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Middle East conflict and central banks in focus

This week, investors continue to monitor developments in the conflict in the Middle East, particularly any impact on global oil supply and transport. Monetary policy dominates the agenda with interest rate decisions from the Federal Reserve and Bank of Canada (both Wednesday); the Bank of Japan, the Swiss National Bank, the Bank of England and the European Central Bank (all Thursday); and the People’s Bank of China (Friday). Euro-area inflation dynamics come into focus with February consumer price data on Wednesday. In the United States, producer price inflation (Wednesday), regional manufacturing indicators and weekly jobless claims (Thursday) provide a broad read on the momentum of the economy and labour market. From Asia, Japan’s trade figures on Wednesday, together with Friday’s Japanese market holiday, frame trading conditions in the region.

  • Date
  • Author Shane Strowmatt, Senior Investment Writer
  • Reading time 5 minutes

Asian equities started the week mixed as the escalating conflict involving Iran, the US and Israel and high crude prices raised concerns about inflation and energy supply disruptions. Brent crude oil futures were trading at USD 104.75 per barrel and West Texas Intermediate (WTI) at USD 97.69, reflecting persistent supply concerns linked to the mostly blocked Strait of Hormuz. Japan’s Nikkei 225 was trading slightly lower, Korea’s Kospi was up 1.1% and Australia’s S&P/ASX 200 was 0.4% weaker. Meanwhile, gold prices were stable to start the week, trading around USD 5030 per ounce, after slipping last week, while Bitcoin was trading higher around USD 73,700.

China growth holds up as risks build

In macroeconomic date, China reported stronger-than-expected data for the first two months of the year on Monday, with retail sales up 2.8% year-on-year versus 4% in the same period last year and industrial output rising 6.3%, helped by robust holiday spending and firm export demand. Fixed-asset investment increased 1.8%, reversing last year’s 3.8% annual decline. While China is relatively shielded from the Strait of Hormuz closure thanks to diversified energy supplies and large reserves, the Iran conflict and higher oil prices could still dampen external demand. Beijing has set a more modest 4.5% to 5% gross domestic product (GDP) growth target for this year. Hong Kong’s Hang Seng Index gained 1.4% and mainland China’s CSI 300 was little changed on Monday.

US and European stocks close lower

US and European stock markets ended the week in negative territory, with sentiment driven by the situation in the Middle East. In the US, the Dow Jones Industrial fell 0.3% to 46,558.47 points, leaving it about 2% lower for the week and back at late-November levels, while the S&P 500 and technology-heavy Nasdaq 100 each lost around 0.6%, with the S&P 500 moving closer to its 200-day moving average. In Europe, the euro area blue-chip EuroStoxx 50 slipped 0.6% to 5716.61 points and Switzerland’s SMI inched down to 12,839.27 points, with cyclical sectors such as resources, travel and airlines under pressure, while energy stocks advanced.

US data mixed ahead of Fed decision

US macroeconomic data released on Friday ahead of this week's Federal Reserve meeting pointed to moderating but still resilient momentum, with some renewed questions around inflation. Revised figures showed that US gross domestic product growth slowed sharply to an annualised 0.7% in the fourth quarter after 4.4% in the previous quarter, taking full‑year 2025 growth to 2.1% versus 2.8% in 2024. The Fed’s preferred inflation gauge, core personal consumption expenditures (PCE), rose 0.4% in January for a second month and 3.1% year-on-year, while overall PCE inflation was 2.8%. Labour-market data were mixed, as JOLTS job openings rose to 6.946 million in January from a revised 6.550 million and averaged 7.1 million in 2025 compared with 2024, indicating an easing but still relatively tight jobs market. Consumer sentiment weakened in early March, with the University of Michigan index slipping to 55.5, its lowest level this year, as higher gasoline prices and geopolitical uncertainty weighed on households.

UK growth stalls as war clouds outlook

The UK economy registered no growth in January, according to data released on Friday by the Office for National Statistics, missing economists’ expectations for a 0.2% monthly expansion after a 0.1% rise in December. Output in the key services sector was unchanged, while production slipped 0.1% and construction edged up 0.2%, following modest 0.1% growth in the final quarter of 2025. The figures highlight a weakening economy even before the US-Iran war triggered a sharp rise in global energy prices, which has pushed up UK mortgage rates and caused volatility in government borrowing costs. Analysts now see significantly reduced prospects for an imminent Bank of England rate cut as higher oil and gas prices threaten to squeeze household incomes, dampen spending and investment, and raise the risk of stagflation.

Corporate and economic calendar

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: Indian trade balance (10:00), Bundesbank monthly report (12:00), Canadian Consumer Price Index (13:30), Empire State Manufacturing Index (13:30), US manufacturing production (14:15).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.