Something Shifted in the Middle East

The Big Story: Something Shifted in the Middle East

On Friday, Trump posted that the US is "getting very close to meeting our objectives" and is considering "winding down" military efforts in the Middle East. According to the Pentagon, Iranian missile and drone attacks are down 90% from the first week. The US claims to have struck over 8,000 targets. Iran's navy and air force have been described as destroyed.

Now, the signals are mixed. The Pentagon is requesting $200 billion in additional funding. More Marines are being deployed. Israel struck Iran's South Pars gas field on Tuesday and the Natanz nuclear site on Saturday. Iran continues to fire salvoes at Israel, and the Strait of Hormuz remains closed. So this isn't over.

But the word "winding down" hadn't appeared in any official statement until this week. Seven NATO countries, including the UK, France, Germany, and Japan, issued a joint statement saying they are ready to help secure safe passage through Hormuz. That's the first coordinated international signal toward reopening the strait. Whether it takes two weeks or two months, the direction of travel has shifted from escalation toward resolution.

That matters for everything that follows.

Oil closed around $106-112 this week. Brent peaked at $112.19 on Friday, the highest since the war began. That's up roughly 45% since February 28. But here's what's worth noticing: oil has not broken the $120 level it touched in early March. It tried and pulled back. Twice.

Why? Because the supply response is already in motion. The US lifted sanctions on 140 million barrels of Iranian oil already loaded on ships. Trump waived the Jones Act for 60 days to ease domestic shipping. US, Canadian, and Brazilian producers are ramping output. And global oil inventories sit at 8.2 billion barrels, the highest since February 2021. That's a significant buffer.

The EIA still forecasts Brent falling below $80 by the third quarter if shipping through Hormuz resumes. Goldman Sachs is less optimistic, warning that higher prices could persist through 2027 if the disruption drags on. The truth is probably somewhere between those two, depending entirely on how quickly the strait reopens.

For expats in Malaysia, higher oil prices continue to support Petronas revenues and the ringgit, which remains near its strongest level against the dollar since 2018. For those in Singapore or Thailand, the cost pressure is real but not runaway. Prices are elevated. They're not spiralling.

What Else Is Moving

The Fed met on Tuesday and held rates at 3.5-3.75%, as expected. The vote was 11-1. The dot plot still signals one cut in 2026 and one in 2027. What mattered more than the decision was what Powell said afterward: "We will be making progress on inflation, not as much as we hoped." The Fed raised its inflation forecast for this year to 2.7% on both headline and core. Growth was revised down to 0.9%. The read-through for expats: the Fed is doing exactly what a sensible central bank should do during a period of uncertainty — holding steady, not overreacting, and keeping the door open for cuts later when visibility improves.

The S&P 500 is down 6.7% from its all-time high. The Dow hit its lowest point of 2026 after the Fed decision. The VIX — a measure of how nervous investors are about the next 30 days — sits at 27, elevated but not extreme. Let me put that in perspective. The S&P 500 dropped 34% during COVID. The 2022 bear market was 25%. A 6.7% drawdown during a Middle East war with oil at $110 is remarkably contained. Every major geopolitical event of the last 50 years has been followed by a full market recovery for investors who stayed the course. Every single one.

On Trump's "winding down" language: it's worth understanding why this matters to your portfolio even if you're not following the political commentary. The single biggest variable determining how long the oil and fertiliser disruption lasts is whether Hormuz reopens. Trump's exit rhetoric is contradictory — saying "winding down" while simultaneously deploying more troops and requesting $200 billion in war funding. Israel's defence minister directly contradicted him, saying strikes would "significantly increase." But markets don't wait for certainty. Markets move on direction. And the direction, for the first time in three weeks, has a potential off-ramp visible. Any credible ceasefire signal or partial reopening of the strait will send oil prices down and equities up. That rebound won't wait for you to get repositioned. It'll happen in a single trading session.

The Expat Takeaway

Three things to check this week. First, your emergency reserve. Six months of liquid, accessible funds in a currency you can actually use. If it's intact, everything else is manageable. Second, your cost-of-living assumptions. If your retirement projections or monthly budget were built on 2024 numbers, the oil and food price environment has shifted. A quick recalibration is smart. Third, any pension or investment decisions you've been putting off. The rate environment has changed. Waiting isn't free.

If you have a UK pension decision sitting open, a transfer value, or a QROPS timing question, the bond yield picture has moved. That's not a reason to rush, but it is a reason to get current advice rather than relying on numbers from January.

And if nothing needs doing, that's fine too. Sometimes the best financial decision in a volatile week is the one you don't make.