Not Strait, but Circuitous

We continue to think the current conflict will not upend corporate profit momentum or adversely impact credit conditions. We do expect the more localized market reactions by sector and geography to continue, meaning we anticipate investors will differentiate among regions and industries more susceptible to higher energy prices. Our optimism rests on the strong earnings environment that preceded the conflict coupled with a still durable consumer. Further, our glass-half-full outlook requires interest rates to remain contained and, ultimately, for hydrocarbons to realize the lower prices markets currently forecast.

The largest risk we can see relates to the Strait of Hormuz remaining a commerce chokepoint. With global shipping lanes remaining impaired, Dun & Bradstreet notes that 44,000 businesses across 174 distinct economies had at least one shipment exposed to the Strait as of the middle of March.¹ Further, Dun & Bradstreet highlighted that only about 20% of total lost import volumes since the conflict’s inception have been successfully redirected through alternative routes, highlighting challenges for business planning.² While U.S. military strategy remains fluid, should Iran retain control of the Strait and constrict passage or invoke heavy levies, oil and other goods may face higher costs.

Inflation represents the first-order spillover risk based on current conflict dynamics. We will explore energy prices in more detail below, but overnight Thursday and into Friday, Iran has targeted energy production facilities in the United Arab Emirates, Kuwait and Saudi Arabia. Military strategists highlight the ease at which Iran can launch drones or missiles, prolonging combat risks and embedding higher cost expectations for consumers and businesses. Central banks and, by implication, interest rates do not like elevated inflation expectations, and higher interest rates have historically provided a performance headwind to riskier asset classes. To be sure, interest rates remain contained relative to longer-term history, but should tensions prolong and costs elevate for longer, capital markets may not perpetually look through the current conflict.

One of the maxims we reflect on is “price represents truth, at least for the moment.” We have shared that statement in prior Weekly Five publications, and the current conflict reinforces its meaning. When a commodity trades, a buyer meets a seller and they agree on price, taking into account all currently known circumstances. In the case of today’s energy markets, circumstances are subject to change moment to moment: Speculation regarding negotiations or ceasefires, reports of new hostilities, and social media posts with strategy updates have each had material market impacts.  

The most significant energy market development over the past week followed President Trump’s address from the White House Wednesday night, when oil prices reached new highs. Dated Brent crude oil, which represents oil shipments bought and sold in the North Sea, touched over $141 per barrel — a full $81 and 132% higher than where prices stood at the year’s start. Dated Brent has surpassed levels we saw during the Russian invasion of Ukraine, and we are now at levels not seen since the 2008 “super spike” brought on by surging Chinese demand and power shortages across Asia. 

While Brent futures markets (the exchanges where buyers and sellers meet to transact on defined contract amounts on a defined future date) reflect that market participants still anticipate lower prices on the horizon, current buyers are paying premiums for oil. Despite this spike higher in current Brent oil prices, we have been somewhat encouraged by local market prices for natural gas, specifically in the UK and Germany, which have eased from extreme levels seen on March 19 yet still trade at a meaningful premium to other regions. The energy market’s message appears to be that, while future prices are expected to come down, the premiums paid remain high for those in vulnerable regions and, in some cases like Dated Brent, are rising by the day. 

Good Friday has been a New York Stock Exchange (NYSE) holiday in all but three years since 1864, and it’s the only NYSE holiday that is not also a federal holiday.³ The bond market had a shortened trading session today to accommodate liquidity needs following the release of the consequential employment situation report from the Bureau of Labor Statistics (BLS). The bond market learned a hard lesson in the late 1990s when an employment situation report highlighting considerable job gains arrived on a day when the bond market was not open. Ever since, the bond market has been open for a half-day session on Good Fridays when the BLS releases the monthly jobs data.⁴

While we defer to our talented Northern Trust Economics team for the full economic implications, “consequential” is an apt descriptor of today’s release. Results significantly exceeded expectations for March payrolls, and the unemployment rate ticked slightly lower from 4.4% to 4.3%; the jobs market added 178,000 payrolls in March versus the 65,000 expected. On the less positive side, February’s previously reported payrolls were revised lower — partially due to a labor strike in the healthcare sector — and underemployment, which reflects workers in jobs below their experience level, moved slightly higher. Finally, hours worked and average hourly earnings came in just below expectations.

Despite the revision-prone nature of this report and some of the slight detractors, capital markets view this as a report demonstrating a still solid labor market and evidence of the pre-crisis strength highlighted above. Further, as it relates to interest rates, this report does not offer the Federal Reserve an immediate argument for more accommodative policies toward a labor market it had expressed concerns about. Adding inflationary concerns to the mix, the bond market currently expects no change to interest rates through midway 2027.

While private credit markets continue to demonstrate jitters, with headlines centering on potential redemptions being unmet, we continue to emphasize the difference between investors seeking a return of their capital and the fundamental performance of the underlying loans within private credit portfolios. Some private credit funds have exposure to companies and industries facing competitive pressures from AI or other mediums, and some have structures that are potentially vulnerable to liquidity demands. However, other funds have both underlying credits and structures that are sound and well underwritten.

Our expectation is that markets will reconcile these issues on a fund-by-fund basis rather than escalate them to a systemic issue. While it can be convenient to associate flare-ups within a category to the entire category, at this point, we don’t see evidence that the loan market is impaired writ large. We do expect the industry to face some pricing issues as loans reflect some movement within underlying portfolios on a mark-to-market basis (as a reminder, loans do not trade on an exchange and are subject to appraisal-based pricing), and we are monitoring underlying liquidity and investor redemption dynamics.

We also highlight the importance of client engagement and education on this topic. Private credit is best manifested when investors do not need immediate liquidity from the dollars they allocate, investment managers source deals diversified by industry, borrower and loan type, and fees and terms are well understood and represent all parties. Private credit continues to serve an important role in global lending markets, and thoughtfully sourced and positioned opportunities can add value over time.  

¹ Navigating Disruptions to the Strait of Hormuz 2026. Dun & Bradstreet. Accessed 2 April 2026.

² Ibid.

³ Bloomberg data from Bloomberg Foreign Exchange and Interest Rates editor Beth Stanton, sourced on terminal 3 April 2026.

⁴ Ibid.