Markets reel on Middle East escalation as energy shock fears rattle global risk assets

Market Commentary

US equity markets closed lower on Tuesday but recovered from steeper intraday losses after President Donald Trump pledged to escort oil tankers through the Strait of Hormuz, helping to calm initial fears over escalating US–Iran tensions. Major indices, which had fallen more than 2.50% at their worst, rebounded as the naval escort commitment tempered Brent crude’s surge and eased pressure on rising Treasury yields that had weighed on rate-sensitive technology stocks. Materials and industrials remained under strain amid energy cost concerns, while Nvidia declined 1.30% and Tesla fell 2.70%. In economic data, US consumer sentiment deteriorated in March 2026, with overall optimism missing expectations. Both the six-month economic outlook and households’ views on their personal finances weakened, while confidence in federal economic policy also edged lower, pointing to a more cautious consumer backdrop.

European equities extended their selloff on Tuesday, pressured by mounting concerns that the conflict in Iran could trigger a sustained energy supply shock and undermine regional growth. Benchmark indices fell more than 3%, as continued strikes on Gulf energy infrastructure and threats to shipping through the Strait of Hormuz pushed European natural gas prices to more than double since last Friday. Financials led the decline, with banks sliding on expectations that renewed inflationary pressures could force central banks to maintain a tighter policy stance, prompting a selloff in sovereign bonds. Santander dropped 6.20%, while BBVA and UniCredit lost around 5%. Energy-intensive industrial and chemical names also came under heavy pressure, with Siemens, Schneider and Bayer each falling more than 5%. The move was compounded by firmer-than-expected February inflation data, which reinforced a more hawkish rate outlook.

Asian markets traded in mixed fashion, with Japan extending gains while Chinese equities remained under pressure amid persistent growth and policy concerns. In Tokyo, the Nikkei 225 advanced, supported by exporter and semiconductor-related counters as a softer yen improved the earnings outlook for globally exposed companies. Autos and machinery stocks led the move, benefiting from currency tailwinds and resilient external demand signals. The move also reflected relative insulation from direct energy supply disruptions, with investors rotating back into cyclicals after recent volatility.

In contrast, sentiment across mainland China was more fragile. The Shanghai Composite and CSI 300 drifted lower, weighed down by property developers and financials as concerns persisted around liquidity conditions, weak housing activity and patchy consumer demand. Stimulus expectations remain in place, but the market is increasingly focused on the scale and transmission effectiveness of any additional policy support. Hong Kong equities also struggled to gain momentum, with the Hang Seng Index pressured by technology and property names. Broader risk appetite in the region remained tentative, as investors balanced global yield movements, commodity price volatility and geopolitical risks against domestic policy developments.

South African markets took a sharp hit on Tuesday, with the FTSE/JSE All Share Index sliding over 5% to close at 119 962.82 points amid heightened global risk aversion from escalating Middle East tensions and Strait of Hormuz concerns. Resource stocks bore the heaviest losses, as miners like Impala Platinum, Northam, and Sibanye Stillwater tumbled alongside softening commodities. The rand softened against major global currencies, reaching R16.57/USD, R22.09/GBP, and R19.22/EUR, as offshore investors sought safety.

Geopolitical flare-ups in key oil chokepoints drove commodities higher, with safe-haven flows lifting gold to around $5 378 per ounce—a gain of over 1%—amid dollar softness and steady central bank accumulation. Brent crude spiked to $82.47 per barrel on supply threat fears, up roughly 5.50%, as WTI hovered near $75; platinum rose to $2 153 per ounce and silver to $90, supporting the broader metals rally. For South African producers, these gains provided a counterbalance to equity pressures, with forecasts pointing to prolonged upside in the commodity supercycle.