SOTS 2nd Hour: $200 Oil? U.S.-Iran Latest, Fmr. Israeli Ambassador Weighs In, & More Private Credit Cracks 3/12/26

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Sara Eisen (1:07)

Good Thursday morning. Welcome to Squawk on the Street. I'm Sara Eisen with Carl Quintanilla and Mike Santoli. We are live at Post 9 of the New York Stock Exchange. David Faber's off today. Coming up this hour, we are all over the fast-moving developments in the Middle East and the impact on global markets as Iran warns about $200 a barrel oil. Former Israel ambassador to the US., Michael Oren, will be with us to discuss what the end game could look like here. Plus, even more concerns creeping up around the private credit market as Morgan Stanley now limits redemptions at one of its funds.

We'll talk about the potential contagion effects for the broader market. But guys, with the rise in oil prices, we are starting to get some new economic forecasts, right, for how this is going to impact the consumer, higher gas prices, higher oil prices, higher inflation prices, inflation. That is, Goldman Sachs put out their note from the economist today and they actually put some numbers on these new forecasts. So, I just wanted to highlight it because, you know, this is what Wall Street is dealing with. They raised their PCE inflation forecast by 0.8 points to 2.9 percent. This is for the fourth quarter, December, sorry, December, yep. They raised their core PCE forecast, 0.2 percent to 2.4 percent. And then on Q4 GDP growth forecast, they lowered it by 0.3 to 2.2 percent. So, you know, we're still looking at decent growth of 2 percent, but it's come down because of what's happening in the war. The peak unemployment rate, they now say, is up to 4.6 from 4.4 percent. So that just gives you a sense of what I think Wall Street is looking at and economists are looking at while they're extrapolating, OK, this is how much the barrel of oil got more expensive. This is going to be the direct impact on the economy for inflation and for growth. I think it also presents the Fed with a little bit of a tricky spot, right? Because you have a new Fed share potentially coming in. Kevin Warsh, if he gets approved and he wants to cut interest rates and now you have a PCE or an inflation rate that is closer to 3% than 2% if this kind of forecast comes true.

Mike Santoli (3:13)

Yeah, it's interesting. The stock market has been trying to kind of sequester the vulnerable parts of the economy in terms of what stocks are really getting punished. And it reflects that, right? A little bit slower growth than we thought. Consumer going to be a little more strained than expected. The equal weight consumer discretionary is down like 7% a month to date, even though the S&P 500 tries to hold its range. Right here, it's kind of being, you know, making it difficult to give it the benefit of the doubt here, as it keeps kind of testing those lows from back in December. But you know, airlines down 15%. All the obvious stuff has been hurt. But more broadly, it feels like a relative trade back toward the US because we are slightly more insulated than other parts of the world.

And everything about the Iran shock has kind of caused these unwinds of the most extended trades. And one of the most extended trades was by non-U.S. stocks. Another one was by gold over Bitcoin. That's reverted.

Sara Eisen (4:09)

And sell the dollar.

Mike Santoli (4:09)

Another one was by equal weight over big tech in the US. That has compressed as well. So I think right now the market is trying to get lucky and say maybe we can just get away easy on having this kind of pockets of weakness and then get through this period. But every day it goes on, you know, it becomes a little bit less probable.