U.S. equity markets closed the week lower, reflecting heightened volatility driven by geopolitical tensions, rising oil prices, and persistent inflation concerns.
Major indices declined, with the Dow Jones Industrial Average and Nasdaq Composite posting notable losses, while mid-cap stocks showed relative resilience.
Energy stocks outperformed as oil prices climbed amid ongoing uncertainty surrounding supply disruptions in the Middle East.
At the same time, U.S. Treasury yields moved higher, with the 10-year yield reaching approximately 4.38%, indicating continued investor caution and expectations of sustained inflationary pressure.
The Federal Reserve maintained its benchmark interest rate at 3.50%–3.75% for the second consecutive meeting.
While policymakers still anticipate one rate cut later this year, they revised their forecasts upward for both inflation and economic growth. Fed Chair Jerome Powell highlighted geopolitical risks particularly the possibility of an energy-driven inflation shock as a key concern.
Economic data further reinforced inflation worries. Producer prices rose more than expected in February, marking the fastest increase since mid-2025.
Meanwhile, the housing market presented mixed signals: builder sentiment and pending home sales improved slightly, but new home sales dropped to their lowest level since 2022, underscoring ongoing affordability challenges.
Europe
European markets also experienced declines, with the STOXX Europe 600 Index falling sharply as investors reacted to escalating geopolitical tensions and rising energy costs. Major indices across Germany, France, Italy, and the UK all ended the week lower.
The European Central Bank (ECB) held interest rates steady but warned that increasing oil and gas prices could significantly impact inflation in the near term. The ECB revised its 2026 inflation forecast upward to 2.6%, reflecting concerns that energy-driven price pressures may persist longer than expected.
Similarly, other central banks in the region including the Swiss National Bank and Sweden’s Riksbank kept their policy rates unchanged, signalling a cautious stance amid economic uncertainty. The Bank of England also maintained its interest rate at 3.75% but cautioned that prolonged energy shocks could necessitate tighter policy in the future.
Economic indicators pointed to underlying weaknesses in the region. The eurozone recorded a widening trade deficit, driven primarily by declining exports in key sectors such as machinery, vehicles, and chemicals. In
Germany, producer prices fell more than expected, largely due to lower energy costs, highlighting uneven price dynamics across the region.
In the UK, manufacturing sentiment weakened as businesses faced declining domestic demand and rising input costs, adding to concerns about slowing economic momentum.
Asia and global markets
In Asia, market performance remained subdued amid global uncertainty and rising energy prices. Japan’s equity markets declined modestly, with investors closely monitoring geopolitical developments and oil price volatility. The Bank of Japan held its interest rate steady at 0.75%, maintaining a cautious approach while signalling the potential for future rate increases if inflation trends persist.
Higher energy costs are expected to place pressure on Japan’s economy by increasing import expenses and dampening growth. Although exports continued to grow, momentum slowed, and the yen remained weak by historical standards despite a slight strengthening during the week.
China’s markets also declined, reflecting ongoing concerns about weak domestic demand and limited policy stimulus. However, recent economic data offered some signs of stabilisation. Industrial production and retail sales exceeded expectations, while infrastructure investment supported modest growth.
The property sector showed tentative improvement, with slower declines in home prices and targeted government support measures. At the same time, renewed trade tensions between the U.S. and major global economies including China added another layer of uncertainty, with potential tariffs posing risks to global trade flows.
Looking ahead
Amid persistent inflation pressures, geopolitical uncertainty, and shifting central bank policies, global markets remain highly sensitive, reinforcing the need for cautious and well-informed investment strategies in the months ahead.
