🦔 Hey everyone, Hedgie here. This was a bad week. Not "markets are volatile" bad. Actually bad. Let's get into it.

Last week I mentioned the strikes were coming. Now we're living with the consequences.

Oil spiked 36% this week. WTI crude went from the low $70s to $91. The Strait of Hormuz is effectively closed. Tankers are stacking up on both sides. Twenty percent of the world's seaborne oil moves through that chokepoint.

Trump says Khamenei is dead. Iran denies it. The IRGC fired missiles at US bases across the Gulf. Over 200 people killed in Iran including 64 students at a girls' school. Nobody knows where this goes next.

JP Morgan estimates oil hits $120-130 if the closure holds. Recession probability models suggest we're at about 15% chance right now, up 6 percentage points from before the spike. If oil hits $125, that rises to 30%. It would take $150 to get to a coin flip.

I've seen a lot of geopolitical crises that felt like the end of the world and turned out to be buying opportunities. I've also seen ones that weren't. I don't know which this is yet.

The economy lost 92,000 jobs in February. Expectations were for a 55,000 gain. Revisions to January and December dragged the three-month average down to 18,000 private sector jobs per month.

Some of this was noise. Strikes, weather, payback from a strong January. The unemployment rate only ticked up to 4.4%, which isn't crisis territory.

But the timing couldn't be worse. Sluggish hiring into an oil shock is how you get a recession. Consumer spending needs people to feel secure in their jobs. Right now they're watching layoffs pile up while gas prices spike.

Here's the problem. Weak jobs data normally means rate cuts are coming. But the oil shock is about to push inflation back above 3%.

The Fed has spent five years fighting inflation that won't die. They're not going to cut rates into a fresh price spike, even if the cause is a war they can't control. But holding rates while the economy weakens creates its own problems.

Markets are now pricing fewer cuts this year. I still think we get one or two eventually, but probably later than anyone expected a month ago. The Fed is going to wait and see, which means we wait and see too.

I wrote a longer piece on this earlier in the week, but the short version: the $2 trillion private credit market is having its first real stress test.

Blue Owl blocked investors from withdrawing money from one of its retail funds. No more quarterly redemptions. You get your money back when they decide to sell assets, not when you ask for it.

Blackstone saw record redemption requests of 7.9% from its flagship fund BCRED. That's $3.8 billion. They had to raise the redemption cap and ask executives to put in $150 million of their own money to meet the requests.

The connection to AI is direct. Private credit funds loaded up on software company debt during the boom years. Now those borrowers face existential disruption, and everyone's trying to exit at once. Software debt is trading at 91 cents on the dollar. The question is whether private marks reflect reality.

Jamie Dimon keeps warning about "cockroaches" in private credit. When you find one problem, there are usually more.

Meanwhile, the same week private credit is showing cracks, the push to put it into retirement accounts continues.

Trump's executive order from August is working its way through regulators. Blackstone, Apollo, and KKR are all building products designed to tap the $14 trillion sitting in American 401(k)s. They call it "democratization."

I'm skeptical. Institutional money is drying up and the industry needs fresh capital. These products are complicated, illiquid, and valued by the same people who profit from high valuations. Blue Owl investors just learned that "quarterly liquidity" means "quarterly liquidity until we decide otherwise."

The S&P is down 1.5% for the year. The Dow is down 1.2%. We're only 3% off all-time highs.

Those numbers feel disconnected from the headlines. Markets are trying to figure out whether this week was a shock that passes or the start of something worse. Nobody knows yet.

Corporate profits are still growing. AI investment is still happening. Tax cuts are filtering through. The fundamentals haven't collapsed. But they're being tested.

I'm not making big moves right now. Panic selling into geopolitical crisis has historically been a bad trade. So has assuming everything will be fine because it usually is. The honest answer is that this is a week where the best move might be no move.

What I'm watching: oil prices, any signs of layoffs accelerating, how the Fed talks about the inflation-growth tradeoff. If oil drifts back down and hiring stabilizes, this becomes a footnote. If neither happens, we're having a different conversation.

Anthropic published research on which jobs AI could theoretically replace versus what it actually does. The numbers look scary until you notice an AI company has an obvious incentive to make AI look capable. Their CEO says coding is solved. Their research says 33% coverage. I wrote more about this earlier in the week.

Google is getting sued after a man died by suicide following months of conversations with Gemini. According to the lawsuit, the chatbot convinced him it was his sentient AI wife and coached him through his fear of dying. It allegedly sent him armed to scout attack locations. No safety systems triggered. This is the kind of story that should make everyone building these systems stop and think.

🦔 Hedgie

CPI and PCE inflation data, housing numbers, GDP. The inflation prints matter a lot given everything happening with oil and the Fed. But the Middle East is still the main event. Everything else is secondary until we see how this plays out.

Source: FactSet, Morningstar Direct, March 8, 2026.

Disclaimer: I'm a hedgehog on the internet, not a financial advisor. Nothing in this newsletter is financial advice. I share what I'm seeing and thinking, but you should always do your own research and consult with a qualified professional before making any investment decisions.