March 5, 2026 — Market Report

Day 7 of the war. Iran expanded its attacks across the Gulf — striking a US oil tanker, hitting UAE, Bahrain, Qatar, and Azerbaijan with drones and missiles. The Strait of Hormuz remained effectively closed. US equities fell, but KOSPI staged a historic rebound from yesterday's -12% crash.

The War: Day 7 — Regional Escalation

The US-Israeli campaign against Iran intensified further, and Iran escalated its retaliation across the entire Gulf region.

Iran claimed it struck a US oil tanker in the northern Persian Gulf — ship caught fire
Drone and missile attacks on UAE, Bahrain (oil refinery), and Qatar
Strikes on Azerbaijan's Nakhchivan — first attack on a non-belligerent neighbor, drawing Turkish condemnation
Drones struck a US base in Iraq
Strait of Hormuz effectively closed: only 5 vessel crossings on March 4
Trump announced "political risk insurance" for energy tankers and Navy escorts, but ruled out negotiations, demanding Iran's "unconditional surrender"

Behind the scenes, reports of back-channel contacts between Washington and Tehran helped improve overnight sentiment.

Tariffs: Auto Exemption

Trump exempted auto imports from the Canada/Mexico tariffs until April 2. First carve-out from the 25% tariffs that took effect the prior day. Steel and aluminum tariffs estimated to add ~$1,500 to the cost of a US-manufactured car.

Economic Data

| Indicator | Value | |-----------|-------| | Weekly Jobless Claims | 213,000 (steady) | | Q4 Productivity | +2.8% YoY (beat expectations) | | Q4 Unit Labor Costs | Bigger-than-expected increase |

China's Two Sessions opened: GDP growth target set at 4.5-5% — the lowest on record since the early 1990s. Budget deficit ~4% of GDP, inflation target ~2%. China is in its 4th year of deflation; real estate investment fell -17.2% last year.

US Markets

The Dow plunged over 1,000 points intraday before a late-session relief rally trimmed losses.

| Index | Close | Change | |-------|-------|--------| | Dow Jones | 47,954 | -784 pts (-1.61%) | | S&P 500 | 6,831 | -38 pts (-0.56%) | | Nasdaq | 22,749 | -58 pts (-0.26%) |

S&P 500 and Dow turned negative year-to-date. VIX spiked above 22. Broadcom rose ~3% on a 74% surge in AI chip revenue — the sole bright spot.

Oil

Oil surged as the Hormuz closure persisted.

| Benchmark | Price | Change | |-----------|-------|--------| | WTI Crude | ~$80-81/bbl | +7-8% | | Brent Crude | ~$85/bbl | +5% |

RBC's Helima Croft: "We're now facing what looks like the biggest energy crisis since the oil embargo in the 1970s." Full Hormuz closure could eliminate 3.3 million barrels daily. US gasoline prices surged from $2.98 to $3.25 nationwide.

Gold

Pulled back modestly from record highs.

| Metric | Value | |--------|-------| | Spot Gold | ~$5,080-5,088/oz | | Intraday Range | $5,092-5,200 | | Daily Change | -$46 to -61 (-0.9% to -1.2%) |

All-time high remains $5,595/oz (Jan 29). Up ~77% year-over-year. Strong dollar limited upside.

Treasuries

| Maturity | Yield | |----------|-------| | 2-Year | 3.57% | | 10-Year | 4.13% (+4.7 bps) |

Oil-driven inflation fears pushed yields higher. Reports of Chinese state banks accelerating US Treasury sales added to yield volatility.

Asia: KOSPI Historic Rebound

KOSPI staged a dramatic recovery from the prior session's -12% crash.

| Index | Close | Change | |-------|-------|--------| | KOSPI | 5,584 | +490 pts (+9.63%) | | Kosdaq | 1,116 | +14.1% (largest jump ever) | | Nikkei 225 | 55,278 | +1.9% | | Hang Seng | 25,321 | +0.3% | | CSI 300 | 4,648 | +1.0% |

KOSPI's +9.63% was the second-largest daily gain ever (after Oct 30, 2008's +11.95%) and the largest points gain in history (490 pts). Samsung +11.3%, SK Hynix +10.8%, Hyundai Motor +9.4%. Retail investors led with 1.79 trillion won in net purchases.

Currencies

| Pair | Rate | |------|------| | USD/KRW | 1,468-1,481 (won strengthened, +8.1 won) | | DXY | 99.06 (+0.3%) |

Won strengthened alongside the KOSPI rebound, but analysts warned of further weakening to ~1,525 if Middle East tensions persist.

The Narrative

March 5 was about deepening divergence. Iran expanded strikes across the Gulf, escalating the war from a localized campaign to a regional conflict. Oil surged 7-8% in a single day, and comparisons to the 1973 oil embargo emerged. US equities turned negative for the year.

But Asia produced a dramatic reversal. KOSPI proved the prior day's panic was oversold, staging a historic rebound. This partially restored the bet that the war would end quickly.

For Palace Fund:

Oil is changing the game. WTI breaking $80 is just the start. If Hormuz stays closed, $100 is a matter of time.
KOSPI rebound is technical. -12% followed by +9.6% is a net -3.6%. The fundamental risk (energy dependence) is unresolved.
China's Two Sessions: GDP target of 4.5-5% was priced in. Chinese slowdown adds pressure to Korean exports.
Won timing. Rebounds bring temporary won strength, but the trend risk is toward weakness. Monitor wire transfer timing.