ORLANDO, Florida, March 5 (Reuters) - Stocks sank on

Thursday and another surge in oil prices sent bond yields

shooting higher, as the spiraling conflict across the Middle

East raised investor fears over energy supplies, higher

inflation and slower growth.

More on that below. In my column today I offer a reminder

that, amid the fog of war, economic fundamentals can't be

forgotten completely. Friday's U.S. payrolls data, and any hint

of AI's impact on jobs, will avert eyes from the Middle East, at

least temporarily.

If you have more time to read, here are a few articles I

recommend to help you make sense of what happened in markets

today.

1. Trump rejects Khamenei's son as Iran war intensifies

with U.S.-Israel strikes

2. Dollar, bonds, or gold - which is the safest haven to

hold?

3. Charting the widening impact of the Iran crisis on

energy markets

4. Private credit meets "show-me-the-money" moment

5. China's parliament rolls out economic, political

blue-print; here's what you need to know

Today's Key Market Moves

* STOCKS: Solid rebound in Asia - Japan +2%, South Korea

+10% - but Europe, Americas slide into the red. Nasdaq only down

0.3%, Russell 2000 -2%; Brazil -2.5%, Mexico -3%.

* SECTORS/SHARES: Eight S&P 500 sectors fall, three

rise. Industrials, consumer staples, healthcare, materials -2%

or more. Caterpillar, Goldman Sachs -3.5%, IBM +2.5%.

* FX: Dollar higher across the board, EM FX hit hardest

with ZAR and CLP down ~2%. AUD the biggest G10 decliner -1%.

* BONDS: U.S. yields rise as much as 6 bps, curve

steepens slightly. UK yields +10 bps, now +30 bps this week.

2-year Schatz yield +25 bps this week, most in three years.

* COMMODITIES/METALS: Oil jumps to highest since July

2024. Brent +5%, WTI +9%; now up 17-20% on the week, the most

since February 2022. Gold -1.5% on firm dollar, yields.

Today's Talking Points

* Learning the "transitory" lesson

As energy prices soar, markets are betting that central

bankers won't repeat the 2021-2022 playbook of looking through

supply shocks and a subsequent surge in "transitory" inflation.

They've learned that lesson, right?

That appears to be traders' bet - only one Fed rate cut this

year is baked in now, and that's not until October; another BoE

cut isn't fully priced at all; the ECB is more likely to hike

than cut; and the RBA could even hike again this month.

* No room for complacency

There was a glimmer of hope on Wednesday that back-channel

U.S.-Iran diplomacy might pave the way for peace to break out in

the Middle East. Traders seized upon it, bought back beaten-down

stocks, and Europe and Wall Street rallied.

Predictions are dangerous at the best of times, but that

looks like a false dawn. The war is spreading, messy, and

getting more entrenched. Energy prices and bond yields are

spiking, and risk assets are feeling the heat. Yet the Nasdaq is

flat on the week. Justified calm, or complacency?

* A job lot

With investors' focus firmly on the market implications of

events in the Middle East, economic fundamentals are

understandably taking a back seat. They should be a driving

force, however, at 8:30 a.m. Eastern Time on Friday, when the

U.S. Bureau of Labor Statistics releases the February jobs data.

A strong report will let Fed officials breathe more easily,

while signs of cracks in the labor market will be tricky to

navigate - yields are spiking on the energy supply shock, yet

the curve is the flattest this year. Stagflation on the horizon?

What could move markets tomorrow?

* Developments in the Middle East

* Reserve Bank of Australia Deputy Governor Andrew Hauser

speaks

* South Korea inflation (February)

* European Central Bank officials scheduled to speak include

President Christine Lagarde, board members Isabel Schnabel and

Piero Cipollone, and Pierre Wunsch

* Euro zone GDP (Q4, revised)

* Germany industrial production (January)

* Canada PMIs (February)

* U.S. non-farm payrolls (February)

* U.S. retail sales (January)

* U.S. Federal Reserve officials scheduled to speak include

Governor Stephen Miran, San Francisco Fed President Mary Daly,

Philadelphia Fed President Anna Paulson, Boston Fed President

Susan Collins, and Cleveland Fed President Beth Hammack

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