The UAE’s Infrastructure & Oil Markets 3/16/26

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0:58Bring in show music, please. Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod, all about oil, the third week of war in Iran. Morgan Stanley's chief U.S. equity strategist, Mike Wilson, is looking to the market's future. The recession risk is very low unless oil truly goes$100,$120 a barrel and stays there. Michelle Caruso-Cabrera says investors don't seem concerned for the long term. First of all, there hasn't been actual real destruction of any important energy infrastructure, right, that would lead to permanent supply disruption. And on the ground in Dubai, CNBC's Dan Murphy on the sentiment in the Middle East.

1:41Most people who have the ability to get out of the country, maybe they have a second home somewhere else, have done so. And the population here has definitely declined over the last couple of weeks. Plus, in Paris, the U.S. and China hold high-level trade talks. And in a scathing ruling, a federal judge has blocked subpoenas to the Federal Reserve in the criminal investigation of Chairman Jerome Powell. CNBC's Steve Leisman has the story and the context. In the couple of decades I've been doing this, I have never had to read the Federal Reserve Act as much as I've had recently. It's been sitting there since 1913 for you, Steve.

2:17It is Monday, March 16, 2026. Thanks. Squawk Pod begins right now. Stand Becky by in 3, 2, 1. Cue it, please. Good morning, everyone. Welcome to Squawk Box right here on CNBC. We are live from the NASDAQ market site in Times Square. I'm Becky Quick along with Mike Santoli and Robert Frank. Joe and Andrew are off today. Gentlemen, welcome. It's good to see you both. Sure, good to see you. After a down week for the markets and nearly four days of a row and declines for most of the major averages, You're now looking at the Dow, which was down by about 2 % last week. It was the biggest decline last week of the three major averages.

2:55It is down by 7.8 % from the all-time highs. NASDAQ is closer to down by about 8%. S &P is down by what? A little more than 5%. Yeah, 5.5 % or so. This has been something we're watching really closely. To this point, we haven't seen major pullbacks, but you are seeing things start to kind of trickle away. It's been this slow kind of grudging decline since the start of the war. Now, the market was already kind of churning around. It wasn't really kind of charging ahead beforehand. So that might have actually helped us. Yes, we're in a 5 % pullback in the S &P. The median stock in the S &P, as always is the case, is down a lot more.

3:29Down more than 15 % from its high. Not since the start of the war, but since, you know, their high. And I do think it's a matter of you've kind of done a little bit of damage to the longer-term trend. We are where we were six months ago in the S &P 500. So you've kind of given back that last burst to all-time highs. Now the question is, what are we waiting for as a little bit of a signal that it's been a little overdone to the downside or we can get better than feared outcomes in the Gulf? I mean, that's really all it comes down to. I do think the market's still alert to the possibility of upside risk if we get de-escalation.

4:01And then you get a day like today where it seems like the NASDAQ can kind of do its own thing independent of oil prices to some degree. And we're looking to bounce basically to where we were Friday morning in the broad indexes. We have seen the dollar pick up. Dollar index at its highest level since May of 2025. If you take a look at where treasuries stand this morning, yields are slightly lower, but you're still talking quite a bit elevation since the last couple of weeks. Ten years sitting at 425. The two year is at 369. We do have a Fed decision coming this week. We'll talk more about that in just a moment.

4:31In the meantime, take a look at oil prices. As Mike mentioned, that is where the markets will be focused. WTI this morning had been hovering a little higher than this, right around$100 a barrel. Right now it's at$98.94. Brent is at$104.57, and that has to be the key, really, for what we'll be watching. I mean, to Mike's point, we have been churning around, but I find it remarkable, given the headlines that we had overnight in Dubai, continued not just the Hormuz issue, but the strikes in the Dubai airport, strikes on continued oil facilities there. You've got oil at$100 or peaking around there this morning.

5:06and you've got yields stubbornly the 10-year, you know, four and a quarter around there. And yet markets are up this morning. I mean, it is the resilience is surprising. A lot of commentary over the weekend about whether there is complacency in the stock market. My line last week was, does this represent composure or complacency? Is it because everybody kind of knows that historically, you're supposed to buy these events when you get a big pullback because they usually don't end a bull market. Often the market kind of overcorrects in the short term. But I almost feel like people were too quick to try to do the buy the dip.

5:42Literally on the Monday morning after the initial attacks, we opened down and everyone tries to buy it. And now it's been this kind of grind lower since then. So I do think we are starting from benign levels, both where oil started, where rates started, where the economy was positioned. So I think there's explanations for why we're not jumping to the worst conclusion in terms of markets. But as I say, the market itself has to prove from here that it's not kind of looking past some of the risks. For the latest on the war in Iran, let's get to CNBC's Dan Murphy in Dubai. Morning, Dan. Mike, good morning to you.

6:17Well, let me update you on some breaking news this morning. We are following a fresh wave of strikes on critical infrastructure here in the UAE. I'll start with the recent strike that we've seen this morning at the Fajera Oil Industry Zone on the UAE's east coast. This caused a large fire that authorities are now managing. This is one of the UAE's most important pieces of energy infrastructure. It is, of course, the only alternative that this country has to the Strait of Hormuz. And then separately, as you've been discussing as well, we have seen a drone strike at Dubai International Airport this morning that hit a fuel storage facility.

6:54The strike shut down the airport. It forced airlines attempting to get people out of the country to halt all traffic. And we have now also started to see some limited traffic begin flying again. But operations, of course, remain heavily disrupted here. What we've also seen is the Dubai media office confirming that no injuries have been reported from either incident. But, of course, you have to also assume that the blow that this presents to the UAE is significant. the optics alone of a strike on critical energy infrastructure and that critical transport hub as well will have a significant long-term impact.

7:31At the same time as well, oil prices, as you flagged, continuing to hold around this 100 US dollar a barrel handle this morning after President Trump told NBC News at the weekend that he is not ready to end this conflict. The president's suggesting that Iran does want to make a deal here, but he says he isn't ready because the terms aren't good enough yet. And of course, it all comes back to the Strait of Hormuz as well. We also learned at the weekend that the president had reportedly been briefing allies in Asia, in Europe, and of course elsewhere around the world regarding what could be a coalition of the willing when it comes to the Strait of Hormuz.

8:09He is hoping to make an announcement, apparently in the coming hours, on what could be a group of nations coming together to secure those critical oil shipments through what is a largely blocked waterway now. Of course, the reaction and reception to this has been mostly lukewarm at this point. The president calling on countries like China and Japan and South Korea to get involved. But given the escalation that we've seen on the ground in the last 24 to 48 hours and the headlines that continue to come out of this conflict, it's still very unlikely that we will see naval escorts beginning through the Strait of Hormuz.

8:45That's a clear concern for energy traders and anyone watching this conflict right now, which still appears to have no military or diplomatic off-ramp coming anytime soon. Guys? Dan, this is a bit of a nightmare for the UAE and a lot of these areas in the Middle East that had basically sold themselves to the world as havens of security and stability in an otherwise tumultuous region. What's been the response? I know the UAE tends to be tight-lipped in these situations, But what's been the response? And do you think that Iran's strategy of getting these countries to pressure the U.S. to dial down the attacks is likely?

9:22Well, that's a key question at this hour as well. Of course, Iran has been threatening to target critical infrastructure in the Gulf countries, and we have seen that eventuate. In terms of the economic impact for the Gulf countries, in particular the UAE, of course, the impact is perhaps too soon to measure. But on the optics alone, this is a really significant blow to this country and indeed to cities like Dubai and Abu Dhabi here in the UAE, which really have in most recent years been positioning themselves as safe spaces for global talent and international capital as well. If Iran's objective was to undermine the investability of the Gulf states, then you could say that objective has been achieved.

10:07However, authorities that I've been speaking to over the weekend are very confident that they can stay on top of this. And in fact, the UAE, which has been the recipient of the bulk of these Iranian attacks, has frankly done an outstanding job of mitigating those risks. The intercept rate is exceptionally high. And of course, locals here are very confident in the ability of the government to continue to protect them as well. Of course, when it comes to the long term, though, which is what we're all focused on right now, whether or not this will have a significant impact on these countries' ability to continue to be magnets for deep pools of public and private capital, I think the question mark is still out on that at this point.

10:50Hey, Dan, very quickly, Friday, we talked about how the financial sector there was basically shut down. People were told to work from home. What's the mood today? What's the feeling? Is that still the case? Well, Becky, as I came into this hotel this morning for our live broadcast, I can tell you the streets are pretty empty here in Dubai. Shops, restaurants, bars, cafes mostly cleared out across the weekend. And most people who have the ability to get out of the country, maybe they have a second home somewhere else, have done so. And the population here has definitely declined over the last couple of weeks as this conflict continued to evolve.

11:29The mood on the ground here is one of cautious optimism, though. Yes, locals here following the instructions of authorities and attempting to stay safe. At the same time as well, as I mentioned, very optimistic and very hopeful that the government here will continue to be able to protect them too. So, yes, the mood on the ground is definitely one of cautious optimism at this stage. And, of course, everyone here hoping that this conflict comes to an end sooner rather than later. Dan, thank you. Dan Murphy with the latest from Dubai. Top U.S. and Chinese economic officials are holding talks in Paris.

12:06Sources told Reuters that yesterday's discussions were, quote, remarkably stable. Those talks reportedly touched on potential areas of agreement in agriculture, critical minerals and managed trade. While a U.S. judge blocking subpoenas issued in the criminal investigation into Fed Chair Jay Powell on Friday, The judge agreed with Powell, saying the probe was an improper attempt to intimidate the central bank into cutting interest rates. U.S. Attorney for D.C., Janine Pirro, vowed to appeal that decision. He has neutered the grand jury's ability to investigate crime. As a result, Jerome Powell today is now bathed in immunity, preventing my office from investigating the Federal Reserve.

12:56This is wrong, and it is without legal authority. Isn't it with legal authority if a court decided this? Isn't it the definition of legal authority? Yeah, not the ultimate legal authority, but yes, for now. For now. Senior economics reporter Steve Leisman joins us with the potential impact on the Fed chair timeline. Hey, Steve. Hey, good morning, Mike. Yeah, how all this affects who will become Fed chair and when could be one of the key outcomes from the Friday ruling. A judge, the background here is a U.S. District Judge slammed Piro's, Jeanine Piro's subpoenas, writing, quote, There is abundant evidence that the subpoena's dominant, if not sole, purpose is to harass and pressure Powell either to yield to the president or to resign and make way for a Fed chair who will.

13:44Piro said she would file both a motion to reconsider and an appeal, keeping the case alive for weeks and maybe months, especially if she wins either effort. And Senator Tom Tillis, who has vowed to not advance Kevin Walsh as Fed chair while the criminal case against Powell remains alive, said after the ruling he would maintain that stance. So there's potential Walsh may not be confirmed when Powell's term as chair ends on May 15th. In fact, odds on Kalshi put the chance that Walsh is approved by May 15th at just 66 percent. So there's a 34 percent chance it doesn't happen by then. And even a 7 % chance isn't done by July 1st.

14:25So what happens if Powell's term expires and Warsh is not approved? Well, I talked over the weekend with Scott Alvarez, the former Fed general counsel. He said Fed Vice Chair Jefferson could take over. The Fed Board of Governors could elect Powell as chair pro-ten. That's happened before. Powell and Greenspan have both been, for a brief period of time, chairs pro-ten. The president could make a recess appointment, except that Congress never goes into recess anymore. And then the FOMC could also separately elect Powell or any FOMC member as their chair. So you could have two different chairs if they want or the same one.

15:01Fed expert Mike Spindell predicted with inflation set to rise from surging oil prices and big questions facing the Fed, quote, markets will respond badly to all of this ridiculousness. Now, CNBC's Emily Wilkins reports that Kevin Worsh will continue meeting with senators this week ahead of nomination hearings that are not scheduled. The question is when senators will get a chance to vote on that nomination. The president over the weekend criticized Powell and the judge in a post. There was no hint, though, he wanted Pirro to drop the case. Guys? It's fascinating, Steve, considering that this effort, wherever it originated and however it was conceived, was meant to get Powell out of office more quickly and the same exact effort could keep him in there longer or at least nearby longer.

15:45And so I just do wonder if there's just a point of practical concern here where it would say, you know, we want to ease the way for the chosen Fed chair to get in there, which will mean, you know, just sunsetting this this court effort, which doesn't really have a hope of getting resolved by the end of Powell's term. Well, certainly the ruling by the judge gave that out to Pyro to basically drop the case. She did not take it. She actually redoubled her efforts. And then the president, I was waiting to see if the president would say something to tell her to either back off or to move on. And that's not the case so far.

16:25And the issue, Mike, is I don't think Tillis is alone in how he feels about this issue. I think he speaks for other senators, too. So the question is whether or not if this case is still alive, it would go forward, even if Tillis himself dropped those objections. And the problem is the injection of politics into all this. I will tell you, Mike, that in the couple of decades I've been doing this, I have never had to read the Federal Reserve Act as much as I've had recently. Yeah, there you go. It's been sitting there since 1913 for you, Steve. All right. Appreciate it. I've met it several times.

16:59Steve, please. Appreciate it.

17:03Coming up next on Squawk Pod, reading the market tea leaves with Morgan Stanley's chief U.S. equity strategist, Mike Wilson. If you can figure it out, the market definitely knows what's going on. It's no surprise or it's not a coincidence that oil and energy stocks are the best performing assets really starting in January. Stay tuned. We'll be right back.

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19:00This is Squawk Pod from CNBC, today with Becky Quick, Robert Frank, and Michael Santoli. All right, welcome back, everybody. Our next guest says that the S &P could trade as low as 6 ,300. That's about 5 % below Friday's close. Mike Wilson is chief investment officer and chief U.S. equity strategist at Morgan Stanley. Mike, we cut that for the headline, but you've actually got a much more complex view of what's happening here. You think that the slowdown in equities actually started last fall, but it takes something more than that to really get things going, and maybe that's what this war with Iran could do at the moment.

19:38That's exactly right. And it feels a lot like last year, right, where we had the market was actually worrying about several other things before the tariff liberation day sort of capitulation. And we think of this as sort of a mini version of that whole setup. So just really simplistically, you know, last year we were worried about Doge, we were worried about immigration controls, deep seek, et cetera. And then tariffs came along and that was the final blow to kind of get the capitulation. This time it's been, you know, AI disruption around labor. You have the private credit concerns, of course, and now you have the issue with Iran, which came out of the blue.

20:09But the markets have a way of thinking about this. You know, I like to kid around folks like that. I mean, if you can figure it out, the market definitely knows what's going on. And it's no surprise or not a coincidence that oil and energy stocks are the best performing assets really starting in January. We started with Venezuela, but it was all related. I mean, this is a very well telegraphed, you know, attack and it happened. And so like the markets got in front of it. Now, That doesn't mean they were out of the woods. I'm not sitting here, Mr. Complacent. But the markets have been digesting this.

20:38And we think the fundamental, the underlying fundamental backdrop going into this event was just much stronger than what it was a year ago. So why should it go down as much? The recession risk is very low unless oil truly goes$100,$120 a barrel and stays there. And I can't predict that. You know, but but you think if we had 6300, then it would be a resumption back to higher levels. That's right. Pretty quickly. And higher highs. I mean, you know, markets are reflexive. And, you know, is sort of as complacent as people think the markets have been. They have not been complacent. Right. 50 percent of the stocks in the Russell 3000 are down 20 percent or more or 20 percent.

21:17And 40 percent in the S &P are down 20 percent. That's a proper correction. And this is the way it always goes down. Right. The S &P, the highest quality index, always kind of gets hit at the end. Now, I don't know if we're going to get the final shock. I'm hoping we don't because that would probably be something bad happened. But you need to be mentally prepared for that. And if that were to happen, think about it as like a year ago. And by the way, we made the same call last year when this event happened around Liberation Day. It was like, OK, we and it was much cheaper than, too. So it was a little easier call.

21:46But I mean, this time it's the same setup. But so you're basically telling people don't sell. And if it does decline, there'd be an opportunity to deploy more. Absolutely. Absolutely. I mean, so we did reduce small caps today. We upgraded that in November, and that has outperformed nicely. So we want to kind of lock that in. So that's our way of saying, hey, there's still risk around rates. There's still risk around oil. There's Fed uncertainties you all were just talking about. OK, so all that could weigh on some of the lower quality parts of the market in the short term. But I want to make it clear.

22:15I want to go back to those areas because the earning story in those areas is actually better, not worse. You've been working with this framework that says we kind of restarted a cycle or have this sort of stealth early cycle dynamic starting almost a year ago. How does that fit with your seeing start of the fraying in credit or at least parts of credit? Spreads have probably bottomed. You know, the unemployment rate bottomed like three years ago. So I don't know how that fits with this idea that we have this upswing dynamic. Yeah. Well, first of all, it's private economy versus the broader economy.

22:45So the private job market has been very, very soft. And as you know, as you know, last year when Doge happened, that was a government recession. And that was the final piece of that sort of rolling recession. So I feel I'm very convicted that we had a recession. It was just sort of stealthy. And now we're having a recovery. Now, it's not going to be as robust as your typical recession where you have everything go down at once. OK, so that's where it's a little bit confusing, Mike, which is that we are kind of later cycle in credit. OK, but we're having these hotter but shorter underlying labor cycles underneath the surface.