling the government of Supreme Leader Ali Khamenei….

“If it is the more ambitious goal, Mr. Trump has offered no sense of why the world should expect this effort at regime change to end better than the 21st-century attempts in Iraq and Afghanistan.  Those wars toppled governments but understandably soured the American public on open-ended military operations of uncertain national interest, and they embittered the troops who loyally served in them.”

The Iranian Red Crescent Society said at least 555 people had been killed in the first two days of the U.S.-Israeli campaign.

Four U.S. soldiers had been killed as of Monday morning, the death toll in an attack on an operations center in Kuwait then rising to six. [There will be a “60 Minutes” story for sure down the road on whether the facility was properly fortified.]

Ten civilians were killed in Israel and there were five more deaths throughout the region.

In Pakistan, at least 23 were killed after demonstrators breached the outer wall of the American Consulate in Karachi.

Monday, Defense Secretary Pete Hegseth and Joint Chiefs Chairman Gen. Dan Caine spoke to the press for the first time since the operation began on Saturday and Hegseth said the U.S. chose to strike conventional Iranian military assets because they were part of Tehran’s plan to build nuclear weapons.

“Iran was building powerful missiles and drones to create a conventional shield for their nuclear blackmail ambitions,” he said. “Our bases, our people, our allies – Iran had a conventional gun to our head as they tried to lie their way to a nuclear bomb.”

The administration’s claims that Iran had restarted its nuclear program, had enough material to build a bomb, and that it is developing long-range ballistic missiles with the ability to strike the United States, are subject to debate.  Last year, the Defense Intelligence Agency assessed that Iran has no such missiles, and that it would take a decade to amass 60 of them.

Gen. Caine confirmed that the overnight downing of three F-15E fighters was not the result of enemy fire, though he would not elaborate.

An hour before the press conference began, U.S. Central Command officials confirmed the jets were accidentally shot down by Kuwaiti forces.

Hegseth gloated over the operation’s success and called on Iranians to “take advantage” oof the country’s power vacuum.

“Turns out the regime who chanted ‘death to America’ and ‘death to Israel’ was gifted death from America and death from Israel,’ Hegseth said. “This is not a so-called regime-change war, but the regime sure did change.”

After the June strikes, Hegseth and other administration officials repeatedly said Iran’s nuclear capabilities were “obliterated.”  On Monday, Hegseth said that Iran’s refusal to negotiate a deal that would end its nuclear ambitions required further strikes.

“The former regime had every chance to make a peaceful and sensible deal,” he said.  “Tehran was not negotiating. They were stalling, buying time to reload their missile stockpiles and restart their nuclear ambitions.”

He did not mention the 2015 nuclear deal that Trump scuttled during his first term in office.

Trump has offered several possible timelines for the operation, including telling the Daily Mail on Sunday that it could take “four weeks or less.”

When a reporter asked Hegseth about the timeline, the secretary called it a “typical NBC, sort of gotcha-type question.”

“So you can play games about four weeks, five weeks – he has all the latitude, and I’m glad he does, because there’s no better communicator than our president at expressing those things,” he said.

Gen. Caine said that more tactical aviation assets are heading into the Middle East, adding to the largest U.S. buildup in the region since the Global War on Terror.

“We’re just about where we want to be in terms of total combat capacity,” he added.

Iran’s security chief, Ali Larijani, said Tehran “will not negotiate with the United States.”

—Back to President Trump, he gave a slew of interviews to the media Sunday and Monday. In a brief telephone interview with the New York Times, Trump offered several seemingly contradictory visions of how power might be transferred to a new government – or even whether the existing Iranian power structure would run that government or be overthrown.

Among the options he suggested was an outcome similar to what he engineered in Venezuela, in which only the top leader was removed and much of the rest of the government remained in place, but newly willing to work pragmatically with the United States.

“Everybody’s keeping their job except for two people,” Trump said of the outcome there.

But the assault on Iran is considered far more complex and riskier than the operation to capture Nicolas Maduro, in part because Iran’s leadership oversees extensive military abilities and because of deep divides in Iranian society over the country’s course.  And unlike Venezuela, Iran has sustained an active nuclear program.

Asked how long the United States and Israel could keep up this level of attacks, he responded: “Well, we intended four to five weeks.”

“It won’t be difficult,” Trump added.  “We have tremendous amounts of ammunition.  You know, we have ammunition stored all over the world in different countries.”

He made no mention of the Pentagon’s concerns that the conflict could further deplete reserves that military strategists have said are critical to retain in scenarios like a conflict over Taiwan or Russian incursions into Europe.

Trump said in the Times interview that he had “three very good choices” about who could lead Iran, though he declined to name them.  Earlier on Sunday, Iran’s top national security official, Ali Larijani, said that an interim committee would run the country until a successor to the supreme leader was chosen.

When pressed on his plans for a transition of power, Trump said he hoped Iran’s elite military forces – including hardened officers of the Islamic Revolutionary Guard Corps who have held substantial influence and profited from the existing regime – would simply turn over their weapons to the Iranian populace.

“They would really surrender to the people, if you think about it,” he said.

It was those same security forces – in particular, the Basij, which organizes local militia – that opened fire on street protesters in January and killed thousands.

So Trump told the Times he hoped Iranian troops would turn over their weapons to the people.

He told the Washington Post the attacks are aimed at regime change and giving freedom to the Iranian people.

He told Axios the military strikes are intended to stop Iran’s nuclear program and to keep it from building missiles.

He told The Atlantic he plans to talk to Iran’s new leaders but that the previous, now-deceased leadership “waited too long” and “played too cute.”

And he told the Daily Mail, “It’s always been about a four-week process – as strong as it is, it’s a big country, it’ll take four weeks, or less,” a window he’s now telling everyone is the case.

According to a Reuters poll taken Sunday, just 27% of Americans approved of the strikes on Iran, while 43% disapproved and 29% were not sure.

—Lebanon’s Health Ministry said 31 people were killed in Israeli strikes across the country overnight Sunday, including 20 who died in the southern suburbs of Beirut.  The ministry said 149 people were wounded in strikes in southern Lebanon and in the southern areas of the capital.

The Israeli military said it hit dozens of targets belonging to Hezbollah in Lebanon after Hezbollah, in retaliation for Khamenei’s assassination, targeted Israel, heightening concerns about the opening of another front in the conflict.

–When I turned on the computer at 4:00 a.m. ET Tuesday morning it sure looked ugly in the global markets as the war in Iran spread, with Israel sending troops into Lebanon after Hezbollah said they are ready for open war.

The State Department closed its embassies in Saudi Arabia and Kuwait Tuesday after Iranian drone attacks struck those facilities. 

Amazon said some of its data centers in the UAE and Bahrain were damaged by drone strikes, disrupting cloud services and making a recovery “prolonged.”

A strike on the UAE facility marks the first time a major U.S. tech company’s data center has been disrupted by military action; raising questions around Big Tech’s pace of expansion in the region.

Oil soared again as Iran said the Strait of Hormuz was closed after Iran hit a number of tankers in retaliation for the U.S.-Israeli airstrikes and the killing of Ayatollah Khamenei, with supertanker costs in the Middle East hitting all-time highs, according to shipping data and industry sources on Tuesday.

And then there was the issue of tens of thousands of American civilians in the Gulf region.

“We feel abandoned,” retired U.S. Army Maj. Gen. Randy Manner told CNN Monday amid the abrupt and unplanned evacuation advisories.  The State Department is “in survival mode, quite frankly, because as we know, the administration reduced their budgets by almost one half over the past year,” he said.  “So this is a difficult situation for people who are not used to being in a combat situation. And that, of course, is, quite frankly, probably 99% of the travelers that are here.”

The U.S. Embassy in Jerusalem announced it “is not in a position at this time to evacuate or directly assist Americans in departing Israel,” though the British, Germans, Chinese and Indians are all sending planes to evacuate their citizens from the region.

President Trump said on Tuesday he ordered U.S. forces to join Israel’s attack on Iran because he believed Iran was about to strike first, contradicting the rationale offered a day earlier by Secretary of State Rubio for how the war began.

Rubio told reporters on Monday that the U.S. launched the attack because of fears that Iran would retaliate in response to planned Israeli action against Tehran.

“We knew that there was going to be an Israeli action; we knew that that would precipitate an attack against American forces, and we knew that if we didn’t preemptively go after them before they launched those attacks, we would suffer higher casualties,” Rubio said.

Trump then rejected suggestions that Israel pushed the U.S. into the conflict, as his administration gave varying accounts and faced criticism from some supporters and Democrats who accused him of launching a “war of choice.”

“I might have forced their (Israel’s) hand,” Trump told reporters in the Oval Office as he met with German Chancellor Friedrich Merz.  “We were having negotiations with these lunatics, and it was my opinion that they were going to attack first.  If we didn’t do it, they were going to attack first.  I felt strongly about that.”

Rubio, pressed on Tuesday about his prior comment during a visit to Capitol Hill, told reporters: “The bottom line is this: The president determined we were not going to get hit first.  It’s that simple, guys.”

Two senior Trump administration officials held a conference call on Tuesday with reporters to describe events leading up to military operations, in particular the Geneva talks with Iranian officials held by U.S. envoys Steve Witkoff and Jared Kushner and mediated by Oman.

The two officials said Witkoff and Kushner repeatedly pressed Iran to give up uranium enrichment.  Iran presented a plan that would allow the Iranians to enrich uranium at higher percentages at the Tehran Research Reactor in northern Iran, they said.

The U.S. envoys felt the Iranians were engaging in delay tactics, according to the officials.

“They were unwilling to give up the building blocks of what they needed to preserve in order to get to a (nuclear) bomb,” one official said.

The envoys reported back to Trump, telling him it might have been possible to get a nuclear agreement similar to the one that former President Barack Obama’s team and world powers negotiated with Iran in 2015 but that it would take months.

Trump ordered U.S. forces into action the next day, and the strikes began on Saturday.

Several prominent conservative commentators ratcheted up their criticism of the Iran attacks, arguing Rubio’s comments indicated that Israel, not the Trump administration, was calling the shots.

Megyn Kelly told her audience that she had doubts about Trump’s decision to strike Iran.

“Our government’s job is not to look out for Iran or for Israel.  It’s to look out for us. And this feels very much to me like it is clearly Israel’s war,” Kelly said in remarks aired prior to Rubio’s comments.

The midterms loom large.

Wednesday…the United States and Isreal hit Iran’s capital and other cities in multiple airstrikes. The Islamic Republic responded with missile barrages and drone attacks on Israel and across the region.

U.S. Navy Adm. Brad Cooper, the head of U.S. Central Command, said Iran has launched more than 500 ballistic missiles and 2,000 drones so far.  He described the American strikes in the opening hours of the campaign as “nearly double the scale” of the initial attacks during the 2003 U.S.-led invasion of Iraq.

There was a mysterious story that an Iranian warship was sunk off the coast of Sri Lanka, with Sri Lankan authorities saying on Wednesday they had rescued 32 people who were on board and recovered several bodies from the sea.

Sources in Sri Lanka’s navy and defense ministry said the vessel had been attacked by a submarine and at least 101 people were missing in the incident that took place off Sri Lanka’s Indian Ocean coast.

The defense sources said it was unclear who attacked the ship.

We then learned from Defense Secretary Hegseth that a U.S. submarine sank it and that at least 80 died in the attack.  Pentagon officials said it was the first for an American submarine since World War II.

Hegseth also said at the briefing that more forces, including jet fighters and bombers, will soon arrive in the region.  He added that the U.S. “will take all the time we need to make sure that we succeed.”

Senate Republicans voted down an effort Wednesday to halt President Trump’s war against Iran, 47-53.  The vote fell mostly along party lines, though Republican Sen. Rand Paul (Ky.) supported it and Democratic Sen. John Fetterman (Pa.) opposed.

The legislation, known as a war powers resolution, gave lawmakers an opportunity to demand congressional approval before any further attacks are carried out.  The vote forced them to take a stand.

The House rejected the resolution Thursday, 212-219.

Thursday, Day Six, Arab states across the Middle East – as well as Israel – reported interceptions of Iranian missiles and drones, with Qatar telling residents to remain indoors due to the high level of threat.  Tehran said it struck an oil tanker in the Persian Gulf, underlining the risk to shipping in the energy-rich region.

Israel continues to carry out waves of airstrikes on the Iranian capital, hitting military and intelligence assets, following attacks on Hezbollah in Lebanon.  At least 1,100 people have died in Iran so far.

Iran’s Islamic Revolutionary Guards Corp said retaliatory attacks will intensify in coming days, according to the Nour news agency.   President Trump was similarly defiant on Wednesday, saying the U.S. is “doing very well on the war front.”  The White House said it was close to “complete and total control of Iranian airspace.”

Iran pledged to respond to the sinking of its warship off Sri Lanka, saying the U.S. would “bitterly regret” torpedoing the warship.  A religious leader called for “Trump’s blood.”

Ayatollah Abdollah Javadi Amoli, in one of the few clerical statements so far from Iran, called on state television for “the shedding of Zionist blood, the shedding of Trump’s blood.”

The Islamic Republic was yet to appoint a new supreme leader, with a decision to be made “as soon as possible,” Iran’s semi-official Mehr reported.

Israel’s military is targeting the Iranian police state that brutally suppressed protests and killed thousands of people, with the hope of clearing the way for a popular revolt to overthrow the regime.

Israeli airstrikes on Wednesday carried out a wave of attacks targeting people responsible for internal security, from members of the Basij paramilitary force to senior intelligence officials, the Israeli military said.  Israel, along with the U.S., has also hit some domestic-security agencies, including the Tehran headquarters of the IRGC.

The Revolutionary Guard and the Basij were the main perpetrators of the bloody crackdown against antigovernment protesters in January that by most estimates killed at least 30,000, in one of the deadliest acts of political crackdowns worldwide in decades.  Police units and intelligence services also suppressed rallies and arrested protesters en masse.

Israel’s actions, looking to do enough damage to the police state so that the people can take over, seems unlikely…my opinion.

—There has been a concern that the U.S. is running out of ammo…munitions…and its allies lack air defenses for a long fight.  President Trump needs to go to Congress and ask for money to expand U.S. arsenals.

But as the Wall Street Journal editorial board opined:

“(Those) who say the U.S. should hoard its air defense for another day are wrong for at least two fundamental reasons. The first is about the nature of the Iranian threat.

“Iran is a dedicated enemy of the U.S., but it is also a nesting doll inside a larger challenge from Xi Jinping and Vladimir Putin.  If you doubt it, read the recent press reports that Beijing may sell Tehran sophisticated antiship missiles that could target American aircraft carriers and destroyers.  Beijing is playing in every region in the world.

“The second error is about the nature of deterrence, because political will matters as much as military power.  The U.S. can choose to build more weapons with long-term contracts, bulk ordering scarce parts, and co-production with allies. Ditto for shifting some of the portfolio to cheaper interceptors in development at defense tech companies.

“But it doesn’t matter how many missies are in the cabinet if our enemies conclude America won’t accept risk to defend itself.  Secretary of State Marco Rubio is right to suggest that the U.S. can’t let Iran build 100 missiles a month while we build six interceptors.  The sleeper risk to U.S. weapons supplies is retreating from the fight before Iran’s capacity to menace the world is eliminated.”

By week’s end, the death toll had risen to at least 1,300 Iranians after more than 3,600 U.S. and Israeli military strikes across the country.

Iran’s retaliatory strikes have targeted the UAE more than any other country, accounting for 1,138 of Tehran’s 2,171 drone and missile attacks, according to the Institute for the Study of War as of Thursday.  There were scores more attacks on the Gulf states today from Iran.

Israel had killed at least 200 people since Saturday in Lebanon, al-Jazeera and the New York Times report.

President Trump on Truth Social, Friday, 8:50 AM:

“There will be no deal with Iran except UNCONDITIONAL SURRENDER!  After that, and the selection of a GREAT & ACCEPTABLE Leader(s), we, and many of our wonderful and very brave allies and partners, will work tirelessly to bring Iran back from the brink of destruction, making it economically bigger, better, and stronger than ever before.  IRAN WILL HAVE A GREAT FUTURE. ‘MAKE IRAN GREAT AGAIN (MIGA!).’  Thank you for your attention to this matter! President DONALD J. TRUMP”

Iranian Foreign Minister Araghchi said Iran was not seeking negotiations.

—Peggy Noonan / Wall Street Journal

“Thoughts on Iran have to begin with the awe we feel, again, for the U.S. military. Its professionalism, cool and courage are impressive and inspiring. And we must give Donald Trump his due.  His decision was bold, he took a big swing.

“The end of Ayatollah Ali Khamenei and scores of his colleagues-in-hellish-rule isn’t bad news for the world but good, as is what looks to be inevitable damage to or even possible ending of its nuclear program.

“You’ve got to hope it’s all going to succeed, that it will make America’s position an inch or two better in the world and not an inch or two worse, that a violent regime will be replaced by something better, safer….

“The argument for the war is serious: For almost half a century, Iran’s government has been causing violent trouble in the world. It has been increasing its production of weaponry, it has long vowed death to America and Israel, and, after the June bombing of its nuclear installations and the crushing of December and January’s street protests, it is seriously weakened. So move….

“(But) it’s hard to imagine the regime’s death throes, if it comes to that, will be pretty.

“It isn’t fear-mongering to think about potentially harrowing repercussions to the U.S. actions, which could include a widening war in the Mideast, a broadening and escalation of hostilities, the dragging in of U.S. allies, a drain on our armaments becoming a provocation to potential adversaries, a terrorist strike or strikes from Iranian operatives or nonstate actors, oil spikes, and energy shock….

“(Mr. Trump) has given many reasons for his decisions.  This is not reassuring. He’s offered varying explanations for going forward – he had a feeling, or Israel was going to move anyway – and in the end whatever happens is what he’ll say he wanted.  If there’s regime change, that was his intention all along. If there isn’t, it wasn’t what he was looking for….

“It is possible that thinking is unimaginative, too dead to the urgency of the moment. The fact is you only know on something like this in retrospect. Right now we’re waiting for the ‘in retrospect’ to occur.  That is an uncomfortable place to be in.”

—Just a word on the deceased Supreme Leader Ayatollah Ali Khamenei. He took power in 1989 and built Iran into a formidable military and political power.  His predecessor, Ayatollah Ruhollah Khomeini, had left the nation bankrupt and humiliated, following an eight-year war with neighboring Iraq, one of the deadliest global conflicts of the past century.

“When Khomeini died, the Islamic Republic was a dumpster fire,” said Afshon Ostovar, associate professor at the Naval Postgraduate School in Monterey, Calif.  “Khamenei, through guile and persistence, was able to achieve something pretty miraculous. He turned Iran into a regional power that controlled a pretty wide geography.”

An instrument for Khamenei’s expansion was a network of armed groups in the Middle East that fought at Iran’s behest, pinning down foes and providing Iran with strategic space to prevent direct enemy attacks.  At the height of Iran’s expansion, it controlled a land corridor running from Tehran through Iraq and Syria to Lebanon, through which it could transport arms and personnel.

But this all began to change, and rapidly so, with what first appeared to be a victory: the attack led by Hamas, its Palestinian ally, on Israel on Oct. 7, 2023.  The deadliest single assault ever on Israel, it was heralded by Tehran as a testament to the strength of the alliance it had built from scratch, and brandished Khamenei’s self-styled status as a flag bearer for the Palestinian people.

But the war Israel then unleashed in response, in Gaza and beyond, set in motion a cascade of events that greatly diminished Iran’s regional power and left Khamenei exposed.   Hezbollah and Hamas were largely destroyed, and a series of Israeli strikes on Iran that killed some of its highest-ranking commanders, upended the entire Middle East.

Khamenei secured his rule at home by building fierce loyalty among those who supported him, and his surveillance state suppressed those who didn’t.

Iran has delayed the naming of a successor out of security concerns, following American and Israeli comments that the new leader could also be targeted, according to Iranian officials.

Ayatollah Khamenei’s son, Mojtaba Khamenei, 56, has emerged as a top contender for the post, but once his name began to circulate, the United States said he would not be acceptable and could be eliminated.

“They are wasting their time,” President Trump told Axios on Thursday, adding Mojtaba is “a lightweight” and an “unacceptable” choice.

“I have to be involved in the appointment, like with Delcy in Venezuela,” Trump said, referring to Delcy Rodriguez, who succeeded Nicolas Maduro.

Israel’s defense minister, Israel Katz, said in a social media post on Wednesday that any leader appointed by Iran to succeed Khamenei would be “an unequivocal target for elimination.”

The appointment of Mojtaba Khamenei would signal the continuity of hard-line conservative rule.  He has close ties to the IRGC.

—French President Emmanuel Macron in a speech this week said France is going to boost its nuclear arsenal and extend the deterrent to cover other European countries, in a major development of its nuclear defense policy.

Macron explained the changes as the response to an increasingly unstable strategic environment.

“The next 50 years will be an era of nuclear weapons,” he said.

Speaking to naval officers in front of a nuclear submarine at a base in Brittany, he said the number of French nuclear warheads would be increased from their current level of around 300.

He announced the launch in 2036 of a new nuclear-armed submarine to be called The Invincible.

Macron said eight other European countries – the UK, Germany, Poland, the Netherlands, Belgium, Greece, Sweden and Denmark – had agreed to participate in a new “advanced deterrence” strategy.  Writing on X, Polish Prime Minister Donald Tusk referenced the decision, saying: “We are arming up together with our friends so that our enemies will never dare to attack us.”

Macron said the eight European countries could take part in exercises of France’s air-launched nuclear capacity – and also host air bases where France’s nuclear bombers could be stationed, allowing France’s Strategic Air Forces (FAS) to “spread out across the depth of the European continent…and thus complicate the calculations of our adversaries,” the president said.

—

Wall Street and the Economy

We had a jobs report for February this morning and it was not good, minus-92,000 jobs, when a gain of 60,000 was expected, following January’s 126,000 (revised) figure.  Average hourly earnings rose 0.4%, 3.8% year-over-year, which is good.  The unemployment rate ticked up to 4.4%.

Yet another reason why the Federal Reserve just needs more data before it could consider cutting rates, including at the upcoming March 17-18 gathering of the Open Market Committee.  January was solid, February putrid.  And now we have an oil shock.

The ISM readings for February were solid.  Manufacturing 52.4 (50 the dividing line between growth and contraction), with the service sector print of 56.1 the best since Aug. 2022.

January retail sales were down 0.2%, as expected.

JPMorgan Chase CEO Jamie Dimon warned this week that inflation could become a “skunk at a party” for the U.S. economy.

“There’s some risk there’s more inflation than people think, and that could be like a skunk at a party if that ever happens,” Dimon said Monday in a CNBC interview. “Hopefully it doesn’t happen.”

Now this was Monday, but with the war having started, Dimon commented: “This right now will increase gas prices a little bit, and again, if it’s not prolonged there’s not going to be a major inflationary hit.  If it went on for a long time, that would be different.”

Since Dimon spoke, gas prices have increased a lot and the figures next Monday will look uglier.

Goldman Sachs Group Chairman David Solomon said he’s been surprised by the “benign” reaction in financial markets to the Middle East conflict, adding that it will take weeks to understand more about the situation.

“I look at the market reaction and I’m actually surprised,” Solomon said at a conference in Sydney, Australia Wednesday morning. [The timing of comments these days is important for context.] “The market reaction has been benign.”

“It’s very hard to speculate because there is so much that is unknown at this point,” Solomon said. “It’s going to take a couple of weeks for markets to really digest the implications,” he said.

Solomon also addressed the tumult in the $1.8 trillion private credit market, saying that while there have been a “handful” of idiosyncratic issues, that doesn’t mean the overall credit quality is a worry.

“If you actually look at the underlying credit performance in a lot of these portfolios, up to this point you haven’t seen a broad deterioration,” he said.

Solomon said the U.S. economy is holding up well, which is making it hard to identify areas where credit risk might be excessive.

—On the trade front, which has taken a back seat with the war and the energy price spike, nonetheless, Spanish Prime Minister Pedro Sanchez delivered a strong rebuttal to President Trump’s threat to end trade with Spain by declaring his opposition to war and what he called the “breakdown of international law.”

In a 10-minute televised address Sanchez, a Socialist, reflected on the wars in Ukraine and Gaza as well as the Iraq War more than 20 years ago and said, “the government’s position can be summed up in four worlds: No to war.”

Trump on Tuesday threatened to impose a full trade embargo on Spain in response to Madrid’s refusal to allow the U.S. to use the jointly run baes in the country for strikes on Iran.

“Spain has been terrible,” Trump said. “We’re going to cut off all trade with Spain. We don’t want anything to do with Spain,” he added.

German Chancellor Merz was in the Oval Office with Trump when he made the statement and Merz said later he had told Trump very clearly that he could not conclude a separate agreement with Germany or all of Europe but not with Spain.

Next week is a busy one on the data front, with readings on consumer prices, the Fed’s preferred inflation barometer, the PCE, housing data and a second look at fourth-quarter GDP.

The Atlanta Fed’s GDPNow barometer for first-quarter growth fell to 2.1% this week.

Freddie Mac’s 30-year fixed-rate mortgage ticked up to 6.00%.

Europe and Asia

Lots of data from the eurozone this week.  S&P Global/Hamburg Commercial Bank released the PMIs for the region for February, with manufacturing at 50.8, services 51.9.

Germany: 50.9 manufacturing., 53.5 services
France: 50.1 mfg., 50.0 services
Italy: 50.6 mfg., 52.3 services
Spain: 50.0 mfg., 51.9 services
Ireland: 53.1 mfg., 51.8 services
Netherlands: 50.8 mfg.
Greece: 54.4 mfg.

UK: 51.7 mfg., 53.9 services

Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank:

“This seems to be a broad-based recovery in the eurozone manufacturing sector, with six out of the eight surveyed countries now in growth territory.  [Ed. Austria was at 49.4.]  Germany’s industry, which experienced a big jump in the headline PMI, has returned to growth for the first time in three-and-a-half years.  Among the four economic powerhouses of Europe, Germany is showing the fastest growth rate in manufacturing. To be sure, we are not talking about a boom, but a moderate recovery coming from a low activity level amid persisting structural challenges like high energy prices, intense competition from China and U.S. tariffs, among other things.”

Eurostat also released the following for the euro area.

A flash reading on February inflation came in at 1.9%, up from 1.7% in January, and 2.3% Feb. 2025. Ex-food and energy the figure is 2.3%.

Industrial producer prices in January increased by 0.7% over December, but decreased by 2.1% from a year ago.

Retail trade in the month of January decreased by 0.1% compared with December, and increased by 2% year-over-year.

Euro area unemployment in January was 6.1%, down from 6.3% a year earlier.

China’s National Bureau of Statistics released the official manufacturing PMI for February, just 49.0 vs. 49.3 prior, services 49.5 vs. 49.4.

But the private RatingDog manufacturing reading was 52.1 vs. 50.3, services a strong 56.7 vs. 52.3.  So, an interesting divergence between the NBS (large state-owned enterprises) vs. RatingDog’s survey of small- and medium-sized businesses.

The big news on the week, however, came out of the National People’s Congress, or “two sessions,” the biggest annual political gathering, and China cut its annual economic growth target to a range of 4.5%-5%, the lowest expansion goal since 1991 as it grapples with challenges both at home and abroad.

It is the first time the target has been lowered since it was cut to “around 5%” in 2023.

China aims to reshape its economy as it faces issues like weak consumption, a shrinking population, an ongoing property crisis, global trade tensions and an energy crunch due to the Iran war.

Japan’s February PMI for manufacturing was a solid 53.0 vs. 51.5 prior, services 53.8.

Street Bytes

—It wasn’t just oil, but private credit woes, and investment vehicles surrounding same, which the above-mentioned Jamie Dimon long warned about, that led to the market’s convulsions this week; the Dow Jones falling 3.0% to 47501, the S&P 500 2.0% and Nasdaq 1.2%.

Giant BlackRock limited withdrawals from one of its flagship private credit funds for the first time and the shares fell 7% today.

—U.S. Treasury Yields

6-mo. 3.61%  2-yr. 3.56%  10-yr. 4.14%  30-yr. 4.77%

It was a bloody week in the global bond market due to the oil shock.  While the yield on the U.S. 10-year rose 18 basis points to 4.14% from a week ago (the 2-year yield surging 18 bps), across the pond, the German 10-year went from 2.64% to 2.86%, the British 10-year from 4.23% to 4.63%, and the Italian 10-year from 3.27% to 3.62% in just one week.

–For those of us following the markets and the situation in Iran, the Gulf Region and the Strait of Hormuz, we woke up Wednesday to a more stable energy market, though while West Texas Intermediate (WTI) traded in the $74-75 range (after hitting $77 early Tuesday), some major problems remained.

Government pledges to safeguard trade routes may have tempered immediate supply fears, but commercial traffic through the critical Strait of Hormuz remains effectively closed, with the Iranian Revolutionary Guard Corps (IRGC) warning it would “set ablaze” any vessel attempting transit.

Now you can say, oh, the IRGC’s capabilities have been severely degraded, but at least three ships were hit by Tuesday and it’s still extremely risky for shipowners.

“Nothing is sure and we need immediate clarity,” said Khalid Hashim, managing director of Precious Shipping Pcl, a Thai firm that owns bulk carriers.  “Lives are at risk, cargoes are at risk, ships are at risk.  We need immediate cover that protects us from all this,” he said.

The company currently has some ships in the Persian Gulf and has been struggling to secure war-risk cover before they proceed.  The world’s largest insurance mutuals have withdrawn such insurance cover for ships in the area.

With ships unable or unwilling to transit the strait, producers cannot export, supertanker costs are skyrocketing, and storage at many Persian Gulf refineries is filling up fast.

Iraq, the biggest Middle Eastern oil producer after Saudi Arabia, has already begun huge cuts to output and faces even deeper reductions, in the clearest sign yet of stress on suppliers in the region.

[If oil producers reach the limits of their storage sites, or “tank tops” in the industry parlance, they have to curtail production.]

Also, while President Trump gave instructions to the government to offer political risk insurance at reasonable rates, that doesn’t just happen with the snap of a finger.

And despite the president’s promise of U.S. naval escorts, the Navy wasn’t prepared for this.

As Warren Patterson, head of commodities strategy at ING Groep NV, noted, while Trump’s moves are welcome news, “Naval escorts would be helpful, but again, this effort will take time.  Naval escorts will be sitting ducks to Iranian attacks.” [Or other terrorists you just know are flooding into the region.]

Iran has at least six types of anti-ship missiles, with a maximum range of 75 miles, which doesn’t allow them to hit U.S. Navy ships, which operate far from Iran’s shores.  But with the Strait of Hormuz, which is less than 25 miles wide at its narrowest point, any U.S. Navy vessels would be in play, though the ships are equipped with a variety of defenses meant to stop or evade ballistic missiles, torpedoes and other weapons.

As for China, which is particularly vulnerable to energy price spike and supply disruptions, ditto Japan and South Korea, over the past several years, Beijing has been stockpiling oil at record rates, preparing it for just such a crisis.  The country has now stored up 1.26 billion barrels of oil after going on a particularly big spending-spree last year, according to Rystad Energy. That’s enough oil to last 120 days at the current pace of consumption, Rystad says.

If China had been forced to quickly buy oil from other sellers in a strained market, it could have led to a bidding war, causing prices to spike much more dramatically.

About 38% of China’s imports flow through the Strait of Hormuz, according to Rystad.

On Thursday, China then ordered its major refiners to halt diesel and gasoline exports.

After Wednesday’s brief pause in the price of crude, we had a huge spike over Thursday and Friday to $91+ on West Texas Intermediate, part of the biggest weekly jump since 2022 (perhaps 1985, though I don’t have time to check the figures some are reporting).

Shipping through the Strait remained virtually closed; impacting about 20 million barrels of oil and petroleum products per day.

Producers began to shut in production, tightening markets further.

Qatar expects all Gulf energy producers to shut down exports within weeks if the conflict continues and drives oil to $150 a barrel, the country’s Energy Minister Saad al-Kaabi told the Financial Times in an interview published today.

Qatar had halted its production of LNG Monday, which also represents about 20% of global supply.

—Nvidia plans to unveil a new processor specially tailored to help OpenAI and other customers build faster, more efficient tools, a major shake-up to its business that is poised to reset the AI race.

The company is designing a new system for “inference” computing, a form of processing that allows AI models to respond to queries, according to people familiar with the plans.  The new platform, set to be revealed at Nvidia’s GTC developer conference in San Jose next month, will incorporate a chip designed by the startup Groq, the people said.

Inference computing has been the subject of industry competition. Rivals Google and Amazon have designed chips that compete with Nvidia’s flagship systems. And the explosion of autonomous coding in the tech workforce has created demand for new chips that can more efficiently handle complex AI- related tasks.

OpenAI has agreed to become one of the largest customers of the new processor, some of the people said, representing a major win for Nvidia.  The ChatGPT maker alluded to the new processor when it announced it would sign up for a major purchase of “dedicated inference capacity” from Nvidia, alongside a $30 billion investment from the chip giant. It also signed a major new deal to use Amazon’s Trainium chips.

“AI inference computing is divided into two main tasks: pre-fill, or the process by which a model interprets a user prompt, and decode, by which a model generates a response, one word at a time.  Pre-fill is usually the faster of the two processes, while decode tends to be especially slow, for larger AI models.

“Coding applications have emerged as one of the most important – and profitable – uses of enterprise AI, with Anthropic’s Claude Code generally regarded as the market leader.  But Anthropic relies primarily on chips designed by Amazon Web Services and Alphabet’s Google Cloud unit, rather than by Nvidia, to power its models.” [Berber Jin, Robbie Whelan and Kate Clark / Wall Street Journal]

–Speaking of Anthropic, the Trump administration’s declaration that the company would be cut off from all government contracts shook the tech industry late last Friday, hardening political and cultural battle lines across Silicon Valley over military use of artificial intelligence.

President Trump ordered government agencies to “immediately cease” using Anthropic’s technology, in a post on Truth Social, and Defense Secretary Pete Hegseth labeled the company a “supply chain risk to national security” in his own post on X, after the company refused to allow its technology to be used for domestic surveillance and autonomous weapons.

The administration’s assault on Anthropic appeared to put the company on course to lose billions of dollars of potential revenue, although the start-up said in a blog post late Friday that it would challenge Hegseth’s designation in court.

The firm’s conversational assistant, Claude, is being deployed or tested in at least five government agencies, including the Pentagon, the Department of Health and Human Services, the Department of Homeland Security and the Department of Energy.

Friday’s moves by the administration put all of Silicon Valley on notice that tech companies seeking Pentagon contracts risk massive political and business fallout if they don’t back administration policies and cede control of how their technology is used.

Trump, in his post, described Anthropic as a “radical Left AI company run by people who have no idea what the real World is all about.”

Calling the company “Leftwing nut jobs,” he said it had made a mistake trying to strong-arm the Pentagon.

Still, Trump announced a “Six Month phase out” for the Pentagon and some other agencies, which could allow for more extended negotiations between Anthropic and the Defense Department, with the company saying it is willing to continue negotiating but will not back down from its red lines.

In the meantime, OpenAI said it would fill the void and they are working with the Pentagon on a potential agreement.

Editorial / Wall Street Journal

“President Trump on Friday banned Anthropic and its AI products from all government contracts, and the Communists must be cheering in Beijing.  The Administration is making what is a modest dispute over the military uses of AI into a self-destructive show of brute political force that will hurt the U.S. military and the rest of the government.

“Anthropic’s models were the first cutting-edge AI deployed on classified networks in the U.S. government.  The Pentagon prefers a contract to use the tools for ‘any lawful use,’ as outlined in its AI strategy. Anthropic took exception.  The company doesn’t want its models deployed for ‘mass domestic surveillance,’ nor used in fully autonomous weapons that strike without a human in the decision loop.

“The Pentagon is within its rights to stop working with the company. The missions of the U.S. military are the responsibility of elected and politically accountable officials.  It’s an imperfect analogy, but a company can’t sell the U.S. military a missile and then haggle about acceptable targets….

“Anthropic could have made a concession without giving up its larger principles.

“But instead of wishing Anthropic the best in its future endeavors and accepting potentially inferior products, the President has gone nuclear.  Mr. Trump thundered online on Friday that he is directing ‘EVERY Federal Agency’ to ‘IMMEDIATELY CEASE all use of Anthropic’s technology,’ with six months to phase out the tech at the Pentagon.

“This will hurt Anthropic, but it may also damage U.S. defenses. The company’s Claude model and AI tools are on the front line of U.S. innovation, and nothing is more important for U.S. troops than having the battlefield edge in technology….

“Elon Musk belly-flopped into the dispute this week by posting that ‘Anthropic hates Western Civilization,’ and no doubt he’s pleased that Mr. Trump’s Anthropic ban may create an opening for his Grok AI to get into the contracts. But Anthropic doesn’t lack for patriotism.  The company says it has left revenue on the table by cutting off firms linked to the Chinese Communist Party. It’s no small matter that a technology company has been willing to help the U.S. military in combat, a change from a decade ago when most of Silicon Valley viewed Pentagon contracts as complicity in imperialism.

“Mr. Trump derided Anthropic as ‘some out-of-control, Radical Left AI company.’  But the bigger picture before the meltdown was that an AI company with a progressive reputation and the Trump Pentagon largely agreed that America has to be defended with premiere technology.  The Pentagon needs all the AI help it can get as the technology races ahead and China isn’t far behind. The People’s Liberation Army is the winner of the Anthropic ban.”

—It’s been total chaos in the Middle East in terms of air travel going back to Saturday when the U.S.-Israeli attacks commenced, with major hubs such as Dubai (the world’s busiest airport in 2024 (last available data), according to Airports Council International, cancelling thousands of flights (23,000 by Thursday), including to Abu Dhabi, Amman, Bahrain and Tel Aviv, with tens of thousands of passengers stranded with airspace closed.

Airline stocks and cruise operators saw their shares decline not just on lost revenue from cancelled flights and maybe cruise passengers cancelling, but also rapidly rising fuel costs for both.

By Wednesday, dozens of repatriation flights were due to take off from the Middle East as governments try to bring tens of thousands of stranded citizens’ home.

Airline stocks were pummeled as jet fuel costs soared.

—TSA checkpoint numbers vs. 2025

3/5…122 percent of 2025 level
3/4…114
3/3…81
3/2…94
3/1…125
2/28…83
2/27…102
2/26…125

—Berkshire Hathaway on Saturday published its last report card on its Warren Buffett era and started to lay out what it will look like under his replacement.

The conglomerate, whose operations include both big insurers and a collection of businesses including a major railroad, consumer goods brands and an energy company, on Saturday reported nearly $67 billion in profit for 2025.  That was down about 25 percent from the same time a year ago, mainly because of a drop in its insurance underwriting.

But Berkshire’s report on Saturday was more notable for including the first letter to shareholders by Gregory E. Abel, the handpicked successor to Mr. Buffett as the company’s chief executive.

In the message, his first extended communication to shareholders since assuming the role at year end, Mr. Abel lavished praise on Mr. Buffett for having made Berkshire one of the most successful investment engines in modern American capitalism.

“Warren is obviously a hard act to follow,” Mr. Abel wrote.

Unlike Buffett’s shareholder letters, which were infused with both folksy Midwestern aphorisms and observations about the world, Abel stuck largely to straight commentary about Berkshire and how he intends to lead the company.

Its performance last year lagged the S&P 500, one of the Mr. Buffett’s traditional benchmarks: Berkshire shares rose 11.8 percent over the past 12 months, behind the stock index’s 17.5 percent.

Berkshire’s operating earnings, its preferred metric because it excludes unrealized gains or losses on the company’s investments, were $10.2 billion in the quarter, down nearly 30 percent from the fourth quarter of 2024.

Berkshire’s cash hoard has grown to more than $370 billion.

Abel didn’t rule out more takeovers, though he did not elaborate on potential targets.

In his letter, Abel reconfirmed that Warren Buffett will not be on onstage to answer shareholders’ questions at Berkshire’s annual investor meeting in Omaha in May, so it will be interesting to see what kind of crowd shows up, what had been called “Woodstock for capitalists.”

Abel also identified in the shareholder letter four stockholdings – Apple, American Express, Coca-Cola, and Moody’s – suggesting they are forever stocks, or close to it.  He also said the concentrated approach Berkshire has taken to stock investing will continue, with limited activity in these holdings, though they may significantly adjust a holding if the managers detect fundamental changes in the long-term economic prospects.

Berkshire has held its Coke and American Express for at least 40 years, and Moody’s more than 20 years. Berkshire paid an average of $3 a share for Coke in the late 1980s, compared with the stock’s record $81 close last Friday.

—Chinese electric vehicle sales are off to a slow start in 2026.  Over the weekend, BYD, XPeng, Li Auto and NIO reported their February delivery figures.

BYD delivered 187,782 passenger vehicles, down 41% from a year ago. It delivered 79,539 all-electric cars, down 36%.  BYD also sells plug-in hybrids.  XPeng delivered 15,256 cars, down 50% from last year.

The results didn’t bode well for Tesla, China accounting for 22% of the company’s revenue in 2025.

Tesla sold about 631,000 cars in China in 2025, down about 4% from the prior year, according to industry data. Tesla doesn’t provide regional sales volumes.

—Target shares rallied even after the company posted lackluster fourth-quarter and full-year results on Tuesday, capping off what the company called a “challenging year” as new CEO Michael Fiddelke looks to turn around results for the struggling retailer.

Target said Tuesday its same-store sales fell 2.5% during the holiday quarter and 2.6% for the full year. Both declines were in line with Wall Street expectations.

In the fourth quarter, in-store sales fell 3.9% while digital sales rose 1.9%. Revenue in the quarter fell 1.5% from last year to $30.5 billion, above the $29.9bn that was expected.  Adjusted earnings of $2.30 also beat the $2.14 the Street expected.

Fiddelke took the reins as CEO from Brian Cornell on Feb. 1.

“I’m incredibly proud of how our team navigated through a challenging year in 2025, as they focused on serving our guests while positioning our business for profitable growth in 2026 and beyond,” Fiddelke said in a statement.  He added the company saw a “healthy, positive sales increase” last month.

In 2026, it expects adjusted earnings in the range of $7.50-$8.50; last year, the company’s adjusted earnings fell 8.2% to $8.13.  The company also expected revenue to grow 2% over last year, when revenue totaled $104.8 billion.

“This expectation reflects a small increase in comparable sales, with new store and non-merchandise sales contributing more than one percentage point of growth,” the company said.

Last year, Target added 17 stores, bringing its total to 1,995.

In February, Target said it planned to cut 500 jobs – including 100 at the store district level and 400 across the supply chain – to reinvest in its store employees.  Last fall, the company cut 1,800 jobs, or about 8% of its corporate workforce, as it looked to streamline its structure.

—Best Buy posted mixed quarterly earnings and signaled weak growth in the year ahead.  But the stock surged.

For the fiscal fourth quarter, Best Buy posted adjusted earnings of $2.61 a share, sharply above analysts’ calls for $2.46. Revenue declined to $13.81 billion from $13.95 billion in the same period last year and was below the $13.87 billion Wall Street had forecast.

Same-store sales fell 0.8%, versus the 0.1% growth analysts were looking for. The company had previously guided for comparable sales ranging from a 1% decline to a 1% increase.

“Our data sources show our overall market share was at least flat, pointing to slightly softer customer demand for our industry during the holiday quarter,” CEO Corie Barry said in a statement.  She noted that the company had returned to positive comparable sales for the year.

Net income in Best Buy’s fourth quarter jumped to $541 million, or $2.56 a share, from $117 million, or 54 cents a share, in the prior year. On an annual basis, revenue rose to $41.69 billion from $41.53 billion after declining for the past three fiscal years.  I think this is what the Street loved most.

Fiscal-year guidance broadly missed estimates.  Best Buy guided for adjusted earnings between $6.30 and $6.60 a share.  Analysts were looking for $6.63, above the high end of the range.

The retailer sees revenue of $41.2 billion to $42.1 billion, compared with the $42.2 billion Wall Street was expecting. Best Buy said it expects comparable sales to be down 1% to up 1%; analysts were anticipating 1.4% growth.

—Morgan Stanley is laying off around 3% of its workforce or about 2,500 people, according to various reports.

The cuts are affecting employees in the bank’s three major divisions, which are investment banking and trading, wealth-management and investment management. They are tied to shifting business and location priorities – as well as individual job performance – and are occurring both in the U.S. and abroad.

The moves come after the bank reported a banner year in 2025.  MS, which has around 83,000 employees, posted record annual revenue in its investment banking and trading division as well as in its wealth-management unit last year.

Many of the job cuts took place on Wednesday, though they have been occurring since last week, the people familiar with the matter said.

—Oracle Corp. is planning to ax thousands of jobs, among its moves to handle a cash crunch from a massive AI data center expansion effort.

The job reductions will affect divisions across the company and may be implemented as soon as this month, Bloomberg reported.

Led by Chairman Larry Ellison, Oracle is embarking on a historic build-out of data centers to power AI workloads for customers such as OpenAI.

Oracle didn’t comment on the report.  It had about 162,000 employees globally as of the end of May 2025.

The high up-front costs of AI have fueled cuts across the tech industry as companies work to balance their budgets.  Microsoft fired some 15,000 people last year amid rising spending on data centers and software development.  Last week Block Inc. announced it would lay off nearly half of its staff, with co-founder Jack Dorsey citing the efficiency-boosting power of AI.

Oracle reports earnings next week, which would be when they give specifics on layoffs, perhaps.

—It’s been a rough multi-year stretch for the U.S. farm industry, which has been looking for some stability after a mercurial year under President Trump’s tariffs.  But with the Supreme Court ruling, uncertainty remains the order of the day.

“The global tariff now throws more volatility and uncertainty into the market,” said Caleb Ragland, chairman of the American Soybean Association.  “We’re drastically held back when these burdens of tariffs and other issues make it where we can’t be competitive.”

President Trump has been pushing for China to secure more soybeans from the U.S., even as supplies produced in Brazil are currently much cheaper.

China, the world’s top consumer of the oilseed, avoided buying soybeans from the U.S. for much of the season, only recently resuming purchases to meet a pledge to secure 12 million tons this season. Whether the Asian nation will meet a commitment to purchase 25 million tons a year through 2028 remains to be seen in the wake of the Supreme Court decision.

And then the attacks on Iran, after the operation in Venezuela, took away China’s two main sources of oil.

[Soybean prices have risen this week as a result of the war, but as one South Dakota farmer of corn and soybeans noted this week, the cost of fertilizer, much of which is shipped through the Strait of Hormuz, is 22% more than late last year – “the highest price I ever had to pay.”]

–With Paramount Skydance’s apparent victory over Netflix in securing Warner Bros. Discovery, it’s really now about the future of CNN, part of WBD and now a member of the Paramount family (assuming the deal passes regulatory muster, let alone shareholder approval), which has CBS News.

With President Trump being anti-CNN, the angst in the newsroom is double. Within CNN, reporters and producers have expressed concern that their newsroom’s independence, a point of pride, could be compromised in the event Paramount absorbs the company.

Of course, CBS News is felt to have a liberal bias.  It’s also unclear whether Bari Weiss, handpicked editor in chief selected by Paramount CEO David Ellison, would be involved in CNN’s leadership if the acquisition is complete.

But…by week’s end, Ellison took steps to reassure journalists at CNN that the network won’t kowtow to the Trump administration when his company acquires WBD.

“Editorial independence will absolutely be maintained,” Ellison said in an interview on CNBC. “It’s maintained at CBS.  It’ll be maintained at CNN.”

“CNN is an incredible brand with an incredible team,” he said.  “We absolutely believe in the independence that needs to be maintained obviously for those incredible journalists, and we want to support that going forward.”

—President Trump said he was going to attend this year’s black-tie dinner thrown by the White House Correspondents’ Association, which takes place on the last Saturday in April.

This was a surprising development for members of the Washington press corps, as Trump skipped the dinner all four years of his first term, and he stayed away last year, too.

It seems that having Oz the Mentalist as the featured speaker may have played a role.  The guy is just terrific, regular viewers of CNBC having seen him many times in the past.

Foreign Affairs

Russia/Ukraine: Ukrainian President Volodymyr Zelensky said talks among U.S., Ukrainian and Russian officials scheduled for this week may be moved from Abu Dhabi as a result of the conflict in the region.

Zelensky said Monday, “The meeting must take place. It is important for us, and we support it. The meeting is important, the results are important, and exchanges are also very important,” he added.

But talks were then postponed.

As for the immediate impact of the war in the Middle East, Russia is a big winner with the spikes in oil prices, while Iranian missiles deplete stocks of Patriot interceptors that Ukraine needs for its defense.

Even before the Iran campaign, production bottlenecks in the U.S.-made Patriot system had drained Ukraine’s reserves and left European allies on yearslong waiting lists.  Those shortfalls have allowed Russia to punch through gaps in Ukraine’s air defenses, devastating its power infrastructure and casting Ukrainian cities into blackouts.

Gulf states possess only days of interceptors under sustained attack, analysts estimate, potentially forcing Washington to pull from Indo-Pacific and other regional stockpiles, weakening its forward posture elsewhere.

Lockheed Martin’s entire 2025 U.S. output of its most advanced interceptor, the PAC-3, was just over 600.  At least two Patriot interceptors are typically required to destroy a single ballistic missile – often followed by a third or more if the first pair fail.  And components to make the interceptor come from all over the world.

But on the topic of drones, you can imagine how all the Gulf states, and the U.S., are seeking Ukraine’s expertise in countering Iran’s Shahed drones, according to President Zelensky.

Ukrainian assistance, however, is provided only if it does not weaken Ukraine’s own defenses, and if it adds leverage to Kyiv’s diplomatic efforts to stop the Russian invasion, according to the Ukrainian leader.

“We help to defend from war those who help us, Ukraine, bring a just end to the war” with Russia, Zelensky said.

Oleksandr Merezhko, the head of Ukraine’s parliamentary foreign affairs committee, said Vladimir Putin is trying to drag out the negotiations so that he can press on with Russia’s invasion while escaping further U.S. sanctions.

He urged the U.S. administration to look at the Russia-Ukraine war and the war in the Middle East as linked.

“In reality, Russia and Iran are close allies that act in concert – Iran supplies weapons and Russia helps Iran develop its defense industry.  These are interconnected conflicts,” Merezhko told the AP.

Ukraine’s army has recently pushed back Russian forces at some points along the roughly 1,250-kilometer (750-mile) front line, according to the Washington-based Institute for the Study of War, which this week estimated Ukrainian counterattacks liberated more territory than Ukrainian forces lost in the last two weeks of February, something like 100 square miles since Jan. 1.

—A Russian liquefied natural gas (LNG) tanker has sunk in the Mediterranean between Libya and Malta after it was hit by explosions and a fire, Libyan port officials have said.

Russia accused Ukraine of targeting the Arctic Metagaz with “uncrewed sea drones” launched from the Libyan coast.

Russia’s transport ministry said 30 Russians were aboard the tanker, with a Maltese minister saying they were all found “safe and sound in a lifeboat” during a rescue operation by Malta’s armed forces.

“This is a terrorist attack,” President Putin told state TV. “This isn’t the first time we’ve encountered something like this.”

The tanker was apparently heading for Port Said in Egypt and is considered part of Russia’s so-called shadow fleet.  It has been widely sanctioned by Western countries.

–But today, Friday, Ukrainian Foreign Minister Andrii Sybiha accused Hungarian authorities of taking hostage seven employees of Ukraine’s state savings bank, Oschadbank.

Writing on X, Sybiha said: “Today in Budapest, Hungarian authorities took seven Ukrainian citizens hostage. The reasons are still unknown, as well as their current well-being.”

The employees were in two cars carrying $80 million worth of cash between Austria and Ukraine.

In a statement, Oschadbank said the employees “were unjustifiably detained in Hungary” and that GPS data showed their vehicles in Budapest.

“The amount of valuables in the stolen cars amounted to 40 million U.S. dollars, 35 million euros, 9 kg of gold,” the Oschadbank statement continues.

Hungary has its close ties with Russia and has consistently opposed military aid for Ukraine.

Sybiha accused Hungary of “state terrorism and racketeering.”

Earlier, President Zelensky criticized Hungarian Prime Minister Viktor Orban for blocking a European aid package for Kyiv.

Orban, a Putin butt-boy, has accused Kyiv of imposing an “oil blockade” on Hungary by deliberately delaying the reopening of the Druzhba pipeline.

Ukraine says the pipeline was damaged by Russian strikes last month and its repair crews have been injured by further attacks.

Druzhba is the main route for delivering Russian oil to Hungary and Slovakia and shipments of Russian oil to both countries have been cut off since January 27.

China: The Trump administration has delayed announcing a package of arms sales to Taiwan valued at billions of dollars to avoid upsetting Xi Jinping ahead of President Trump’s planned trip to Beijing next month (he leaves March 31, last I saw).

The weapons sales, which includes air-defense missiles, is in an advanced stage.  Senior Republican and Democratic lawmakers approved the package after the State Department sent it to them in January for informal review.

However, since then, the sales package has languished in the State Department ahead of the summit, which is pathetic.

In a statement, the State Dept. said: “This administration has been very clear that the enduring U.S. commitment to Taiwan continues, as it has for over four decades.”

The topic of the arms sale came up in a phone conversation between Trump and Xi back on Feb. 4, with Xi clearly emphasizing the topic, according to multiple Chinese media accounts, while the White House totally downplayed it.

“The U.S. must handle arms sales to Taiwan with extreme caution,” Xi told Trump, according to the Chinese media.  Xi also warned Trump that the position of Taiwan was “the most important issue in China-U.S. relations” and that China “will never allow Taiwan to be separated from China.”

Ecuador: Ecuadorean and U.S. forces launched operations against what it said were designated terrorist organizations in the South American country, the U.S. military’s Southern Command said on Tuesday.

The Southern Command said the action was aimed at tackling illicit drug trafficking, but did not provide more details in a statement on X.

The announcement comes a day after Ecuador’s President Daniel Noboa said the U.S. was among “regional allies” taking part in a “new phase” of Ecuador’s war on the drug cartels.

Noboa says around 70% of the world’s cocaine now flows through Ecuador’s huge ports, making it a lucrative location for drug-trafficking gangs. It also neighbors Colombia and Peru, the world’s two largest producers of cocaine.

The latest operations come four months after Ecuadoreans dashed U.S. hopes of expanding its presence in the eastern Pacific region by voting against allowing the return of foreign military bases in the country.

The referendum result was a blow to Noboa, a close ally of President Trump, who is trying to fight organized crime and reduce soaring violence.

Venezuela: The U.S. and Venezuela have agreed to reestablish diplomatic relations in the aftermath of the raid removing Nicolas Maduro from power.

The development is a major step years after Trump first cut off relations with the South American country during his first term.  But Trump has signaled a new phase of the countries’ relationship with Delcy Rodriguez, the acting president, in charge.

“This step will facilitate our joint efforts to promote stability, support economic recovery, and advance political reconciliation in Venezuela,” the State Department said in a statement.  “Our engagement is focused on helping the Venezuelan people move forward through a phased process that creates the conditions for a peaceful transition to a democratically elected government.”

The U.S. has largely focused on improving access to Venezuela’s large oil reserves since removing Maduro, though Rodriguez approved an amnesty bill last month that could lead to the release of many political prisoners.

Trump praised Rodriguez on Wednesday following reports that his administration was preparing to indict her if she didn’t continue cooperating with the U.S.

Random Musings

–Presidential approval ratings….

Rasmussen: 45% approve of President Trump’s job performance, 54% disapprove (Mar. 6).

In a new Emerson College poll released days before the announcement of the U.S.-Israeli attack on Iran, the president had a 43% approval rating, 55% disapproval.

In a generic congressional ballot, the Emerson poll showed that a Democratic Party candidate would beat a Republican candidate by eight points, 50% to 42%.  That figure is two points higher than in Emerson’s January poll. [Independents are leaning towards Democratic candidates 50% to 37%.]

The Emerson poll also shows that more than half of Hispanics surveyed disapprove of the job the president is doing, 58%, compared with 37% that approve of Trump.

That’s a significant shift from last month, when Emerson reported a near-split approval rating, with 43% approving and 45% disapproving.

Emerson also found California Gov. Gavin Newsom is the early frontrunner to win the 2028 Democratic presidential primary with 20%.  Former Transportation Secretary Pete Buttigieg follows at 16%, and former Vice President Kamala Harris at 13%.  The next three are Rep. Alexandria Ocasio-Cortez (9%), Pennsylvania Gov. Josh Shapiro (7%) and Kentucky Gov. Andy Beshear (5%).

On the Republican side, Vice President Vance leads with 52%, followed by Secretary of State Rubio at 20%.

–Heading into Tuesday’s big Texas senate primary, an Emerson College/Nexstar Media survey showed state Attorney General Ken Paxton leading incumbent Senator John Cornyn, 40% to 36%, in the Republican primary, with Rep. Wesley Hunt third at 17%.

On the Democratic side, state Rep. James Talarico led Rep. Jasmine Crockett with 52% to her 47%.

So how did it turn out?

Cornyn (41.9%) and Paxton (40.7%) are heading to a run-off in May to see who faces off against Talarico, who defeated Crockett 53% to 46%, so the pollsters were pretty accurate.

The Cornyn-Paxton battle is vicious.  I want Cornyn.  President Trump is expected to endorse him, on the urging of the likes of Senate Majority Leader John Thune.

In a House race, Republican challenger Steve Toth defeated Rep. Dan Crenshaw. Crenshaw, who was seeking his fifth term, a district that spans the suburbs of Houston, was the only Texas House Republican who Donald Trump didn’t endorse.

Crenshaw, a former Navy SEAL whose independent streak sometimes clashed with fellow Republicans, spent the primary trying to fend off attacks from the party’s hard right that he was not in step with Trump’s agenda.

Toth, a state representative and member of the GOP’s hard-right caucus in the Legislature, picked up a big endorsement late in the primary from Republican Sen. Ted Cruz.

I liked Crenshaw.  Sorry to see him go, come next January.

–In North Carolina, it’s going to be Roy Cooper, a former Democratic governor of the state, and Michael Whatley, a former chairman of the Republican National Committee, battling it out in November for retiring Republican Sen. Thom Tillis’ seat, in a race that could exceed the Texas battle in importance in terms of Senate control.

Cooper is a moderate Democrat with widespread name recognition who has never lost an election in more than 30 years.

The state voted for Trump in 2016, 2020 and 2024, but Democrats managed to win the governor’s contest those years, too.  Cooper won in 2016 and 2020.

Whatley doesn’t have the name recognition Cooper does, but he has worked for Republicans for decades and spent years boosting Trump’s political movement.

—Senator Steve Daines, Republican of Montana, kind of shockingly announced Wednesday that he would not seek re-election this year, an announcement that offers Democrats a long-shot chance to flip the seat.

Daines made his announcement just minutes before the filing deadline closed for November’s election, saying that he had been “wrestling with this decision for months” and that it was time for “new leaders,” like the state’s junior Republican senator, Tim Sheehy, to “spearhead the fight for Montana in the United States Senate.”

Daines endorsed a successor: Kurt Alme, the U.S. attorney for Montana.

The last remaining statewide Democrat, Senator Jon Tester, lost his re-election bid to Tim Sheehy in 2024.  While Daines move gives Dems some hope, Tester himself has called the party’s messaging “horrible.”

State Democrats, though, were duly pissed at Daines’ timing because it gave them no chance to put up a strong opponent.

Days earlier, Montana Rep. Ryan Zinke, one of the state’s two Republican House members, said he would retire at the end of his term, citing health reasons.

—Rep. Tony Gonzales, a Texas Republican who admitted to having an affair with a former staffer who died by self-immolation, will not seek reelection, the lawmaker announced on March 5.

“After deep reflection and with the support of my loving family, I have decided not to seek re-election while serving out the rest of this Congress with the same commitment I’ve always had to my district,” Gonzales wrote in a statement posted on X.

His announcement came hours after House Speaker Mike Johnson and Republican leaders called on Gonzales to withdraw from his reelection bid ahead of a May 26 runoff against gun activist Brandon Herrera.  Gonzales has been under pressure since allegations spread about an affair with his late ex-staffer, Regina Santos-Aviles.

—President Trump fired his embattled homeland security secretary, Kristi Noem, on Thursday and announced plans to replace her with Senator Markwayne Mullin of Oklahoma, after Noem was grilled by Republican lawmakers this week at congressional hearings on a variety of topics including her knowledge of a lucrative advertising contract.

Trump announced the change on Truth Social, along with a new, and previously nonexistent, role for Noem: special envoy for the Shield of the Americas, which he said would be a new security initiative for the Western Hemisphere.

Trump is close with Mullin and speaks to him regularly.  Mullin is also popular with members across the aisle and will be easily confirmed, though he still has to confront Democrats’ objections over the current running of the DHS and immigration/deportation policies.

Noem faced scrutiny from lawmakers about a $220 million advertising campaign featuring her, with Noem claiming Trump had signed off on it.

The ads prominently featured Noem, including in a scene filmed on horseback at Mount Rushmore in the former South Dakota governor’s home state.  She looked lovely.

Senator John Kennedy, a Louisiana Republican who forcefully questioned Noem over the ad contracts, suggesting the ads were designed to promote Noem rather than Trump’s agenda, thus putting the president in a “terribly awkward spot.”

Kennedy told reporters on Thursday that he received a call from the president about her testimony.  “Put it this way,” he said. “His recollection and her recollection are different.”

“I never knew anything about it,” Trump told Reuters.

“I spent less money than that to become president,” he told NBC News.

Sen. Thom Tillis (R-N.C.), who had increasingly become a staunch critic of Noem, tore into her on issues such as immigration and FEMA during her Senate hearing.

“We’re an exceptional nation, and one of the reasons we’re exceptional is we expect exceptional leadership, and you’ve demonstrated anything but that in the time that I’ve seen you,” Tillis aid.

Bye-bye, Barbie.  Bye-bye, Corey.

—The gunman who killed three people at a bar in Austin, Texas early Sunday in a mass shooting that left 13 others wounded was wearing a sweatshirt that said “Property of Allah,” and another shirt with an Iranian flag design, law enforcement officials said.

The shooter was identified as a 53-year-old who was originally from Senegal and was a naturalized U.S. citizen.  He was shot and killed by Austin police who responded quickly.

The shooting was at a popular Austin entertainment district that always has a large police presence, especially after a shooting there in the summer of 2021 that left 14 people wounded, and because of that presence, the swift response saved lives.

This was a clear case of terrorism, though the FBI has yet to declare it so.

–I didn’t have a chance last Friday to note NASA’s announcement that it is adding an extra mission to its Artemis program before it attempts to land astronauts on the Moon for the first time in half a century.

The original plan was to fly around the Moon for the Artemis II mission, which is currently scheduled for April, and then attempt a lunar landing with Artemis III in 2028.

Now Artemis III will stay closer to home – a crew will head to low-Earth orbit in 2027 to practice docking with a lunar lander.

NASA said this additional flight would not slow down its return to the Moon – it is still aiming for 2028 for one or even two lunar landings in what will be Artemis IV and V.

NASA administrator Jared Isaacman told a media briefing that he was adding an extra step to the Artemis program because he did not want such long gaps between launches.

The U.S. is under pressure to return to the Moon.  China is aiming for a lunar landing by 2030, and has been making steady progress towards this.

Both nations are planning to land at the Moon’s south pole – and are competing for the best spots to build their lunar bases.

NASA’s final Apollo flight in 1972 was the last time any human touched down on the lunar surface.

—

Pray for the men and women of our armed forces…and all the fallen.

This week we remember the fallen that have been identified from the war in Iran…Capt. Cody A. Khork, 35, of Winter Haven, Florida; Sgt. 1st Class Noah L. Tietjens, 42, of Bellevue, Nebraska; Sgt. 1st Class Nicole M. Amor, 39, of White Bear Lake, Minnesota; Sgt. Declan J. Coady, 20, of West Des Moines, Iowa; Maj. Jeffrey R. O’Brien, 45, of Indianola, Iowa; and Chief Warrant Officer Three Robert M. Marzan, 54, Sacramento, Calif., who all  died on March 1, 2026, in Port Shuaiba, Kuwait.

Slava Ukraini.

God bless America.

—

Gold $5167…Silver $83.80…
Oil $90.75

Bitcoin $68,116 [4:00 PM ET, Friday…a big drop Th/Fri after hitting $73,000…]

Regular Gas: $3.32; Diesel: $4.33 [$3.11 – $3.65 yr. ago]

Returns for the week 3/2-3/6

Dow Jones  -3.0%  [47501]
S&P 500  -2.0%  [6740]
S&P MidCap  -4.6%
Russell 2000  -4.1%
Nasdaq  -1.2%  [22387]

Returns for the period 1/1/26-3/6/26

Dow Jones  -1.2%
S&P 500  -1.5%
S&P MidCap  +3.2%
Russell 2000  +1.8%
Nasdaq   -3.7%

Hang in there. #CoorsLight

Brian Trumbore