Geopolitical threats high, along with the Oil price

Macroeconomic/ geopolitical developments

• US equities ended the week lower, with the S&P 500 down 1.9%, the Nasdaq Composite falling 2.07%, and the Dow Jones Industrial Average dropping 2.11%, as inflation volatility and geopolitical tensions dampened risk appetite. Global markets followed suit, with European and Asian stocks also slipping amid elevated oil prices and ongoing Middle East uncertainties, reinforcing concerns over global growth.

• Middle East tensions, driven by the US-Israel strike on Iran and regional retaliation, are keeping oil prices elevated (Brent above $109 and West Texas Intermediate near $99) while fueling market volatility, supply chain disruptions, and inflation pressures. The conflict’s economic impact remains significant, and a persistent geopolitical risk premium could keep energy prices structurally higher through 2026.
• The Federal Reserve, ECB, and Bank of England all kept interest rates on hold this week but signalled a more hawkish stance, citing rising energy prices and geopolitical uncertainty as key risks to inflation. Markets now expect tighter policy ahead, with elevated near-term inflation forecasts in the US, eurozone, and UK prompting central banks to delay cuts and consider future rate hikes.

• Markets remain focused on the Middle East conflict, with rising oil prices and a stronger dollar driving volatility across equities and currencies, while European and Asian markets struggled amid energy supply concerns. Attention now turns to global flash PMI data, as investors assess the impact of higher energy costs on growth, inflation, and central bank policy expectations.

Global financial market developments

• US and global equity averages were lower.
• US and European bond yields were notably higher on the week
• The US Dollar Index consolidated near a multi-month high.
• Gold futures declined to a multi-week low.
• Oil futures prices edged back towards the multi-year spike high.

Key this week

Central Bank Watch: It is a relatively quiet week for central bank activity, with attention centered on the Bank of Japan’s Monetary Policy Meeting Minutes on Wednesday, alongside a series of speeches from ECB and Federal Reserve members throughout the week.

Macro Data Watch: Macro data is light this week, key releases including the global Flash PMI readings on Tuesday, Japanese CPI data also on Tuesday, UK CPI data on Wednesday, and UK Retail Sales figures on Friday.

Steve Miley (The Market Chartist)

Editor in chief

Steve Miley is the Market Chartist and has 32 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Mar... Continued