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Between a rock and a hard place

Oil prices extended gains at the start of the week, driven by the conflict in the Gulf and concerns that prolonged disruption in the Strait of Hormuz, while stock markets remained on the defensive. Investors weighed comments from US President Trump, who said Washington was in talks with a “more reasonable regime” to end the war, but reiterated threats to attack Iranian energy infrastructure if the key shipping lane remains closed. Meanwhile, Fed Chair Powell stressed that the eventual economic impact of the Iran war is highly unpredictable.

Data 31 marzo 2026
Autore Alessandro Fezzi, Content & Publications
Tempo di lettura 5 minuto

Asia-Pacific equities saw choppy trading on Tuesday after oil prices swung lower on reports that US President Donald Trump is prepared to end military operations against Iran even if the Strait of Hormuz remains largely closed. West Texas Intermediate futures for May delivery fell 0.7%, while May Brent crude declined 1% after earlier gains, easing some concerns about energy-driven inflation. The conflict with Iran has entered its fifth week, with analysts noting that Washington appears increasingly keen to limit the duration of the war even as Iran continues asymmetric pressure. Equity moves reflected the uncertainty, with South Korea’s Kospi dropping 2.2%, Japan’s Nikkei 225 slipping 0.1%, Hong Kong’s Hang Seng Index losing 0.3% and Australia’s S&P/ASX 200 turning 0.9% higher.

US stocks mixed amid Middle East tensions

US equities ended Monday’s session mixed in a volatile environment, with the technology-heavy Nasdaq 100 falling 0.8% to 22,953.38 points and the broad S&P 500 declining 0.4% to 6343.72, while the Dow Jones Industrial Average edged 0.1% higher to 45,216.14 after briefly touching its lowest level since last September. Investor sentiment remained fragile as President Trump said on Monday that the US is in “serious talks” with what he called a more moderate Iranian government to end the military operation, while simultaneously threatening massive strikes on Iran’s energy infrastructure if no agreement is reached to halt hostilities and reopen the Strait of Hormuz.

Powell signals patience on Iran shock

Federal Reserve Chair Jerome Powell said in remarks published on Monday that US monetary policy is well positioned to “wait and see” how the recent oil price surge linked to the Middle East conflict affects inflation and growth. Powell reiterated that interest rate tools primarily influence demand and have little short-term impact during supply-driven energy shocks, warning that tightening policy against a temporary oil spike could later unnecessarily weigh on the economy. The Fed left rates unchanged earlier this month and maintained projections for at least one rate cut this year, even as its latest forecasts pointed to somewhat higher core PCE inflation and officials stressed unusually high uncertainty around the outlook. Powell again emphasised that the eventual economic impact of the Iran war is highly unpredictable, saying policymakers have low conviction in their projections and do not yet know whether the shock will prove larger or smaller than currently assumed.

ECB officials play down outlook for rapid rate hike

European Central Bank Governing Council member Francois Villeroy de Galhau said in comments published on Monday that market speculation about a swift interest-rate increase in response to the latest oil price shock and higher inflation is premature, arguing that investors have overinterpreted recent developments. The Banque de France governor stressed that the ECB stands ready to act if needed in order to keep inflation expectations anchored around its medium-term target of 2%. Earlier, some policymakers had floated the option of a quick rate move as early as the April meeting, but both Villeroy and Executive Board member Isabel Schnabel have recently adopted a more cautious tone, warning that the ECB should not rush its response to the Iran war. Schnabel said on Friday in Zurich that the central bank has time to assess incoming data and evaluate whether the current inflation shock risks becoming entrenched in expectations and wage growth.

Euro-area sentiment hit by Iran war

Economic confidence in the euro area weakened in March, with the European Commission’s Economic Sentiment Indicator falling to 96.6 from 98.2 in February, according to data released on Monday. The drop was sharper than economists had anticipated and pushed the composite index, which covers businesses and households, further below its long-term average of 100. The figures suggest that the war in Iran has added to already fragile sentiment among companies and consumers across the currency bloc.

Swiss KOF indicator signals slowdown

Switzerland’s economic outlook deteriorated markedly in March, with the KOF Economic Barometer from ETH Zurich dropping 7.7 points to 96.1, according to data released on Tuesday. The indicator, which last fell below its long-term average of 100 after the tariff shock in August and September last year, again slipped under this threshold, surprising economists who had expected readings between 100 and 104. The weakening is broad-based, with both supply- and demand-side indicator groups signalling gloomier prospects, and the manufacturing sector and foreign demand components showing particularly pronounced declines. As a leading composite indicator based on a wide range of data, the KOF barometer now points to below-average Swiss growth in the near term.

Corporate and economic calendar

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

Economic data in focus: UK gross domestic product (08:00), German retail sales (08:00), French Consumer Price Index (08:45), German unemployment rate (09:55), euro-area Consumer Price Index (11:00), Italian Consumer Price Index (11:00), Canadian gross domestic product (14:30), US JOLTS jobs report (16:00) and US Conference Board Consumer Confidence Index (16:00).

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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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