Financial markets are shrouded in uncertainty amid escalating Middle East tensions. On the afternoon of March 13, Beijing time, major European stock indices opened lower, while U.S. stock index futures also experienced a broad decline. Additionally, long-term government bonds in the United States, the United Kingdom, and Germany faced heavy selling pressure. The ICE BofA MOVE Index, often referred to as the bond market's "fear gauge," climbed to its highest level since June 2025. Analysts note that concerns over fiscal spending triggered by the current Middle East situation are sweeping through global bond markets.
Regarding the Middle East conflict, according to the latest reports from Xinhua News Agency, the Israeli Defense Forces issued a statement on March 13 announcing the start of a new round of "large-scale strikes" on infrastructure in Tehran, Iran's capital. Goldman Sachs warned in a recent report that, affected by the Middle East conflict, damage to energy infrastructure, and disruptions to shipping through the Strait of Hormuz, the average price of Brent crude oil in March is expected to exceed $100 per barrel.
**Global Markets Experience Broad Declines** On the afternoon of March 13, Beijing time, futures for the three major U.S. stock indices fell across the board. As of 16:20, Dow Jones Industrial Average futures were down 0.47%, Nasdaq 100 futures fell 0.56%, and S&P 500 futures declined 0.46%. Major European stock indices opened collectively lower: the Euro Stoxx 50 dropped 1.13%, the UK's FTSE 100 fell 0.79%, France's CAC 40 declined 1.19%, Germany's DAX decreased 0.98%, and Italy's FTSE MIB index was down 1.18%. Analysts pointed out that the continuous escalation of the Middle East conflict has intensified the selling wave in European and American markets, as investors worry that the resolution of the conflict may be further delayed.
Notably, long-term government bonds in countries including the United States, the United Kingdom, Germany, and Japan also faced a new round of selling. The yield on the U.S. 30-year Treasury note climbed close to 4.90%, hitting a near one-month high. Since the outbreak of the conflict on February 28, this yield has risen by more than 20 basis points, erasing all gains made by U.S. Treasuries so far this year. A Bloomberg index tracking returns on U.S. government debt has seen its year-to-date gains nearly wiped out. Furthermore, the ICE BofA MOVE Index climbed to its highest level since June 2025. Bond yields in the UK, Germany, Australia, and Japan also surged across the board, putting widespread pressure on long-term government bonds.
Gang Hu, Managing Partner at Winshore Capital Partners, stated that the rise in long-end yields reflects market expectations that the U.S. government will need to spend heavily to fund the war and subsidize consumers dealing with high oil prices.
According to Xinhua News Agency, Jules Hurst, the acting U.S. Defense Department Comptroller, said on March 12 that the United States spent approximately $11 billion last week on military operations against Iran. This is the first time the U.S. government has publicly estimated the cost of the conflict. Reports indicated that Hurst disclosed this "rough figure" at a defense conference in Washington, D.C. He also mentioned that the Office of the Comptroller is preparing a more specific number for a supplemental budget request, planned to be submitted to the White House and Congress within days. The Center for Strategic and International Studies estimated that the cost of aerial and naval strikes in the first 100 hours of the conflict was about $3.7 billion. The conservative think tank American Enterprise Institute estimated the cost of operations to date to be between $11.2 billion and $14.5 billion.
In Europe, governments are facing dual pressures from higher defense spending and potential energy subsidies. European Commission President Ursula von der Leyen proposed several countermeasures this week, including a natural gas price cap. Andrzej Szczepaniak, Senior European Economist at Nomura, analyzed that European governments might replicate the response seen during the 2022 energy crisis by financing crisis expenditures through joint EU bond issuance, which would create structural pressure on eurozone bond markets.
Chris Arcari, Head of Capital Markets at Hymans Robertson, noted that compared to the energy crisis triggered by the Russia-Ukraine conflict in 2022, governments now have more limited fiscal space, with higher debt burdens and interest costs. This time, the bond market may be less willing to finance such large-scale fiscal expansion, or at least demand higher real yields as compensation.
**Israel Launches Large-Scale Airstrikes on Iran** On the Middle East front, according to Xinhua News Agency, the Israeli Defense Forces issued a statement on March 13 stating that the military had begun a new round of "large-scale strikes" on infrastructure in Tehran, Iran's capital. Other Iranian media reported multiple explosions heard in western Tehran that day. Earlier on March 13, the Israeli Defense Forces stated that over the past day, dozens of Israeli Air Force aircraft had conducted approximately 20 large-scale airstrikes on western and central Iran, hitting over 200 Iranian targets, including ballistic missile launchers, air defense systems, and weapons production facilities. The Israeli military stated that since the strikes on Iran began in late February, the Israeli Air Force has conducted hundreds of sorties against Iranian targets to degrade missile attack capabilities directed at Israeli territory.
**Strait of Hormuz Disruption and Conflict Impact: Goldman Sachs Forecasts Brent Above $100** The combination of the Strait of Hormuz blockade and the Middle East conflict has led Goldman Sachs to predict that the average price of Brent crude will surpass $100 in March, while also warning that prices may gradually decline in the second half of the year. According to a Reuters report on Friday, March 13, Goldman Sachs stated that, impacted by the Iran conflict, damage to Middle East energy infrastructure, and shipping disruptions in the Strait of Hormuz, it expects the average price of Brent crude to exceed $100 per barrel in March, before falling back to an average of $85 in April. Despite short-term upward pressure on oil prices, Goldman Sachs maintains a relatively cautious outlook for the full year. Assuming no further deterioration in oil flow disruptions, it expects Brent crude prices to gradually retreat to the lower $70 range by the end of the year.
As of 16:20 Beijing time on March 13, Brent crude futures rose 1.71% to $102.18 per barrel, with a weekly gain of over 8%. WTI crude futures increased 1.79% to $97.46 per barrel, marking a weekly rise of over 7%.
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