• Treasury yields surged, with the 20-year and 30-year yields rising 8.0 bp (1.69% and 1.67% respectively, z=2.90σ), reflecting market concerns of potential tightening in liquidity. • Brent crude oil prices skyrocketed by 12.52% (4.23σ), spurred by geopolitical tensions amidst supply disruptions, impacting inflation expectations and overall market sentiment. • The Bovespa index declined by 2.91% (z=-3.69σ), indicating a bearish sentiment in the emerging market space as local issues compounded global risk aversion. Markets closed generally lower on Thursday as Treasury yields rose sharply and crude oil prices surged, reflecting heightened concerns over geopolitical tensions and inflation risks. Key headlines today highlighted the deteriorating sentiment driven by a sharp spike in energy prices following reports of worsening situations in the Middle East, notably the ongoing conflict involving Iran. Specifically, Reuters noted that the Iranian nuclear program remains a point of friction between the U.S. and its allies, which continues to pressure oil prices upwards and exacerbate inflation fears. This backdrop contributed to a significant sell-off in equities, particularly in tech and consumer discretionary sectors, where major players like Tesla and Amazon fell by 2.97% and 2.10%, respectively. Per the economic data calendar, today’s releases included housing starts, which came in at 1.487M, outperforming expectations of 1.34M, showcasing resilience in the housing sector. However, building permits disappointed with a drop to 1.376M from a prior 1.45M, raising caution regarding future constructions. Despite these mixed signals, the GDPNow from the Atlanta Fed provides a more optimistic outlook, currently estimating a 2.74% GDP growth for Q1 2026, which is an encouraging sign against the backdrop of rising yields. Markets appeared to underestimate this strength, as equities weighed down amidst tightening financial conditions rather than re-evaluating growth prospects. In the fixed income market, the increase in U.S. Treasury yields was especially pronounced in the 20-year and 30-year notes, both rising 8.0 bp. The Moody's corporate yields also increased by 13 bp, suggesting a rise in perceived credit risk and reflecting broader market worries. The liquidity regime signal indicates an improving environment, with the momentum currently at +0.939; however, the overall risk-off sentiment evident in the equity markets appears contradictory. This divergence raises questions about sustainability — positive liquidity conditions, fueled by a solid position in inflation expectations and tight credit spreads, could hint at resilience that was not reflected in equity price behavior. Energy stocks notably outperformed, with the energy sector gaining 2.41%, driven by the sharp increase in both Brent and WTI prices due to market tightening perceptions. The crude oil indices showed an extreme unusual move, particularly notable as Brent crude oil prices surged 12.52% (4.23σ), driven by concerns over supply constraints related to geopolitical uncertainties. This reflects increasing inflation pressures that may warrant ongoing attention from the Federal Reserve in the context of their upcoming decision-making, with CME FedWatch showing probabilities indicating a high likelihood of maintaining rates at current levels for the next meetings. Given this context, particularly notable is the concurrent increase in high yield and investment-grade yields, indicating a tightening of financial conditions. Emerging markets fared poorly, particularly the Bovespa, which dropped 2.91% (z=-3.69σ), indicating that local economic challenges may be compounding global risk factors. The Nifty index also saw significant losses of 2.46%, showing broader vulnerabilities in the emerging market space tied to global liquidity concerns. Investors might consider looking selectively for opportunities in stable sectors or defensive equities as volatility persists, particularly eyeing earnings reports from tech and financial sectors in the coming weeks. Going forward, key data to watch includes the upcoming Core PCE Price Index and JOLTS Job Openings tomorrow, as these will likely provide additional insights into inflation trajectories and labor market dynamics. Given the interaction between rising yields and pricing power, the economic data may significantly influence the risk appetite in equity and credit markets. With oil prices likely remaining volatile amidst geopolitical uncertainties, the outlook suggests traders should lean cautiously towards defensive positioning, as the combination of rising rates and uncertain growth prospects may weigh on equity valuations. In contrast, sectors such as energy may continue to see momentum, but broader market risks driven by macro liquidity conditions should keep investors alert.