Week in Markets: Operation Epic Fury, NVIDIA Beats and Drops, Stagflation Confirmed

The United States and Israel killed Iran's Supreme Leader. The Strait of Hormuz shut down. Oil gapped 13%. Gold crossed $5,300. And the week had already been bad before any of it happened.

Last week we asked whether NVIDIA would validate the AI capex thesis, whether Trump would escalate tariffs further, and whether BTC could break above $69K. NVIDIA beat every estimate and lost $260 billion in market cap the next day. Section 122 tariffs took effect Tuesday. BTC crashed to $63K, bounced to $70K, and closed back at $66K. Then on Saturday, the US and Israel launched Operation Epic Fury, the largest Western military operation in the Middle East since 2003, and the entire risk calculus changed overnight.

Macro Pulse

Section 122 Tariffs Take Effect

Tuesday February 24, Trump's 10% global import tariff under Section 122 of the Trade Act of 1974 became effective. This was the immediate pivot after the Supreme Court struck down his IEEPA tariffs on February 20.

Markets shrugged. The S&P rose slightly on Tuesday. Trading desks called it the "TACO trade" (Trump Always Chickens Out) as the 10% rate came in below the proclaimed 15%. But the tariff is already showing up in the data. The PPI report four days later showed professional equipment margins up 14.4%, a direct reflection of businesses repricing imports.

The legal challenge is already forming. Foreign Policy, CNN, and trade scholars argue Section 122 was designed for balance-of-payments emergencies, not trade deficits, making it vulnerable to the same judicial scrutiny that killed the IEEPA tariffs. Congress is unlikely to extend it past the 150-day cap.

Trump used his February 25 State of the Union address to double down. He called tariffs a potential replacement for income tax and slammed the Supreme Court ruling as "disappointing." India paused its interim trade deal. The EU postponed its vote on a 15% reciprocal arrangement. The Trump-Xi summit is confirmed for March 31 to April 2 in Beijing.

NVIDIA: Record Quarter, Record Disappointment

NVIDIA reported Q4 FY2026 earnings Wednesday after the bell. Every single metric beat consensus.

Jensen Huang raised the annual chip revenue target, stating Nvidia "will surpass the $500 billion goal." The Blackwell architecture is at full production. Data center revenue grew 75% year-over-year, faster than the prior quarter's 66%.

The stock rose 3.5% after hours. Then it gave it all back and more.

Thursday, NVIDIA fell 5.5% to $184.89, its worst day since April. It erased roughly $260 billion in market cap. The Nasdaq dropped 1.2%. The S&P 500 fell 0.4%.

The message from the market is clear: beating expectations is not enough. The AI infrastructure trade has entered a new phase where investors want to see revenue from AI applications, not just from selling the tools. Competition from DeepSeek, Meta, and Amazon's custom silicon is becoming a real headwind. Morgan Stanley called it "the largest, cleanest beat in semis history" but the reaction tells you where sentiment sits.

PPI: Inflation Strikes Back

The Producer Price Index for January, released Friday February 27, was the week's hardest macro punch.

Services inflation drove the entire beat. Goods prices actually fell 0.3%. The 14.4% spike in professional equipment margins is a direct tariff pass-through effect.

PPI feeds into the PCE calculation that the Fed watches most closely. With Core PCE already at 3.0% and the instantaneous rate at 3.6% (Cleveland Fed method), any remaining hope for a March rate cut evaporated. CME FedWatch shows 94.1% probability of a hold at the March 17-18 FOMC meeting.

The timing matters. This is the first PPI report that captures the period after Section 122 tariffs were announced. If tariffs are already showing up in producer prices at 10%, the Fed has a new input to worry about.

Consumer Confidence: Slightly Less Pessimistic

Consumers under 35 are the most optimistic cohort. Everyone else is getting more cautious. Spending plans for services softened. The number is consistent with a consumer that is holding up but losing momentum. Not panic. Not confidence. Just grinding through.

Fed: No Path Out

The Fed is trapped in a policy box that got tighter this week.

The stagflation scenario is no longer theoretical. Growth is decelerating. Inflation is reaccelerating. The oil shock from Iran compounds both problems. Goldman Sachs pushed its next cut forecast to June 2026 last week. After Friday's PPI, even that looks optimistic. Rate markets now see the earliest plausible cut in July at best.

Sources - Macro Pulse: White House: Section 122 Fact Sheet | CNBC: NVIDIA Q4 FY2026 Earnings | CNBC: NVIDIA Stock Sinks 5% | BLS: PPI January 2026 | CME FedWatch Tool | Tax Foundation: State of US Tariffs

Geopolitics

Operation Epic Fury: The Week's Defining Event

Three days separated diplomacy from war.

On Thursday February 26, the third round of indirect US-Iran nuclear talks concluded in Geneva. Iran's Foreign Minister Araghchi called it "the longest, most serious round." Oman mediated. Both sides identified key elements of a potential agreement. No deal was reached. Technical meetings in Vienna were announced as next steps.

On Saturday February 28, the United States and Israel launched Operation Epic Fury, a coordinated air campaign targeting at least nine Iranian cities, nuclear facilities, military commanders, and government officials. Supreme Leader Ayatollah Ali Khamenei was killed in the strikes. Trump confirmed the elimination publicly.

Iran retaliated with missile strikes on Israel, Jordan, Saudi Arabia, and US military installations in Qatar, Kuwait, the UAE, and Bahrain. Israel issued nationwide shelter orders.

The Strait of Hormuz is effectively closed. Tanker operators suspended transit unilaterally. Semi-official Iranian media announced a naval blockade. Roughly 31% of global seaborne crude oil, approximately 13 to 20 million barrels per day, transits this chokepoint.

Weekend Market Reaction

The Houthis compounded the disruption. Having paused Red Sea attacks since October 2025, they announced immediate resumption in response to the Iran strikes. Both the Strait of Hormuz and the Red Sea, the world's two most critical maritime oil routes, are simultaneously disrupted. This has not happened in modern history.

This is the most significant Western military operation in the Middle East since the 2003 Iraq invasion. The elimination of a head of state and the closure of Hormuz are first-order events for oil, gold, the dollar, and every risk asset on the planet.

Ukraine-Russia: Stalemate Deepens

February 27-28, Bloomberg reported that Russian officials see "little point" in continuing US-brokered peace talks unless Ukraine cedes Donetsk. Zelenskyy proposes a ceasefire along current front lines with Western security guarantees. Bilateral Ukraine-US talks ended without progress on March 1. Trilateral negotiations are scheduled for March 4-5 and are described as "decisive."

The Iran strikes have eclipsed Ukraine in the news cycle. If the March 4-5 talks fail, wheat, European gas, and defense equities would be the assets most affected.

European Defense: Record Spending

European defense spending reached 21% of global total, up from 17% in 2022. Germany crossed $107 billion in defense spending in 2025, a 25% increase. Berlin committed to 500 billion euros by 2029. European defense stocks are structural outperformers.

Sources - Geopolitics: PBS: US-Israel Attack on Iran | Washington Post: Operation Epic Fury | CNN: US-Israeli Strikes Feb 28 | Bloomberg: Iran Strikes Oil Stakes | Axios: US Sinks 9 Iran Warships | Bloomberg: Russia Weighs Halt to Peace Talks

Markets

Indices: A Week in Two Acts

Act one was the tariff-NVIDIA-PPI trifecta. Act two was the Saturday air raid.

The Nasdaq posted its worst February since March 2025. The Dow lost 521 points on Friday alone. The S&P 500 closed the month 0.9% lower, within 1.5% of its January all-time high.

Tuesday sold off on tariff activation. Wednesday saw cautious buying ahead of NVIDIA. Thursday collapsed after NVIDIA's "beat and dump." Friday's hot PPI sealed the week in the red. None of these Friday closing prices reflect the Iran strikes. Monday March 3 is when equity markets price in Operation Epic Fury.

Yields and Dollar

The 10-year yield fell below 4.00% for the first time since November 2025. This was its best monthly performance in over a year. Paradoxically, yields fell alongside a hot PPI report. The explanation: flight to safety. When equities sell off and geopolitical risk rises, Treasuries absorb capital regardless of inflation data.

Post-Iran, expect further yield compression as safe-haven flows accelerate. The 10-year could test 3.75% if Hormuz remains closed through the week.

Commodities

Gold pushed higher all week on tariff uncertainty, safe-haven demand, and falling real yields. Goldman Sachs maintained its $5,400 year-end target. JP Morgan raised its target to $6,300. The weekend Iran strikes sent gold through $5,300 and toward $5,400.

Silver outperformed gold for the second consecutive week, adding 14%. Solar demand, electronics, and monetary hedge are all pointing the same direction.

Oil was the most volatile commodity. WTI closed Friday at $67.02. Then the strikes happened. Brent gapped to $82.37 on Sunday evening, a 13% intraday move. If the Strait of Hormuz remains closed beyond 72 hours, $90-100 Brent becomes the base case.

Sector Rotation and Earnings

The AI trade is cracking. The value trade is accelerating.

Block's 24% surge after cutting half its workforce is the week's most striking signal. The market is rewarding AI-driven efficiency over AI-driven spending. Dell's $43 billion AI server backlog shows enterprise demand is real. The narrative is shifting from "who builds AI infrastructure" to "who monetizes AI in their core business."

Sources - Markets: Yahoo Finance: Stock Market Feb 27 | CNBC: Dow Closes 500 Points Lower | CNBC: Oil Prices Jump on Iran | Goldman Sachs: Gold Forecast $5,400 | JP Morgan: Gold Target $6,300 | CNBC: Block Cuts 40% Workforce

Crypto

Price Action: The $7,000 Range

Bitcoin had its most volatile week since the January crash.

Tuesday was a bloodbath. BTC crashed from $67,825 to $62,552 during Asian hours as tariff activation and tech selloff fears cascaded. A $61.5 million BTC-USDT position was liquidated on HTX, the largest single liquidation in weeks.

Wednesday through Thursday saw a violent reversal. BTC reclaimed $67,500 on Wednesday and pushed to $70,005 by Thursday as short sellers got squeezed. Over $307 million in short positions were liquidated in 24 hours. The bounce coincided with NVIDIA's after-hours beat and returning ETF inflows.

Thursday through Friday gave it all back. NVIDIA's sell-the-news reaction on Thursday dragged risk assets lower. The hot PPI print on Friday sealed the reversal. BTC closed the week at approximately $65,700.

Then the Iran strikes hit Saturday. BTC flash-crashed to $64,000, then spiked to $68,200 within hours as markets processed the elimination of Khamenei. By Sunday evening, BTC settled around $66,500. February 2026 closes as BTC's worst month in the cycle: -14%.

ETF Flows: The Streak Breaks

The most important signal in crypto this week. After five consecutive weeks of outflows totaling $3.8 billion, BTC spot ETFs posted their first positive week.

BlackRock's IBIT dominated with +$503 million for the week. Despite the positive weekly number, February 2026 was the first full month of net negative BTC ETF flows since the products launched.

ETH ETFs also turned positive: +$116.9 million for the week. SOL ETFs continued their streak with approximately +$43-45 million and 12+ consecutive days of positive flows. SOL remains the only crypto ETF segment with consistent inflows throughout the downturn.

The flow reversal while prices remain 23% below year-to-date highs suggests institutional accumulation at lower prices, not speculative chasing. Abu Dhabi sovereign funds reportedly added BTC ETF exposure in mid-February.

Derivatives: Short Squeeze Setup

The derivatives setup is textbook contrarian. Funding rates at -6% mean shorts are paying longs, a historically reliable indicator that bearish positioning is overcrowded. Rising open interest with negative funding creates the conditions for a short squeeze. The Monday-Tuesday reversal from $63K to $70K was exactly this mechanism playing out.

On-Chain

The stablecoin picture is the most concerning metric. USDT reserves on exchanges have fallen from $60 billion to $51.1 billion since the start of the year. This $9 billion outflow represents buying power that has left the system entirely. New capital is not entering crypto markets.

Exchange deposits normalized to 23,000 BTC/day. Selling pressure has eased but has not reversed. The Exchange Whale Ratio at 0.64 means large holders still dominate flows. Until whales shift from distribution to accumulation, prices remain capped on rallies.

Sentiment

The Fear and Greed Index touched 5 during the week, the lowest reading in the entire history of the indicator. Lower than the COVID crash (8). Lower than Terra-Luna (6). Lower than FTX (10). By Friday it recovered to 11-14, still deep in Extreme Fear for 30+ consecutive days.

VanEck's Matthew Sigel framed it as "orderly deleveraging rather than capitulation." James Check at CoinDesk argued that "Bitcoin's price pain is largely over, but time pain remains." Every historical reading this low has been a 6-12 month buy signal.

Regulation

The Federal Reserve proposed eliminating "reputation risk" as a factor in bank supervision, which had been used to pressure banks into cutting ties with crypto businesses. This is a meaningful structural change for the industry.

JPMorgan identified the CLARITY Act (market structure bill) as a "positive catalyst for H2 2026" if passed. The bill would classify major tokens including XRP, SOL, LTC, and DOGE as commodities under a grandfather clause. It passed the House but remains blocked in the Senate.

Iran Reaction: BTC as Safe Haven?

BTC still trades as a risk asset first, safe haven second. The initial reaction was to sell. Gold gained immediately. BTC only rallied when the market interpreted Khamenei's death as a potential path to de-escalation. The rally faded within hours. Gold held.

Monad Ecosystem

The evm/accathon hackathon launched February 26 with two in-person days at ETHDenver followed by two weeks online. Over $100K in prizes. The Monad Foundation hired executives from FalconX, BVNK, and Optimism to accelerate institutional expansion post-mainnet.

Sources - Crypto: CoinDesk: BTC Dips Under $63K | CoinDesk: BTC Tops $68K After Khamenei | Blockchain.news: BTC ETFs $787M Weekly | VanEck: February Selloff Analysis | CryptoQuant: USDT Reserves Drop | Monad: evm/accathon Hackathon

Week Ahead

March 2-6: War and Jobs

Monday morning opens with the Iran aftermath and a wall of macro data. This is the most consequential trading week of 2026 so far.

NFP is the macro event of the week. The consensus of 58K would be the weakest non-farm payrolls report since the pandemic recovery period. A miss below 30K would trigger recession panic. A beat above 100K could provide temporary relief. The number arrives on a market already digesting a military conflict and an oil shock.

Monday is a pricing event. Equity futures, oil, gold, and crypto will gap on the first post-strike session. VIX is expected to spike to 25-30+. The magnitude of Monday's move depends on whether Hormuz remains closed and whether Iran's retaliation escalates or pauses.

Key Questions for W11

1. Does the Strait of Hormuz reopen within days, or does this become a protracted blockade?

2. Will Iran's retaliation escalate beyond the initial missile strikes, or does Khamenei's death fracture the command structure?

3. Can BTC hold $60K through the equity selloff, confirming the capitulation bottom?

4. Does NFP at 58K confirm the stagflation thesis, or does it beat expectations?

5. Will Ukraine-Russia trilateral talks (March 4-5) produce any breakthrough, or does Iran dominate all diplomatic bandwidth?