Middle East conflict is casting a shadow over global financial markets. On the afternoon of March 13th Beijing time, major European stock indices opened lower, while futures for the three major US indices also experienced a broad sell-off. 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 point out that concerns over fiscal spending triggered by the current Middle East tensions are sweeping through global bond markets.
Regarding the Middle East situation, according to the latest reports from Xinhua News Agency, the Israeli Defense Forces issued a statement on the 13th announcing that they had begun 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, it expects the average price of Brent crude oil for March to exceed $100 per barrel.
**Broad Sell-Off in European and US Markets** On the afternoon of March 13th Beijing time, futures for the three major US stock indices all fell sharply. As of 16:20 Beijing time, Dow Jones Industrial Average futures were down 0.47%, Nasdaq 100 futures were down 0.56%, and S&P 500 futures were down 0.46%.
Major European stock indices opened collectively lower. The Euro Stoxx 50 index fell 1.13%, the UK's FTSE 100 index dropped 0.79%, France's CAC 40 index declined 1.19%, Germany's DAX 30 index decreased 0.98%, and Italy's FTSE MIB index fell 1.18%.
Analysis suggests that the continued escalation of the Middle East conflict is intensifying the sell-off in European and US markets, as investors worry that a resolution to the conflict may be further delayed.
Notably, long-term government bonds in the United States, the United Kingdom, Germany, and Japan also faced a new wave of selling.
On Friday, the yield on the US 30-year Treasury note climbed close to 4.90%, hitting a near one-month high. Since the outbreak of the war on February 28th, this yield has risen by more than 20 basis points, erasing all the gains US Treasuries had made since the start of the year. A Bloomberg index tracking US bond returns has seen its year-to-date gains nearly vanish.
Furthermore, the ICE BofA MOVE Index, commonly known as the bond market's "fear gauge," rose to its highest level since June 2025.
Bond yields in the United Kingdom, Germany, Australia, and Japan also surged across the board, putting pressure on long-term government bonds globally.
Gang Hu, Managing Partner at Winshore Capital Partners, stated that the rise in long-end yields reflects market expectations that the US government will need to spend heavily to fund the war and subsidize consumers facing high oil prices.
According to a Xinhua report, acting US Defense Department Comptroller Jules Hurst said on the 12th that the US spent approximately $11 billion on military operations against Iran last week. This is the first time the US government has publicly estimated the cost of the conflict.
A report on the US political website Politico stated that Hurst disclosed this "rough figure" at a defense conference in Washington D.C. that day. He also mentioned that the Defense Department's comptroller office 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 air and sea strikes in the first 100 hours after the conflict began was approximately $3.7 billion. The conservative think tank American Enterprise Institute, however, estimates the cost of operations so far 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 path seen during the 2022 energy crisis, 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, pointed out that compared to the energy crisis triggered by the 2022 Russia-Ukraine conflict, 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 a 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 13th stating that they 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 13th local time, the Israeli Defense Forces issued a statement saying that over the past day, the Israeli Air Force dispatched dozens of fighter jets and conducted 20 large-scale airstrikes on western and central regions of Iran, hitting over 200 Iranian targets. These included ballistic missile launchers, air defense systems, and weapons production facilities.
The Israeli military stated that since the strikes on Iran began at the end of February, the Israeli Air Force has conducted hundreds of sorties against Iranian targets to degrade its capability for missile attacks on Israeli territory.
**Impact on Oil Prices** With the Strait of Hormuz disruptions compounding the effects of the Middle East conflict, Goldman Sachs predicts the average price of Brent crude for March will break into triple digits, but also warns that prices may gradually decline in the second half of the year.
According to a Reuters report on Friday, March 13th, Goldman Sachs stated that, affected 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 for March to exceed $100 per barrel, while the April average is forecast to fall back to $85.
Despite upward pressure on oil prices in the short term, Goldman Sachs maintains a relatively cautious outlook for the full-year price trend. Assuming no further deterioration in oil flow disruptions, it expects Brent crude prices to gradually decline to the lower $70 range by the end of the year.
As of 16:20 Beijing time on the 13th, Brent crude futures were up 1.71% at $102.18 per barrel, with a weekly gain of over 8%. WTI crude futures were up 1.79% at $97.46 per barrel, posting a weekly increase of over 7%.
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