Market Context
Over the past seven days, markets entered their fourth consecutive week of active US-Iran military conflict, which began on 1 March 2026. The week produced no resolution and considerable noise: a diplomatic pause here, an escalation there, and an oil market that continued to price for disruption rather than settlement. The VIX doubled from roughly 13 to above 27, and equity benchmarks shed 6–10% from their all-time highs. US equity indices fell further to their lowest in seven months on Friday as the war in the Middle East and threat of trade disruptions magnified stagflation concerns. Fnarena The headline resilience of just a few weeks ago has given way to something more cautious.
Key Signals
Central banks are in a holding pattern, but the exits are narrowing. The Federal Reserve, Bank of England, ECB, and Bank of Japan all held rates at their last meetings. While standing pat for now, all four warned they could hike this year if energy-driven inflation persists. Rate cuts remain in the dot plots, but the confidence behind them is fading.
Oil is now the single most important macro input. Vanguard's global chief economist described oil as "by far the most important indicator" and set $150 per barrel as the threshold that would move the Fed into a materially more difficult position — combining weaker economic activity with higher inflation. The base case remains a moderation later in the year, but the tail scenario is live.
Cross-sector dispersion has reached a multi-decade extreme. The average rolling three-month pairwise correlation among S&P 500 stocks has fallen to 13% — lower than 98% of the time since 2022. Energy is up 33% on the year; financials are down 11%.
AI capital flows remain structurally intact, but correlation is breaking down. The infrastructure layer — semiconductors, electrical components — continues to attract capital. Application-layer software has sold off sharply. Tech heavyweights remained under significant pressure, with Nvidia dropping 2.2%, Microsoft falling 2.5%, and Alphabet shedding 2.5%, while Meta saw steeper declines of 4% amid shifting risk sentiment. Fnarena
Bond yields reflect genuine policy uncertainty. The 10-year yield hit 4.48%, its highest level since July, before trading around 4.43%. The 30-year yield briefly hit 5%, a key threshold. The Rio Times The bond market is no longer anchored — it is repricing.
Stock Market Performance & Other Assets
Equities
The S&P 500 fell 1.67% on Friday, and the Nasdaq declined 2.15%, with both indices closing at their lowest level since August. The Nasdaq extended losses after closing in correction territory Thursday, now down more than 12.5% from its record high in October. The Rio Times The lone bright spot came Monday, when the Dow surged 631 points (+1.38%), the S&P 500 rose 1.15%, and the Nasdaq gained 1.38% Capitalstreetfx, all driven by Trump's announcement of "productive" talks with Iran, which unravelled within hours. The Dow and S&P 500 have now dropped for five consecutive weeks, their worst streak in nearly four years. The Rio Times
European and Asian markets tracked the same pattern. The DAX fell 1.38%, the CAC 40 dropped 0.87%, and the Euro Stoxx 50 declined 1.08% on Friday alone. The FTSE 100 held relatively flat, down just 0.05%. Asian markets were more mixed — the Nikkei slipped 0.43%, while the Hang Seng and Shanghai Composite both posted modest gains of 0.38% and 0.63%, respectively. Voice Of Emirates
Commodities
Brent crude surged to $112.57 per barrel on Friday — a 4.22% single-session gain — while WTI broke through $100 for the first time since July 2022. Bondsavvy The week's trajectory was volatile: Brent opened the week at $101.24, down sharply from the prior week's $113 high following Trump's delay announcement, before reversing all of that relief by Friday's close. CNBC Brent is now up approximately 51% every month. Gold held its safe-haven profile, with spot gold trading around $4,422 per ounce. Federal Reserve
Crypto
Bitcoin had a rough day on Friday, dropping 3.6% to trade around $66,000. The Rio Times By Sunday evening, Bitcoin had recovered modestly to approximately $69,038. Federal Reserve Crypto assets continue to move in lockstep with broader risk sentiment rather than acting as independent hedges — a pattern that has been consistent throughout the conflict period.
One Insight
The defining feature of this market is not the geopolitical conflict itself — it is the policy paralysis it has created. Central banks spent the past 18 months carefully engineering a path toward easing. That path has not been closed, but it has narrowed considerably. Investors are assigning significantly greater weight to the economic fallout of the conflict than the Federal Reserve appears willing to acknowledge, and the on-again, off-again news cycle is generating enormous intra-day swings that make orderly positioning difficult.
Iran's IRGC Navy has been imposing a de facto transit fee on commercial tankers using the Strait of Hormuz, denominated in Chinese yuan. Several investment banks, including Goldman Sachs and JPMorgan, have published $130 Brent scenarios contingent on a simultaneous Hormuz–Bab al-Mandeb closure. Bondsavvy That scenario is not consensus — but its inclusion in mainstream bank research is itself a signal. The resilience of equities through this period is notable, but so is the fragility just beneath it.
What We’re Watching (next 7–14 days)
Strait of Hormuz developments: Trump extended the deadline for a planned strike on Iranian energy infrastructure to 6 April to allow for negotiations, while Iran reportedly mobilised over one million troops in response. The next two weeks will determine whether this diplomatic window produces anything concrete.
Flash PMI data: The March PMI surveys will be the first hard data capturing how manufacturing and services are absorbing elevated energy costs in real time.
PCE inflation data: The Federal Reserve's preferred inflation measure will be closely watched for early signs of energy pass-through into core readings.
Bond market: A further rise in real yields or curve flattening would intensify pressure on equity valuations and bank margins alike.
Next week's major earnings:
Nike (March 31) — Consensus estimates EPS of $0.29, roughly 45% below the same quarter last year, on revenue of $11.23 billion. A read on consumer demand, tariff cost absorption, and whether the Elliott Hill turnaround is gaining traction.
TD Synnex (April 1) — The tech distributor connecting vendors like Microsoft, Cisco, and Palo Alto Networks is expected to report EPS of $3.31, up 18% year-over-year, on revenue of $15.65 billion — a useful gauge of enterprise hardware and software spending.
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