The War Just Got Bigger. Houthis Fire on Israel. Pentagon Preps Ground Ops. Yanbu Under Threat. Brent $112.

The war expanded over the weekend. Yemen’s Iran-backed Houthi rebels launched their first attacks on Israel since the conflict began: two ballistic missiles targeting Beersheba, a cruise missile intercepted before reaching Israeli territory, and a drone aimed at Eilat shot down by IDF. No casualties, but the strategic implications are enormous. The Houthis now threaten the Bab el-Mandeb Strait, the southern gateway to the Red Sea and Suez Canal, putting 10% of global maritime trade and 40% of container traffic at risk. The Pentagon is preparing limited ground operations in Iran, including raids on Kharg Island and Hormuz coastal sites. The 82nd Airborne Division and 2,500 Marines aboard USS Tripoli are now in theater. Meanwhile, the most coordinated regional diplomatic effort of the war kicked off in Islamabad, with Pakistan, Saudi Arabia, Turkey, and Egypt pushing for face-to-face US-Iran talks before April 6. Brent hit $112.50, up 48% for March, the largest monthly oil gain since 2008. S&P futures bounced 0.6% on Islamabad optimism. Ceasefire probability: 30–35%. Two of the world’s three critical maritime chokepoints are now threatened simultaneously. If both Hormuz and Bab el-Mandeb are disrupted, there is no alternative route for Persian Gulf oil.

Market Snapshot | 6:45 AM ET Monday

Two Chokepoints: Why Oil Is Headed to $120+

The single most important development of the weekend is not any individual event. It is that the war now threatens two of the world’s three critical maritime energy chokepoints simultaneously:

• Strait of Hormuz (blocked since Day 1): 20% of global oil supply, 25% of LNG. IRGC Navy continues to turn away ships. Three container ships rejected Friday. 20,000 seafarers stranded. Saudi Arabia has been diverting 4.6 million bbl/day through the East-West Pipeline to its Red Sea port of Yanbu, a workaround, not a solution.
• Bab el-Mandeb / Red Sea (newly threatened): 10% of global maritime trade, 40% of container traffic. The Houthis’ missile strikes on Israel signal they are willing to expand operations. In 2024, Houthi Red Sea attacks forced major shipping lines (Maersk, Hapag-Lloyd, CMA CGM, MSC) to reroute via the Cape of Good Hope, adding 10–14 days and $1M+ per voyage. If this resumes, it compounds the Hormuz disruption.
• The Yanbu vulnerability: Saudi Arabia’s East-West Pipeline hit 7M bbl/day on March 28, diverting Persian Gulf oil to Yanbu on the Red Sea. But Yanbu is within Houthi missile range. A drone already fell on the Samref refinery at Yanbu, and a ballistic missile was intercepted nearby. If the Houthis attack Yanbu systematically, the bypass fails and global oil supply loses both exit routes simultaneously.

If Both Hormuz and Bab el-Mandeb Are Disrupted, There Is No Alternative Route for Persian Gulf Oil

The Hormuz-to-Yanbu-to-Red-Sea pipeline was the market’s comfort blanket. That blanket is now on fire. Analysts project Brent $150+ within weeks if Houthi attacks on Red Sea shipping resume in earnest. Even the threat is worth $5–10/bbl of risk premium. Brent at $112 this morning is pricing the Houthi entry but not a full Red Sea disruption. The tail risk is extreme.

Houthis Enter the War

Yemen’s Houthi rebels launched their first strikes on Israel since the war began on February 28: two ballistic missiles targeting Beersheba, a cruise missile intercepted en route, and a drone aimed at Eilat. All were neutralized. No casualties reported. But the strategic consequences go well beyond the physical damage. The Houthis now operate on the second active maritime chokepoint of this war, and their track record in 2024 shows they are willing and capable of disrupting global shipping at scale. If they resume attacks on commercial vessels transiting the Bab el-Mandeb Strait, 10% of global maritime trade faces rerouting around the Cape of Good Hope, adding 10–14 days and $1M+ per voyage.

Pentagon Ground Plans: What Kharg Island Raids Would Mean

The Washington Post reports the Pentagon is planning limited ground operations in Iran. Here is what that means in practice:

• What it is: Limited raids by special operations and 82nd Airborne on specific targets, notably Kharg Island (90% of Iran’s oil exports), coastal Hormuz facilities, and possibly IRGC Navy bases. These would be in-and-out operations to damage Iran’s ability to control the Strait and export oil. Duration: days to weeks, not months.
• What it isn’t: A full-scale ground invasion. No one is talking about occupying Tehran or regime change. The 2,500 Marines and airborne units are structured for rapid-strike operations, not sustained ground war.
• Market implication: A Kharg Island raid would temporarily remove 1.5–2M bbl/day of Iranian exports from the market, but it would also demonstrate the US is willing to escalate beyond air strikes. This is simultaneously bearish (supply destruction) and bullish (credible military pressure increases ceasefire probability). The net effect on oil depends on timing relative to Islamabad talks.
• The Iran response: Ghalibaf’s “set on fire” rhetoric is alarming but typical. Iran’s actual capability to repel US special operations forces is limited. The real risk is asymmetric retaliation, such as Hezbollah attacks on US bases in Iraq/Syria, Houthi escalation in the Red Sea, or cyber attacks on Gulf infrastructure.

Islamabad Four-Nation Summit: The Most Coordinated Peace Effort Yet

The most coordinated regional diplomatic effort of the war kicked off Sunday. Foreign ministers of Pakistan, Saudi Arabia, Turkey, and Egypt held two-day consultations in Islamabad. Pakistan’s FM Dar confirmed “both Iran and the US have expressed confidence in Pakistan to facilitate talks.” The goal: face-to-face US-Iran negotiations in Islamabad before the April 6 deadline. This is real. Four regional powers do not convene a summit over a head fake.

Friday Recap: The Worst Week Since the War Began

Friday closed the worst week for equities since the war began on February 28:

• S&P 500: 6,344 (-0.39% Monday, after -1.67% Friday). Six consecutive losing sessions. Seven-month low.
• Dow: 45,216 (+0.11% Monday, still in correction territory at -10% from Feb highs).
• Nasdaq: 20,795 (-0.73% Monday). NVDA fell 1.4% to $165.17. Tech under siege from rising yields, TurboQuant, and war.
• Week totals: S&P -2.1%, Nasdaq -2.5%, Dow -2.0%. Fifth straight weekly decline for all three.
• Gold: Paradoxically weak at $4,567. Down 21% from January’s $5,589 ATH. Strong dollar and rising real yields are overpowering safe-haven demand. Gold is losing the war-premium trade to oil and the dollar.

Oil & Commodities: March Was a Historic Month

As March closes, the commodity moves deserve perspective. This was the most violent month for oil since the 2022 Russia-Ukraine invasion:

• Oil range now $110–$130: The floor is $110 (Hormuz blocked + Houthi threat). The ceiling depends on Bab el-Mandeb. If Houthis resume Red Sea shipping attacks, $130–$150 is in play. If Islamabad talks produce a framework, $95 is possible within a week. The dispersion is the widest it has been.
• Gold’s paradox: Gold should be screaming higher in a war. Instead, it’s down 18% from its January ATH. The culprit: the dollar. DXY at 106 means foreign gold buyers face currency headwinds. Rising real yields (10Y at 4.35%) make non-yielding gold less attractive. Gold needs the Fed to pivot dovish to break out. That’s not happening with oil at $112.

War Signal Tracker | Monday Assessment

Assessment: 2 BULL / 7 BEAR / 1 NEUTRAL. Worse than Friday’s 1/6/3. The Houthi entry is the key downgrade, opening a second front and threatening the Saudi Yanbu bypass. The Islamabad summit is the sole bright spot. Ceasefire probability: 30–35%, unchanged from Friday, but the composition shifted. Diplomatic effort is up, while military escalation is also up. The race between war and peace is accelerating on both tracks.

Company Headlines

Top 12 Headlines

Trade Ideas

▲ BUY LMT / RTX / NOC: Defence, Now the Core War Trade

The war just expanded to four fronts: US air campaign, Israeli nuclear strikes, Houthi missile attacks, and potential US ground ops. Defence names benefit from every escalation vector. LMT builds the F-35s flying over Iran. RTX builds the Patriot and Standard missiles intercepting Houthi projectiles. NOC builds the B-2s potentially staging from Diego Garcia. Congress will fast-track supplemental defence spending regardless of which party wins. This is now a 12–18 month trade, not a tactical position. Risk: Rapid ceasefire collapses war premium; defence budget gets caught in fiscal fights.

▲ BUY XOM / CVX: Energy Majors, Cash Machines at $112 Oil

Brent $112 with WTI $108. US integrated majors are generating $3–4B in free cash flow per quarter at these levels. Q1 2026 earnings (due late April) will be extraordinary. The market hasn’t fully priced sustained $110+ oil because it keeps expecting a ceasefire. If Hormuz stays blocked through April, XOM could report $15B+ Q1 FCF. Buy the cash, not the hope. Risk: Ceasefire reopens Hormuz; oil drops to $85; windfall tax rhetoric resurfaces.

▲ HOLD MU / NVDA: Tech Longs, Wait for the Catalyst

NVDA at $165 (20x forward). MU at $350 (-26% from ATH). Both are at valuations that imply the AI story is over. It is not. Vera Rubin ships Q3, HBM demand is unchanged, TurboQuant’s real-world impact is 2.6x not 6x. But the macro headwinds are brutal: oil $112, Fed hike odds 52%, Dow in correction. Do not add here. Wait for either: (a) Islamabad breakthrough for macro relief, or (b) ISM above 52 + VIX below 22 as a risk-on signal. The upside when the turn comes is 20–30% in 2–3 months. Risk: Stagflation becomes consensus; PE multiples compress further; AI spending decelerates.

▼ SHORT JETS: Airlines, The $112 Oil Death Trap

Every $10 increase in jet fuel costs the industry $2B+ annually. At Brent $112, jet fuel is $3.80/gal, the highest since 2022. DAL, UAL, and AAL guided on $80–90 oil assumptions. Those assumptions are obliterated. Airlines cannot pass through 40% fuel cost increases without destroying demand. JETS ETF is down 12% from Feb highs but has another 5–10% downside if oil stays above $110 through Q2. Buy puts or short directly. Risk: Ceasefire collapses oil to $85; airlines reprice fuel hedges; summer travel demand surprises.

Event Calendar | The Week Ahead

Two things to watch above all else: (1) ISM Manufacturing on Wednesday tells us if the war is causing a manufacturing recession; a print below 50 would be the first contraction signal and would trigger a major risk-off move. (2) Islamabad talks: if face-to-face US-Iran contact happens before April 6, expect a 3–5% equity rally and $10–15 oil drop on the headline alone.

Bottom Line

The Race Between War and Peace Is Accelerating.

The war just got bigger. The Houthis opened a new front. The Pentagon is positioning ground forces. Israel is striking nuclear sites. Oil is at $112 and headed higher. Two of three global maritime energy chokepoints are threatened simultaneously.

But the diplomacy also got bigger. Four regional powers convened in Islamabad, the most coordinated peace effort of the war. Pakistan says both sides trust them. Trump says talks are “going very well.” The April 6 deadline creates urgency. If face-to-face talks happen this week, the entire war trade unwinds violently in the bullish direction.

This is the paradox of the moment: the military escalation and the diplomatic effort are both intensifying simultaneously. The ground ops prep might be the leverage that makes Islamabad talks work. Or it might trigger Iranian retaliation that kills the talks. We don’t know which. The market doesn’t either, which is why the VIX is at 27 and oil is at $112.

What we’re doing: Maintaining defence overweight (LMT/RTX/NOC). Holding energy (XOM/CVX). Short airlines (JETS). Holding tech longs but not adding (NVDA/MU/GOOGL/COHR). Watching ISM Wednesday for recession signal. Watching Islamabad for peace signal. This week determines Q2.

For internal use only. Not investment advice.