Operation Epic Fury: The United States and Israel Have Taken the World to the Edge of a New Oil War

In the early hours of Saturday, February 28, the world changed. The United States and Israel launched what they are calling “Operation Epic Fury” — a coordinated, multi-day military assault on Iran unlike anything seen in the modern era. Over 1,000 targets across nine Iranian cities were struck. B-2 stealth bombers flew from Missouri to obliterate hardened ballistic missile facilities. Israeli F-35s established air superiority over Tehran and, in what Israel calls “a historic strike,” killed Supreme Leader Ayatollah Ali Khamenei — a man who had ruled the Islamic Republic for 37 years — along with the country’s defence minister, its armed forces chief, and the commander of the Revolutionary Guards. “The majority of the highest-ranking senior military officials of the Iranian security leadership have been eliminated,” the IDF stated.

Iran’s retaliation has been swift, wide, and real. Ballistic missiles and drones have struck US military bases across the Gulf — Al-Udeid in Qatar, Bahrain’s Fifth Fleet HQ, Al-Salem in Kuwait (where three US soldiers were killed), Al-Dhafra in the UAE. Civilian airports were hit too. Dubai’s Jebel Ali Port caught fire from drone debris. Iran struck 165 ballistic missiles at the UAE alone, according to Abu Dhabi’s Defence Ministry. In the first hour of March 2, a drone reportedly struck RAF Akrotiri on Cyprus — bringing the conflict to European soil for the first time. Ben Gurion Airport remains closed. The US Embassy in Jerusalem has told Americans it cannot help them evacuate.

President Trump, speaking to CNBC, described operations as “ahead of schedule” and projected the campaign would last “one month or less.” The stated objectives — destroying Iran’s missile capability, ending its nuclear programme, and triggering regime change — are vast. Analysts broadly contest whether they can be achieved through airpower alone. As Stimson Center experts wrote: “air strikes alone cannot topple a government.”

For financial markets, the calculus is stark. Brent crude opened Monday up 9–12%, briefly topping $80/barrel. Gold surged 3.3% to $5,278 as safe-haven demand exploded. US equity futures plunged — the Dow is down 800 points pre-market. Every oil-importing economy from Japan to Germany to India faces a potential stagflationary shock. The OPEC+ announcement of a +206,000 barrel-per-day increase for April partially offsets the concern but does nothing to address the shipping risk.

Pakistan and Afghanistan Are Now at War — And One of Them Has Nuclear Weapons

The world was so transfixed by Iran that it almost missed the second war breaking out simultaneously in South Asia. Pakistan — a nuclear-armed state with 160+ warheads and a long history of military adventurism — formally declared “open war” on Afghanistan on February 27, after weeks of escalating cross-border strikes. Pakistani jets have now bombed Kabul, Kandahar, and Bagram Airbase. Afghanistan’s Taliban government has retaliated with drone attacks, ground assaults, and artillery strikes on Pakistani border posts, claiming to have killed 55 Pakistani soldiers.

The roots are deep. Pakistan has long accused the Taliban of harbouring the TTP — the Pakistani Taliban — which has launched a string of devastating attacks inside Pakistan, including a massive suicide bombing in Islamabad in February that triggered this escalation. As Pakistan’s Defence Minister Khawaja Asif put it: “our patience has run out.”

The Taliban, battle-hardened from 20 years of fighting the US and NATO, are not an easy opponent. Kabul residents described being woken by explosions and gunfire, watching “bullet-like flames going up in the sky.” Pakistan’s military claims 73 Taliban posts destroyed; Afghanistan claims 19 Pakistani posts taken. CNN, Al Jazeera, and the Washington Post all report cross-border capital strikes in both directions. Qatar is attempting mediation. Prediction markets are currently pricing only a moderate probability of a ceasefire by March 31.

For markets, the Pakistan-Afghanistan war compounds the Iran crisis in important ways. Pakistan is a major transit corridor for Central Asian trade. A prolonged conflict will disrupt supply chains, push up food prices (Pakistan is a major wheat and cotton exporter), and add another layer of instability to already-stressed emerging market portfolios. Watch the Pakistani rupee, Indian equity markets, and any South Asia-exposed ETFs for early signals of contagion.

America’s Inflation Problem Just Got Dramatically Worse — And the Fed Has Run Out of Easy Answers

Just 48 hours before the Iran bombs fell, Wall Street was already reeling. On Friday, February 27, the Bureau of Labor Statistics released January’s Producer Price Index — and it was a genuine shock. Headline PPI rose 0.5% month-on-month, against a consensus of 0.3%. Core PPI, stripping out food and energy, surged 0.8% — more than double the 0.3% forecast — bringing the annual core rate to 3.6%, the highest reading in ten months. The Dow dropped 521 points. The S&P 500 and Nasdaq closed February in the red.

The problem this creates for the Federal Reserve is almost unsolvable. The economy grew just 1.4% in Q4 — less than half of the 2.8% forecast, with a 43-day government shutdown carving out roughly 1 percentage point. Inflation is reaccelerating. The two conditions have a name: stagflation. Jerome Powell’s term ends in May; his replacement, Kevin Warsh, will inherit a trapped institution that can neither cut (inflation is too hot) nor hike (the economy is too fragile) without causing serious damage. Futures markets are now pricing virtually zero chance of a rate cut before June, and the oil shock from the Iran crisis will only harden that outlook further.

Add the Supreme Court’s ruling against Trump’s use of emergency powers for tariff implementation — forcing a pivot to a 10% universal levy via Section 301 — and you have complete policy uncertainty layered on top of economic fragility. As SWBC’s market commentary observed: “markets cannot decide whether to treat this as disinflationary (tariff rollback) or as a deepening policy quagmire.”

Today’s ISM Manufacturing PMI release at 10:00 AM ET arrives in this environment like a lit match near a gas leak. A reading below 50 — the contraction threshold — would combine with the hot PPI, the Iran shock, and the GDP miss to create a powerful triple-threat narrative. Watch the Prices Paid sub-index particularly: if it shows businesses are already absorbing the energy shock, the Fed’s credibility will be tested within days.

The AI Trade Has Fractured — And February 2026 Was the Month Wall Street Finally Admitted It

Something broke in February 2026, and the cracks are not closing quickly. The AI trade — the thesis that has powered markets since 2023 — is experiencing its most severe crisis of confidence yet. Consider the contradictions that defined the month’s final week alone: Nvidia reported earnings that beat estimates by $2 billion and the stock fell 10%, erasing $260 billion in market cap, because investors had priced perfection and received something less. CoreWeave — an actual AI infrastructure company — crashed 20% after posting weak guidance despite revenue of $1.57 billion, because the market suddenly started asking when any of this makes money. Block, Jack Dorsey’s payments company, announced it was firing more than 4,000 employees — nearly half its workforce — betting that AI agents could replace them. Its stock surged 18%. The market cheered the pink slips.

The software sector’s collapse is severe. The iShares Expanded Tech-Software ETF closed February down 10% for the month and is now down 23% year-to-date — its worst quarter since the 2008 financial crisis. Salesforce fell more than 4% on Friday alone. Zscaler dropped 11%. Microsoft declined 2%. The “Magnificent Seven” collectively sit 5% lower in 2026. Meanwhile, equal-weighted S&P 500 is up 6.4% and international equities are up 8%. Capital is rotating away from AI narrative plays and toward companies with actual earnings, actual dividends, and actual products.

OpenAI’s own financial position adds a surreal dimension. The company projects it will lose $14 billion in 2026 — and yet just raised $110 billion, largely from the same tech giants whose chips and cloud services it depends upon. “A funding circle that looks like a perpetual motion machine,” as the Market Breakdown newsletter described it. The question the market is beginning to ask, seriously and aloud, is whether AI productivity gains for companies experimenting with the technology are actually materialising — or whether the ROI remains perpetually in the future.

The World Order Has Split. Europe Is Rearming, Russia Is Escalating, and America Has Changed the Rules — For Good

Step back from the hourly headlines and a deeper story comes into focus. The United States is fighting an undeclared war against Iran without congressional approval. Pakistan and Afghanistan are in open armed conflict. European leaders are pledging the largest defence spending increases since the Cold War. Russia’s hybrid warfare — arson, sabotage, cyberattacks — is escalating against NATO infrastructure across the continent. A drone reportedly struck RAF Akrotiri on Cyprus in the first hour of Monday, bringing active conflict to European soil. The rules of the post-1945 international order — which provided the operating environment for the greatest era of wealth creation in human history — are being discarded one by one.

The Iran war is already drawing in European allies. British Prime Minister Keir Starmer said the UK would allow US use of British bases for “defensive” strikes. The EU three — UK, France, Germany — have pledged to back “proportionate military defensive measures” if needed. This brings Europe closer to direct participation in a Middle East conflict than at any point since Suez. Meanwhile, at NATO’s eastern flank, the most dangerous front has shifted from Ukrainian trenches to the hybrid war between Russia and NATO members, with Moscow systematically testing the limits of what provocation the alliance will tolerate.

For traders, the structural implications are profound and durable. Defence and aerospace stocks are structural long positions now — not cyclical plays. BAE Systems, Rheinmetall, L3Harris, RTX, and their peers are pricing in a decade of elevated government procurement. Critical minerals — lithium, cobalt, copper, rare earths — are becoming geopolitical assets as supply chain security becomes a national security priority for every major power. Gold’s record run (best year since 1979 through 2025, and already up 3.3% this morning) reflects a fundamental repricing of political risk, not a temporary spike.