Markets entered the week trading largely on the geopolitical narrative surrounding the Middle East, with investors focused on whether tensions between the US and Iran would evolve into a prolonged disruption of global energy flows. Oil prices had surged in the previous week as markets priced a higher probability of supply interruptions through the Strait of Hormuz, raising concerns that a renewed energy shock could reinforce inflation pressures just as central banks were attempting to stabilise financial conditions.
Global markets saw volatile trading as energy price swings and geopolitical tensions pushed yields higher and tightened financial conditions, while a mid-week improvement in sentiment supported a selective rebound in equities.
Markets entered the week navigating a shift in focus away from the immediate energy shock narrative toward the broader implications of persistently tight financial conditions. While geopolitical tensions continued to support elevated oil prices, investor attention increasingly turned to the interaction between inflation expectations, sovereign yields and the pace at which central banks could eventually move toward policy easing.
Global markets spent the week repricing inflation risk as an oil spike triggered a defensive rotation across equities, bonds, currencies and commodities.
