Weekend Update #268
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Global markets ended a turbulent week on high alert as the “US–Israeli war on Iran” entered its seventh day, triggering a sharp bond selloff and a surge in energy prices. Equities fell broadly on Friday, erasing mid-week gains that had been fueled by brief hopes of a rapid de-escalation. Investor sentiment deteriorated further as geopolitical escalation collided with a surprise contraction in the U.S. labor market, compounding fears that the global economy could face both slowing growth and renewed inflation pressure. Oil is now pacing for its largest weekly increase since 2022, with WTI topping $91 per barrel after officials in Qatar warned that a prolonged conflict could “bring down the economies of the world.”
Market volatility rose sharply as investors rushed to hedge geopolitical risk. The CBOE Volatility Index (VIX) climbed to 29—its highest level since the April 2025 “Liberation Day” shock—driving a surge in options activity and tightening liquidity across both equity and credit markets.
The conflict has also severely disrupted global energy logistics, particularly through the Strait of Hormuz—one of the world’s most critical oil transit routes. Bloomberg vessel data shows a sharp collapse in traffic, with tanker crossings down 64.8% and container ship transits falling 71.9% on a seven-day rolling basis. President Donald Trump has authorized the U.S. Navy to escort commercial tankers and offered federal insurance support for shippers, but conditions on the water remain strained. Shipping costs in the Middle Eastern Gulf have surged, with spot rates now more than doubling relative to their recent averages.
At the same time, the domestic economic backdrop weakened noticeably. U.S. employers unexpectedly shed 92,000 jobs in February, pushing unemployment higher and reviving recession concerns. Treasury markets also came under pressure, with the 10-year yield rising to 4.17% as surging oil prices stoked renewed inflation fears. The combination of weaker labor data and higher energy costs forced traders to reassess the policy outlook from the Federal Reserve, with futures markets rapidly pricing out near-term rate cuts as policymakers confront the risk of an energy-driven inflation shock.
The fallout is increasingly spreading across global markets. South Korean equities plunged 18% over two days—erasing roughly $625 billion in market value—as heavily leveraged retail trading positions unraveled in a wave of forced liquidations. Energy markets are tightening further after an Iranian drone strike forced the shutdown of the world’s largest LNG export facility in Qatar, threatening a significant portion of global supply. Meanwhile, the U.S. administration has begun coordinating with defense leaders to sharply ramp production of “Exquisite Class” weaponry to replenish stockpiles strained by ongoing conflicts in Iran and Ukraine.
Friday’s Close (Weekly Performance)
S&P 500 6,740.02 (-2.02%)
Nasdaq 22,387.68 (-1.24%)
Dow Jones 47,501.55 (-3.01%)
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