Happy Friday, investors. Phil here. Last night, President Trump hinted that Cuba could be an upcoming target for a US military operation, following the recent moves in Venezuela and Iran.

While he still has to figure out next steps with the first two nations, it sounds like there’s plenty more geopolitical moves top of mind for the Commander in Chief.

For the purposes of market-watchers like us, that means market volatility is here to stay.

Cautious consumer

Oil prices will determine whether the Iran conflict becomes an economic problem.

If crude stays elevated long enough, the conflict stops being a geopolitical headline and becomes perceived as a new tax on everyday households.

Energy shocks typically make themselves known across the economy not because of direct supply shocks but through the squeeze they put on consumer spending.

When gas prices rise, disposable income falls.

And the spending power that shifts from everyday Americans to energy corporations tends to circulate far slower back into the real economy.

Neil Dutta, head of economics at Renaissance Macro, told me on Full Signal that this dynamic matters more now because households have little financial cushion.

Real income growth excluding government transfers has barely risen over the past year, leaving consumers vulnerable to even small increases in fuel prices.

The usual forecasts suggest a spike in oil prices like the recent move catalyzed by the Iran conflict would shave off a tenth or two from annualized GDP growth.

But those models, Dutta said, assume that households have enough savings on hand to withstand high prices.

With savings already drawn down, the hit to consumers could be more severe than previous cycles.

To be sure, there’s no exact price level where oil suddenly snaps the economy.

The relationship tends to be non-linear — consumers often tolerate gradual increases at the pump until, effectively overnight, prices become too steep and spending behavior changes abruptly.

According to the so-called “Hamilton Trigger,” the switch flips once oil prices exceed their highest level from the last three years.

Today, that suggests crude would need to hit roughly $95 a barrel for consumers to respond quickly and negatively, according to Dutta.

On Thursday, Brent crude topped $80 a barrel to mark it’s largest one-day gain since May 2020.

“A non-linear spike in oil prices will crush spending, but the linear increase we have now is bad enough,” Dutta said.

📉 The February jobs report is due this morning. Nonfarm payrolls are expected to rise 60,000 for the month, which would mark a decrease from the 130,000 seen in January. Unemployment is forecasted to hit 4.3%. (FactSet)

✂ Oracle is planning to cut thousands of jobs. The company is facing a cash crunch from the massive AI data center buildout, according to insiders. Some layoffs will reportedly be aimed at jobs that could be automated from AI. (Bloomberg)

☁ Cloud stocks suddenly rallied on Thursday. The Wisdom Tree Cloud Computing ETF (WCLD) saw its biggest rally since last April when it jumped 4.7%. Okta, Wix, MongoDB and Sailpoint all climbed more than 6%. (CNBC)

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Neil Dutta is one of the best economists on Wall Street — and he's paying close attention to Iran. He joined me on Full Signal to discuss the Middle East conflict’s macro implications, the risks of rising crude prices, the Fed’s new dilemma, and more.

Tune in on YouTube, Spotify, and Apple Podcasts.

🗓 March 6, 1933: President Franklin D. Roosevelt shut down the entire US banking system as bank runs swept across the country amid the Great Depression.

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