Oil prices surged by almost +30.0% last week as US–Israeli strikes inside Iran, followed by rapid retaliatory action, sent shockwaves through global energy markets. Brent crude initially spiked to $93 a barrel and has since broken above the $100 mark this morning, underscoring both the severity of disruption around the Strait of Hormuz and the growing market conviction that the conflict may prove prolonged. Although the White House attempted to characterise the move as a short‑term distortion, the global ramifications were immediate given the world’s extensive reliance on Gulf‑sourced oil and gas, particularly across Asia and Europe where import dependence remains structurally high. The resulting surge in energy prices fed directly into higher inflation expectations, prompting investors to reassess the near‑term interest‑rate path across major central banks. Rising sovereign bond yields added to tightening financial conditions, contributing to what became an exceptionally volatile week for risk assets.

Equity markets endured sharp losses, with recent resilience in several regions quickly unwound. The MSCI Europe ex UK index fell -7.0% in local‑currency terms as investors confronted the possible combination of potential stagflation, underscored by higher inflation alongside weaker growth momentum. UK equities fared marginally better but still declined meaningfully, with the FTSE 100 down -5.7%, while sterling slipped to a three‑month low. The gilt market also came under pressure, with yields rising across the curve, driven by a reassessment of the likelihood and timing of any future Bank of England (BoE) policy easing.

Losses across Asia were similarly pronounced. Korea and Japan both saw significant declines, with Korean equities suffering their worst single‑day drop on record as heavyweight names such as Samsung and SK Hynix faltered amid deteriorating global risk appetite. The Nikkei 225 fell -5.5% (in yen terms), reflecting Japan’s acute sensitivity to higher energy prices given its heavy reliance on imported oil and gas from the Gulf region. US equities also retreated, though declines at the large‑cap end of the market were less severe than in Europe or Asia. The S&P 500 fell around -2.0% in dollar terms, cushioned by the market’s sector composition and relative insulation from immediate energy‑supply risks. Nonetheless, small, and mid‑cap indices weakened more noticeably as rising borrowing costs and heightened macro uncertainty placed additional pressure on domestically oriented companies.

SJP Approved: 09/03/2026

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