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Stocks slump as oil spikes on Iran conflict

Asian stock markets kicked off the new week in deep red. On Wall Street, the Dow tumbled almost 800 points on Friday pushing into correction territory and extending the S&P 500’s losing streak to a fifth consecutive week, as investors reacted to escalating tensions in the Middle East and further gains in oil prices. Brent and WTI crude rose to their highest closing levels since 2022 at the end of last week after renewed disruptions in the Strait of Hormuz. This intensified concerns about global energy supplies, despite US President Trump extending his deadline for potential strikes on Iran’s energy infrastructure to early April. Expectations that higher energy costs could fuel inflation and keep interest rates elevated weighed on sentiment. 

  • Date
  • Author Alessandro Fezzi, Content & Publications
  • Reading time 5 minutes

Oil
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Asia-Pacific equities fell sharply on Monday as the Middle East conflict, now in its fifth week, intensified following Yemen’s Houthi movement claiming on Saturday to have fired ballistic missiles at Israeli military sites. South Korea’s Kospi led regional losses, plunging more than 5% while the small-cap Kosdaq dropped nearly 4%, and Japan’s Nikkei 225 and Topix each fell about 4%. Oil prices climbed, with West Texas Intermediate futures up 2.6% in early Asian trading, and Bank of Japan policymakers signalled at their March meeting that faster interest rate hikes may be needed as higher energy costs push up underlying inflation. Australia’s S&P/ASX 200, Hong Kong’s Hang Seng index and China’s CSI 300 also declined, while US equity futures pointed to further weakness.

This week, markets focus on a dense data and policy calendar that offers fresh insight into inflation dynamics, growth momentum and central bank thinking across major economies.

US stocks fall on geopolitical tensions

US equities extended their decline on Friday, with the Dow Jones Industrial Average closing 1.7% lower at 45,166.64 points while the broad S&P 500 fell 1.7% to 6368.85 points and the technology-heavy Nasdaq 100 lost 1.9% to 23,132.77 points. Dow and Nasdaq 100 recorded weekly losses of 0.9% and 3.2% respectively, marking a fifth straight negative week, and the S&P 500’s decline resulted in its longest losing streak since 2022, as investors reacted to the ongoing Iran war, elevated oil prices and renewed trade tensions with China. Tensions in the Middle East remained high after an Iranian militia blocked three container ships in the Strait of Hormuz and US President Donald Trump extended his ultimatum for reopening the waterway on Thursday, while Israel signalled expanded strikes in Iran, which market observers said kept perceived risks elevated. 

US consumer sentiment weakens on Iran war fallout

US consumer confidence deteriorated in March, according to the University of Michigan survey released on Friday, with the final sentiment index falling to 53.3 from 56.6 in February, its lowest reading since December but still above last year’s troughs linked to uncertainty over President Donald Trump’s tariff policies. The survey showed that middle- and higher-income households with equity holdings were particularly hit by the combination of rising gasoline prices and volatile financial markets following the launch of US‑Israeli military operations in Iran late last month. Respondents reported a marked decline in their short-term economic outlook and in year-ahead expectations for their personal finances, while longer-term expectations fell less sharply, suggesting that consumers currently see the shock as temporary. 

European stocks retreated at the end of last week

Major European equity indices weakened on Friday, with the euro area benchmark EuroStoxx 50 falling 1.1% to 5505.80 points, although a three-day rebound earlier in the week still left it with a marginal weekly gain. Switzerland’s SMI, which had recently shown relative resilience, slipped 0.6% to 12,570.26 points. 

Euro-area inflation expectations ease before Iran shock

Households’ inflation expectations in the eurozone moderated in February, according to the European Central Bank’s latest Consumer Expectations Survey, with the median outlook for price growth over the next 12 months slipping to 2.5% from 2.6% in January and three-year expectations also edging down to 2.5%. The survey, which ran from early February until early March and was almost entirely completed before the Iran war began late last month, showed backward-looking inflation perceptions holding at 3%, while five-year expectations were stable at 2.3%. Expectations for economic growth and the labour market improved slightly. The poll covered around 19,000 adults across eleven euro-area countries.

Spain’s harmonised inflation rate accelerated to 3.3% in March, up from 2.5% in February, according to data released by the national statistics office INE on Friday. The increase was driven mainly by higher prices for fuel and lubricants for private transport. The surge in consumer prices reflects the impact of the recent energy shock linked to the US and Israel’s war with Iran, which is starting to feed through to inflation across the euro area.

Corporate and economic calendar

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

Economic data in focus: Swiss KOF Economic Barometer (09:00), Spanish retail sales (09:00), German Harmonised Index of Consumer Prices (14:00), euro-area consumer confidence (11:00), Federal Reserve Chair Jerome Powell speaks (16:30) and Dallas Fed Manufacturing Index (16:30).

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

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