While energy prices and government bond yields rose this week, the impact on equities was different across regions, and credit stress was contained. The situation so far is one of uncertainty rather than a downturn.
Read this article to understand:
- The key market moves this week
- Why markets progressively stabilised as the week progressed
- The importance of keeping things in perspective
This week was dominated by the rapid escalation of geopolitical tensions in the Middle East, driving sharp but uneven volatility across global markets. Market reaction focused on distinguishing immediate price shocks from the longer-term implications for growth, inflation and monetary policy.
The initial reaction brought renewed attention to the strategically critical Strait of Hormuz. This key shipping route connects the Gulf with global markets and accounts for around 20 per cent of global seaborne oil, making it a central route for energy supply.
Energy markets reacted first. Oil prices surged early in the week, with Brent crude recording its largest daily move since 2022; the price of a barrel of oil rose in the week from $72 to $85, an 18 per cent increase. European natural gas prices were even more volatile, climbing by as much as 75 per cent at their peak before partially retracting, and were still up by 57 per cent by the morning of Friday March 6.
Equity markets reflected regional sensitivities rather than a uniform risk-off move. European, UK and emerging market equities were hit hardest, experiencing their sharpest daily declines in over a year due to their exposure to imported energy costs. Asian markets saw extreme swings, including a 12 per cent selloff in South Korea on Tuesday, March 3, followed by an equally sharp rebound the next day. US equities, by contrast, showed relative resilience. Despite elevated volatility, the S&P 500 remained within a few percentage points of recent highs, supported by large technology stocks, energy shares and the perception that the US is more insulated from direct supply disruptions. As of Thursday, March 5’s close, the S&P 500 was down by less than one per cent on the week, compared with declines of nearly six per cent for European equities and 4.5 per cent for the UK.
Bond markets repriced meaningfully as investors reassessed inflation risks. Higher oil and gas prices fed quickly into inflation expectations, prompting markets to scale back anticipated interest rate cuts. US Treasury yields rose across the curve, with the ten‑year yield increasing by almost 0.25 per cent. European and UK government bond yields also moved higher, and by mid‑week markets were even implying the possibility of ECB rate rises by the end of 2026.
Traditional safe havens did not always behave as expected, with both government bonds and gold falling in the week. After several months of strong performance, some of the crowded trades that have done very well this year came under pressure as investors looked where they could take profit. As a result, gold was down by three per cent in the week by Friday, March 6, morning. The US dollar, however, reverted to its safe‑haven role, rising by two per cent against a basket of currencies.
As the week progressed, market sentiment began to stabilise. Strong US economic data helped anchor expectations for underlying growth, reinforcing the view that the global economy remains on a relatively steady footing. Attention now turns to US labour-market data, which will be an important test of whether economic momentum can offset the growth risks posed by higher energy prices.
Stepping back, perspective remains important. Despite sharp daily moves, markets have not entered correction territory, credit stress remains contained, and economic data continue to point to ongoing growth. History suggests geopolitical shocks typically have limited and short‑lived effects on risk assets unless they translate into a sustained energy shock that raises inflation and damages growth. For now, markets appear to be navigating uncertainty rather than pricing a downturn. It’s important for investors to remain diversified and focused on balancing near‑term risks with underlying resilience.1
References
- Source of all the data for this article: Aviva Investors and Bloomberg. Data as of March 6, 2026.
