Global markets slide as oil shock and hawkish policy fuel broad risk-off move

Market Commentary

US equities ended modestly lower as the S&P 500, Dow, and Nasdaq all posted small losses in a volatile session driven by geopolitical tensions in the Middle East and elevated oil prices, while markets remained on track for a fourth consecutive weekly decline. Key drivers included a brief spike in Brent crude above triple‑digit levels, persistent fears of an oil‑price‑induced growth shock, and a hawkish Federal Reserve stance that kept real yields elevated and supported a rotation away from expensive growth and tech names toward more defensive and value‑oriented sectors.

European equities closed lower on Thursday, as a renewed surge in energy prices and increasingly hawkish signals from major central banks weighed on sentiment. The Eurozone’s STOXX 50 fell 2.10%, while the broader pan-European index declined 2.40%, marking their lowest levels this year. Energy markets drove much of the weakness, with European gas and power prices spiking after Iran targeted Qatari and Saudi infrastructure, prompting US threats against Iranian gas assets and intensifying inflation concerns. Against this backdrop, the European Central Bank held rates steady but revised inflation forecasts higher, with markets now pricing in two rate hikes this year—a sharp shift from expectations of a cut just a month ago—mirroring similarly hawkish holds from the Bank of England and Swiss National Bank. Financials led the losses as pressure on sovereign bonds weighed on banks, with UniCredit, ING, Santander, and Intesa Sanpaolo down over 4%, while industrials such as Schneider, Safran, and Airbus fell around 3.50%.

Asian markets followed the global risk-off tone, closing sharply lower as surging oil prices and escalating Middle East tensions weighed on sentiment. Chinese equities led losses, with the Shanghai Composite down roughly 1.50% and the CSI 300 off about 0.90%, pressured by industrials, property-linked names, and energy-sensitive sectors amid rising input costs and softer growth concerns. Hong Kong’s Hang Seng fell around 1.70%, with tech and cyclical stocks underperforming as investors reassessed external growth exposure and China-related policy risks. Japan’s equities were also among the weakest, with the Nikkei 225 declining 2%, dragged lower by chipmakers, exporters, and insurers as a firmer yen and elevated oil prices weighed on margins.

Locally, equities extended the global sell-off, with the FTSE/JSE All Share Index dropping around 2.80% to approximately 110 572 points, pushing the market into correction territory after a double-digit pullback from recent highs. The decline reflected sustained risk-off flows amid elevated oil prices, Middle East tensions, and a more hawkish US policy backdrop, with mining and other cyclical sectors bearing the brunt. Financials and consumer names also lagged, as major banks and large-cap resource stocks extended losses following earlier gains in the month, leaving the JSE more than 10% down peak-to-trough, though still ahead on a year-on-year basis.

Commodities extended the risk-driven moves, trading sharply higher as oil surged on escalating Middle East tensions, while gold remained supported on safe-haven demand. Brent crude jumped to around $114/bbl—up roughly $5 on the day and more than $40 higher year-on-year—amid renewed attacks on Iranian energy infrastructure and rising fears of prolonged supply disruption, with WTI also advancing and technicals pointing to a potential test of the $110 level. In contrast, gold held firmer at $4 579/oz, with gains more measured as elevated real yields and a still-hawkish US policy backdrop capped upside, despite increased inflows into physical and ETF-linked positions. Overall, the complex reflected a clear “war premium” repricing in energy, with oil driving inflation expectations, while gold and other metals played a more defensive, secondary role.