Stock and bond markets declined on Thursday as oil prices surged once again. The optimistic market expectations for a swift conclusion to the Middle East conflict and a subsequent easing of energy supply disruptions were dampened by recent statements from the U.S. President.
As of the latest update, Dow Jones futures were down 1.32%, S&P 500 futures fell 1.49%, and Nasdaq futures dropped 1.98%.
In a prime-time address, the U.S. President pledged tougher actions against Iran within the next two to three weeks but did not outline a specific plan for reopening the Strait of Hormuz. This led to a rapid deterioration in market sentiment.
**Equities Plunge** European markets traded lower. Declines in banking and industrial stocks pulled the pan-European Stoxx 600 index down by 1.2%, nearly erasing all gains from the previous session. Germany's DAX index fell 1.5%, led lower by energy-intensive manufacturing stocks. In Paris, losses in luxury goods and industrial shares contributed to a 1.25% decline in the CAC 40 index.
Italy's FTSE MIB index and Spain's IBEX 35 index dropped 1.2% and 1.3%, respectively. In London, gains from major oil companies provided some cushion, but the FTSE 100 index still finished 0.7% lower.
Following the presidential address, U.S. stock index futures declined. Dow Jones Industrial Average futures were down 1.3%, S&P 500 futures fell 1.5%, and the tech-heavy Nasdaq 100 futures dropped 2%. In pre-market trading, shares of oil and gas firms like Venture Global Inc. and Exxon Mobil advanced, while travel, mining, and semiconductor sectors retreated.
Asian markets slumped due to the lack of a clear timeline for ending the Middle East conflict in the address. Japan's Nikkei 225 index closed down 2.4%, and South Korea's Kospi index plunged 4.7%. Both indices have significant exposure to energy-intensive technology manufacturing firms.
Although the U.S. President also indicated that military operations were nearing their conclusion, the reaffirmed hawkish tone contributed to declines in major European indices and Wall Street futures. This followed Asian markets largely giving back the previous session's gains overnight.
"The President's characteristically ambiguous stance leaves multiple military options on the table in the near term," said Claudio Galimberti, Chief Economist at Rystad Energy. "As long as the path toward de-escalation remains unclear, markets are likely to stay highly volatile."
**Oil Nears $110** Oil prices jumped more than $5 following the address. Brent crude surged 7.4%, breaking above $108 per barrel. WTI crude futures for May delivery rose 6.1% to $106.19 per barrel. Natural gas prices also climbed, with the European benchmark, the Dutch TTF front-month contract, rising 4.8% to €49.87 per megawatt-hour. European diesel futures rose to $200 per barrel.
"Since the initial spike, oil prices have rarely dipped below $100 per barrel," said Russ Mould, Investment Director at AJ Bell. "Compared to the latest swings in global stock indices, this perhaps tells us more about the current situation, as the world is forced to confront the reality that roughly 20% of global supply is being disrupted."
"This market is incredibly difficult to navigate right now," said Laurent Lamagnere, Deputy CEO at Paris-based Alphavalue. "Our real concern is the second-round effects, not just from the oil price itself, but from oil supply issues, such as airlines cutting routes, which could have severe consequences for tourism."
**Strait of Hormuz Reopening?** The U.S. President stated on Wednesday that the U.S. does not rely on the critical oil passageway and suggested it would naturally reopen after the conflict ends.
"The past 48 hours have been filled with statements from Tehran and Washington, some of which seemed to suggest an increased possibility of de-escalation," said Felix-Antoine Vezina-Poirier, an analyst at BCA Research. "Simultaneously, substantive military actions have shown no signs of abating."
"Our macro-political strategists offer a simple suggestion for navigating volatile headlines: stick to the facts," he added. "First, shipping traffic through the Strait of Hormuz has increased over the past few days. Second, Iran appears to be deliberately shifting its targeting from Gulf Arab states towards Israeli assets."
In the preceding days, markets had been optimistic that the administration was seeking a rapid exit from the war. However, Wednesday's address provided no clear timeline or substantive breakthrough on how to end the conflict, which has disrupted financial markets and pushed some indices into technical correction territory.
"The longer high energy prices persist, the more they erode consumer spending," said Mathias Heim, Chief Investment Officer at Belle Capital. "Without fiscal transfers to offset this, it squeezes disposable income and weakens demand."
"The only question that truly matters is whether the Strait of Hormuz will reopen soon," said Prashant Newnaha, Senior Rates Strategist at TD Securities, referring to the narrow chokepoint that handles about one-fifth of the world's crude oil and liquefied natural gas. "The address did not suggest this would happen as quickly as the market had initially hoped."
**Bond Sell-Off** Government bond yields rose again as markets anticipated that impending inflationary pressures would force central banks to hike interest rates or, at a minimum, hold them steady.
U.S. Treasury yields moved higher across the curve. The two-year yield increased by 5 basis points to 3.85%. The 10-year yield rose 5.9 basis points to 4.379%, and the 30-year yield climbed 5.1 basis points to 4.952%. This shift occurred as traders reduced the probability of Federal Reserve rate cuts by 2026 from above 20% to around 10%.
Eurozone government bond yields followed U.S. Treasuries higher. Germany's 10-year bund yield rose 4.1 basis points to 3.027%, while France's 10-year OAT yield increased 6.3 basis points to 3.744%. An upcoming long-term bond auction in France, expected to raise between €10.5 billion and €12.5 billion, may have exacerbated the sell-off in French debt. Money markets are now fully pricing in two 25-basis-point rate hikes from the Bank of England and nearly three from the European Central Bank this year.
**Dollar Regains Strength** The U.S. dollar, a preferred safe-haven asset during turmoil, strengthened against most currencies. This followed a nearly 1% decline over the previous two days, driven by optimism that the war might end soon. Year-to-date, the dollar index is up nearly 2%. The euro fell 0.5% to $1.1526, and the pound declined 0.8% to just below $1.32.
"With expectations now set for another two to three weeks of military action, the possibility of ground force involvement not being ruled out, and renewed emphasis on threats to infrastructure, this will push markets back into a defensive posture," said Jon Withaar of Pictet Asset Management.
The Reserve Bank of India intervened on Thursday by banning so-called "non-deliverable forward" (NDF) trades as the Indian rupee hit a record low. The move pushed the rupee up by 2%, though analysts questioned how long the rebound would last.
According to LSEG data, Bitcoin fell 2.2% to $66,664. This followed a rally on Wednesday to $69,232, its highest level in nearly a week, from which it has now retreated.
Gold ended a four-day winning streak. Other precious metals also fell sharply, with silver down 7.3% to $70.54 and platinum dropping 4.6% to $1,896.70. Rising inflation risks associated with higher oil prices, which cloud the interest rate cut outlook, overshadowed gold's appeal as a safe haven. Despite this, gold is still on track for a weekly gain of over 5%, following a rally earlier in the week when the U.S. President had hinted that the U.S. might disengage from the Iran situation within two to three weeks.
Investors will next focus on U.S. February trade balance data and weekly initial jobless claims figures. European and U.S. stock markets will be closed for Good Friday. The U.S. bond market will trade until noon tomorrow, with markets also watching for the March non-farm payrolls report.
**Standard Chartered Forecast: Gold to Resume Rally and Break Records** Since the outbreak of the Middle East conflict, the gold price has fallen significantly. This contradicts the traditional view of gold as a safe-haven asset that provides stability (or appreciation) during market turmoil, heightened uncertainty, or geopolitical tension.
However, Suki Cooper, Head of Global Commodities Research at Standard Chartered, believes that gold often becomes a source of liquidity in the early stages of a crisis, with historical suppression periods typically lasting 4-6 weeks. Although the current decline has been more severe, overheated positioning has largely been unwound. Gold's safe-haven status remains intact, and prices are expected to challenge historical highs again.
She pointed out that many structural drivers for gold remain firm, including concerns about high debt levels in the U.S. and globally, fiat currency debasement, tariff and trade uncertainties, and geopolitical risks. Gold is currently pricing in multiple risks simultaneously, making short-term trends difficult to predict linearly. Existing liquidity pressures might weigh on prices for a while longer, but she still expects gold to resume its upward trend in the coming months. On the downside, the 200-day moving average, which has held since October 2023, provides strong support. The overall trajectory for the gold market remains upward.
**Bank of America Warning: Iran War Unleashing "Stagflation Bomb" on Globe** Analysts at Bank of America anticipate that, due to the impact of the Iran war, the full year will be characterized by slower economic growth, higher inflation, and oil prices around $100 per barrel, even if the conflict ends within weeks.
"So far, the 'dividend' from the war has been mild stagflation," wrote Bank of America economists Claudio Irigoyen and his team in a report on Wednesday, referring to the economic phenomenon of high inflation coexisting with slowing growth.
If the conflict escalates and drags on, "a sharp rise in energy prices, combined with a significant adjustment in asset prices, could tip the global economy into a recessionary scenario," Irigoyen wrote.
The economists still expect the Federal Reserve to cut rates by 50 basis points this year, but the timing of these cuts has been pushed back from summer to autumn, acknowledging that "the risk that these cuts may not materialize is high."
**War Ignites Stock Market "Weekend Fear"! S&P 500 Trapped in "Black Thursday" Rout Pattern** As the Middle East war enters its fifth week, continuing to impact the global economy, U.S. stock markets have developed a predictable pattern: strong gains at the start of the week, narrow fluctuations mid-week, followed by a sharp, clockwork-like sell-off on Thursdays and Fridays.
This pattern is particularly evident in the S&P 500 index. Since the outbreak of the Iran war, the index has recorded cumulative gains over the first three trading days of each week, but has fallen a total of 9% on Thursdays and Fridays combined.
Experts say the logic behind this is straightforward. The weekend represents two (or three, with a holiday) days without trading, during which numerous events related to the war could further shock the global economy, especially given the administration's tendency to announce significant actions during market closures.
Consequently, many investors prefer to reduce equity exposure heading into the weekend.
**Stocks in Focus** Major technology stocks were mostly lower in pre-market trading. Tesla and NVDA 3xLongSG261006 fell 2%. Meta, Amazon, and Google's Class A shares dropped over 1%. Microsoft declined 0.9%, and Apple was down 0.7%.
Memory chip companies declined pre-market. SanDisk fell over 5%, and Micron Technology dropped over 4%.
As global chemical prices enter an upward cycle, Dow Chemical rose over 3% pre-market.
TotalEnergies gained over 2% pre-market after forming a new energy joint venture with Masdar.
Satellite operator Globalstar jumped nearly 12% pre-market on reports it is in acquisition talks with Amazon.
Penguin Solutions advanced 8.66% pre-market after reporting better-than-expected results for the second quarter of fiscal year 2026 and raising its full-year outlook.
Vertex Pharmaceuticals rose over 3% pre-market after the U.S. FDA approved label expansions for Alyftrek and Trikafta.
Comments