The Real Risk Goes Beyond War | Macro Mondays: March 23, 2026 w/ Andreas Steno & Mikkel Rosenvold

Key Concepts

• Geopolitical Volatility: The impact of the Trump administration’s unpredictable decision-making on global markets.
• Strait of Hormuz: A critical maritime chokepoint currently serving as a "hostage" in the US-Iran conflict.
• Indirect Diplomacy: Back-channel negotiations involving intermediaries like Pakistan, Turkey, and Egypt.
• Supply Chain Lag: The time delay (approx. 3 weeks) between geopolitical events and the manifestation of physical supply shortages.
• TGA (Treasury General Account): The US government’s cash balance used to fund operations, including military expenditures.
• SOFR (Secured Overnight Financing Rate): A benchmark interest rate for dollar-denominated derivatives and loans, used here to gauge liquidity and funding stress.
• De-grossing: The process of hedge funds reducing leverage and closing directional positions to mitigate risk during high-volatility events.

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1. Geopolitical Situation: The US-Iran Conflict

The hosts discuss the ongoing volatility surrounding the US-Iran conflict.

• Diplomatic Status: While public rhetoric remains aggressive, "indirect talks" are occurring via intermediaries (Pakistan, Turkey, Egypt). A potential summit in Karachi is being discussed.
• Strategic Objectives: The US aims to neutralize Iran’s nuclear program and secure the Strait of Hormuz. Iran is fighting for regime survival, viewing the Strait as a strategic "hostage" to prevent further US/Israeli attacks.
• The "Countdown": Andreas Steno notes that the economic impact of the conflict is now entering a critical phase. Because it takes ~3 weeks to ship goods from Qatar to Japan, the physical supply shortages are only just beginning to hit global markets.
• Regime Dynamics: There is speculation regarding a potential power shift within Iran—moving influence away from the IRGC (Islamic Revolutionary Guard Corps) and clergy toward more secular leadership, which could facilitate a deal.

2. Market Analysis and Macro Outlook

• Federal Reserve Policy: Despite the conflict, the Fed maintained its interest rate forecast, showing restraint compared to European central banks. The "cutting bias" remains intact, with expectations for four rate cuts this year, provided the crisis is resolved within a few weeks.
• Liquidity and Funding: The spread between the SOFR and the effective Fed funds rate has returned to pre-October levels, indicating that money markets are currently less levered. Hedge funds have "de-grossed" their books, leading to a more benign funding environment despite the geopolitical tension.
• Risk Appetite: Markets are currently in a "slow grind" lower. Because of the high volatility and the risk of sudden "tweets" or policy shifts, large directional bets are difficult to maintain. However, if the "fog of war" dissipates, the current liquidity levels could pave the way for a significant spike in risk-taking.

3. Political Commentary: The Trump Administration

• Arbitrary Volatility: Andreas Steno criticizes the current administration for creating "random, arbitrary volatility" without facing the economic consequences that market participants endure.
• Scott Bessent’s Performance: Regarding the Treasury Secretary’s recent media appearance, the hosts argue that his poor performance was not due to incompetence, but the inherent difficulty of defending a massive U-turn in policy (moving from "no endless wars" to funding a $200 billion conflict).
• Funding the War: The administration is utilizing the TGA, which currently holds approximately $860 billion. The hosts expect this to be drawn down toward $700 billion to fund military operations, which may actually provide a temporary liquidity boost to the system.

4. Notable Quotes

• On War Information: "You cannot trust either side for true information in times of war... you cannot take information at face value." — Andreas Steno
• On Political Accountability: "It is incredibly sad that politicians do not face the same economic consequences as the most market participants from this volatility." — Andreas Steno
• On Market Direction: "We’re always only one tweet away from completely getting run over by a bus in either direction." — Andreas Steno

5. Synthesis and Conclusion

The current market environment is defined by a "wait-and-see" approach to the Iran conflict. While the immediate threat of energy infrastructure destruction has been priced out, the physical supply chain consequences are just beginning to materialize. The US and Iran are locked in a high-stakes negotiation where the US seeks to sell a "victory" (degraded Iranian missile capabilities) and Iran seeks a security guarantee for regime survival. From a macro perspective, the Fed remains steady, and the lack of leverage in the system suggests that while the market is currently grinding lower, it is primed for a potential rally once geopolitical clarity is achieved.