Global Market Overview and Key Developments
Financial Market Performance
Global financial markets exhibited mixed movements last week, driven by a confluence of economic and geopolitical factors. The US Dollar Index maintained a generally weaker trend, struggling to hold above the 100-point mark. This weakening is primarily attributed to more hawkish monetary policy signals from the central banks of Europe, Japan, and the UK, in response to inflationary pressures stemming from oil price shocks. These factors have diminished the dollar's interest rate differential advantage, and haven't been fully offset by safe-haven buying that could counterbalance the pressure from shifting rate expectations.
In precious metals, gold experienced a significant downturn, approaching its largest weekly decline in six years. Prices fell consecutively throughout the week, with sharp drops occurring on Wednesday and Thursday, pushing spot gold prices close to the 4500 mark. Spot silver mirrored gold's trend but with greater volatility, hitting lows near $65.5. The underlying reasons for this weakness in precious metals include upward revisions in interest rate expectations, dollar fluctuations, and concentrated short-term profit-taking.
International oil prices were characterized by sharp volatility, predominantly dictated by geopolitical factors. Early in the week, prices dipped following US attempts to facilitate passage through the Strait of Hormuz. Mid-week, however, oil prices surged again, with WTI crude breaking above $100 and Brent briefly exceeding $113, attributed to threats or attacks on energy facilities in the region. Subsequently, prices retreated amidst expectations of potential sanctions easing and de-escalation of the conflict. This seesaw between supply disruptions and geopolitical risks led to substantial price swings.
Non-US currencies generally showed a marked rebound, with the Euro, Yen, and Pound Sterling broadly strengthening. The logic behind this is the increasing vigilance of several central banks towards energy-driven inflation risks, making 'non-dollar hawkishness' the dominant theme.
US equities faced pressure and declined overall, with the three major indices experiencing consecutive drops at times and heightened intraday volatility. Inflationary concerns from surging oil prices, expectations of persistently high interest rates, and Middle East uncertainties suppressed risk appetite. However, as oil prices receded, the extent of the decline narrowed, indicating the market remains in a phase of 'risk-off then recovery' fluctuations.
Expert and Institutional Views
Commodity analysts at UBS predict that gold prices will rise to $6,200 per ounce by the end of 2026, over 20% higher than current levels, despite the metal's sideways consolidation following the outbreak of war in Iran.
OCBC pointed out that oil prices may remain elevated due to the absence of a clear path toward de-escalation.
Bank of America believes the market is underestimating the risks of a protracted Middle East conflict.
Goldman Sachs warned that an Iran war could lead to the worst recession in Gulf economies since the 1990s.
Morgan Stanley has pushed back its timeline for Fed rate cuts to September, citing inflation concerns.
Bank of America dismissed Fed rate cut speculation as "baseless" and suggested consumer stocks might present the best buying opportunity.
Rabobank expects the Federal Reserve to implement two rate cuts in 2026.
Goldman Sachs forecasts no rate cuts by the Bank of England this year, with gradual reductions to 3% next year.
JPMorgan anticipates both the ECB and BoE will each raise rates by 25 basis points in April and July.
Key Economic Events of the Week
1. **Fed Holds Rates Steady: Stagnant Inflation and Energy Shocks Reignite Rate Hike Discussions**
This week, the Federal Reserve announced its decision to maintain the target range for the federal funds rate at 3.5% to 3.75%, marking the second consecutive hold this year. Data released on Thursday indicated that traders are no longer anticipating a Fed rate cut in 2026. While the probability of a hold in April remains extremely high, the market has begun pricing in the possibility of a rate hike within the year.
Recent escalating Middle East geopolitical risks have disrupted policy pacing, with markets closely monitoring oil prices and inflation. The Fed stated that the impact of geopolitical conflicts on the US economy remains uncertain, and the magnitude and duration of oil price increases on inflation are yet to be observed. Future policy path will continue to be adjusted flexibly based on data.
Powell noted that oil prices transmit through production and transportation, not only pushing up overall inflation but potentially affecting core inflation as well. However, he emphasized that the situation is still in its early stages, and the impact is not yet clear.
In this policy vote, 11 out of 12 FOMC members supported maintaining interest rates unchanged, with only Governor Christopher Waller advocating for a 25-basis-point cut. Previously supportive Governor Michelle Bowman shifted her stance to a pause this month. Overall, the meeting statement showed little change from January, continuing to view job growth as sluggish, unemployment as stable, and inflation as remaining relatively high.
The dot plot revealed a narrowing of dispersion among officials, with a general inclination towards fewer rate cuts: seven members expected no cuts this year, and seven expected one cut, with a decrease in the proportion advocating for more aggressive reductions. The median projection indicates one rate cut in 2026 and one in 2027, with rates remaining unchanged in 2028. Powell also revealed that the FOMC has begun discussing "whether it is possible to raise interest rates next," although this is not the base case scenario assumed by most officials.
Regarding economic projections, the Fed revised its 2026 Personal Consumption Expenditures (PCE) inflation forecast upward from 2.4% to 2.7%, slightly raised its 2025 GDP growth forecast to 2.4%, and maintained the unemployment rate projection at 4.4%.
Furthermore, the question of Powell's tenure has drawn attention. His term as Chair expires in May, while his term as Governor continues until January 2028. The Department of Justice previously issued a subpoena to him regarding renovations at the Federal Reserve building. Powell stated that he would serve as acting chair according to law if a successor is not confirmed and has no intention of leaving the Board before the investigation is fully concluded, with his future tenure undecided thereafter.
Currently, President Trump has nominated former Governor Kevin Walsh to succeed him as Chair, subject to Senate confirmation.
2. **Major Central Banks Collectively Shift to "Hawkish Pause"; Energy Shock Reshapes Global Interest Rate Path**
This week saw a flurry of central bank meetings from major developed economies. Aside from the Reserve Bank of Australia's rate hike, most central banks opted to hold rates steady, but their policy tone clearly shifted towards tightening, with a "hawkish pause" becoming a common characteristic. Market expectations for rate cuts within the year have significantly contracted.
The only central bank to implement a rate hike this week was the Reserve Bank of Australia, which raised its cash rate by 25 basis points to 4.10%. This decision passed by a close 5-4 vote, indicating internal divergence, but policy leaning towards "proactive" action amid upward inflation pressures. In contrast, the Bank of England, European Central Bank, Bank of Japan, Swiss National Bank, and Bank of Canada all kept rates unchanged but strengthened their vigilance on inflation risks.
The shift at the Bank of England was particularly notable. The March meeting unanimously (9-0) decided to keep rates at 3.75%, emphasizing that Middle East conflict-driven energy price increases would exert upward pressure on inflation. Meeting minutes revealed that members who previously supported rate cuts had shifted to supporting a hold, warning against "second-round effects" on wages and prices, explicitly signaling a tightening bias if necessary.
The European Central Bank also held rates steady but significantly raised its inflation forecast, revising its 2026 inflation projection from 1.9% to 2.6%. Its statement highlighted increased uncertainty from geopolitical conflict, which not only boosts inflation risks but also dampens economic growth. The market adjusted its expectations accordingly, moving from bets on a prolonged wait-and-see approach to anticipating rate hike discussions as early as April.
While the Bank of Japan and the Swiss National Bank did not alter rates, they issued differing tightening signals. The Bank of Japan indicated it would continue its path of rate hikes if economic and price outlooks align with expectations, and would monitor the impact of rising oil prices. Switzerland, meanwhile, stressed its intention to counter safe-haven capital inflows through foreign exchange intervention and raised its inflation outlook.
The Bank of Canada maintained its rate at 2.25%, while noting that the Middle East conflict exacerbates global energy price volatility and financial market uncertainty, leading to a more cautious policy stance.
Market expectations for the interest rate path have undergone a significant repricing. Short-term interest rate markets in the UK and Eurozone have shifted from pricing in rate cuts to incorporating hike risks. UK markets anticipate two to three hikes this year, while the Eurozone has priced in at least two rate increases.
3. **Middle East Conflict Enters Third Week: Escalation from Airstrikes to Full Confrontation Over Energy and Sea Lanes**
The third week of US-Israeli military operations against Iran has seen a marked escalation in conflict intensity and spillover range, transforming from isolated military strikes into a systemic risk event encompassing energy facilities, maritime routes, and regional political structures.
**High-Level Targeted Eliminations Impact Iran's Power Center:** Iran's political landscape has faced intense strikes. On March 17, Supreme National Security Council Secretary Ali Larijani was killed in an airstrike on the outskirts of Tehran, along with his son and several aides. Following an attack on the Supreme Leader in late February, Larijani was seen as a key figure during a transitional period, and his death further undermined political stability.
On March 18, Intelligence Minister Ismail Khatib died in a strike targeting intelligence agencies, and Basij militia commander Gholamreza Soleimani was also killed concurrently. On March 20, local time, Iranian Revolutionary Guard Corps spokesman Nainy was killed in an attack.
**Energy Warfare Crosses "Red Line," Spilling Over to Core Gulf Facilities:** On March 18, Israel struck facilities related to Iran's South Pars gas field, marking a critical turning point in the conflict, although Trump claimed ignorance of the event. This field accounts for about 40% of Iran's natural gas processing capacity and is shared with Qatar, making it one of the world's largest gas fields.
Iran subsequently expanded its retaliation scope to Gulf nations, naming multiple oil and gas facilities in Saudi Arabia, the UAE, and Qatar as targets. That evening into the early hours of March 19, Iranian missile and drone attacks were swiftly executed.
Qatar's Ras Laffan Industrial City suffered multiple hits and fires, an area central to the nation's LNG processing and export functions. The UAE's Habshan gas facility was damaged by intercepted debris and halted operations. Saudi Arabia's Samref refinery and Yanbu-bound targets were attacked and intercepted. Two major refineries in Kuwait also reported fires.
Following this, Israeli Prime Minister Netanyahu announced a pause in attacks on Iranian energy facilities, claiming the destruction of Iran's nuclear fuel production capacity and missile manufacturing plants, but acknowledged that similar future actions would require US consent.
US Treasury Secretary Bentsen stated that the US plans to increase physical supply and curb soaring oil prices by releasing strategic petroleum reserves and lifting restrictions on approximately 130-140 million barrels of sanctioned Iranian crude oil. He also said that oil prices would eventually fall back to pre-February 28 levels, emphasizing no financial intervention in the futures market.
**Strait of Hormuz Continuously Obstructed; Bab el-Mandeb Strait Prospects Grim?** Passage through the Strait of Hormuz, a vital chokepoint for about 20% of global oil and gas transport, has significantly deteriorated. Multiple countries reported stranded vessels and shipping suspensions, with hundreds of merchant ships opting for anchorage. Iran has floated the possibility of imposing fees on transit vessels and hinted at reshaping strait order post-war.
Trump demanded approximately seven nations dispatch warships to the Strait of Hormuz for escort duty in response to Iran's blockade threat, warning NATO allies of severe consequences if they did not assist. Several European countries refused participation, with Britain offering only mine-clearing drone support, and Germany, Poland, and Spain ruling out troop deployment, while Japan maintained a cautious stance.
After being rejected, Trump reversed course, stating no assistance was needed, and turned to personal attacks and threats. He belittled Macron as "not Churchill," predicted Macron's imminent downfall, implied pressure on Europe over Ukraine aid, and expressed dissatisfaction with NATO. Irish Taoiseach Micheal Martin was present as Trump retorted to criticism from Irish President Katherine Conroy by saying, "He's lucky to have me."
Saudi Arabia activated its East-West pipeline, built in 1981, increasing its throughput to 7 million barrels per day by injecting drag-reducing agents, allowing Yanbu's Red Sea port exports to recover to 60% of pre-war levels (4.19 million bpd). However, this solution shifts risk from the Strait of Hormuz to the Bab el-Mandeb Strait, controlled by Houthi forces.
On Friday, a Houthi political bureau member in Yemen told foreign media that the group is considering all possible options to support Iran's resistance against US-Israeli military action, including blockading the Bab el-Mandeb Strait. If a blockade were implemented, it would target only vessels from countries involved in attacking Iran, Iraq, Lebanon, and Palestine.
**Multilateral Diplomacy and Rising Regional Security Risks:** Gulf states have requested an urgent consultation with the UN, accusing Iran of attacking civilian and energy facilities. European nations like Germany have explicitly stated they will not participate in military action but warned that conflict escalation would impact European energy and security. Concurrently, Israel launched ground operations in southern Lebanon, indicating a potential expansion of the front lines.
Additionally, the World Health Organization stated that attacks on nuclear facilities and oil fields during Middle East conflicts have raised concerns about radioactive contamination risks, and the WHO is preparing for such eventualities. Iran's Bushehr nuclear power plant was attacked on March 17 but remained undamaged, with the International Atomic Energy Agency confirming normal radiation levels.
4. **Former US Counterterrorism Official Resigns, Citing Limited Decision-Making and Questioning Logic of War with Iran:** Joe Kent, former Director of the US National Counterterrorism Center, publicly voiced his skepticism about the decision-making process for US military action against Iran for the first time since his resignation, sparking discussions about the dominance of Middle East policy.
In an interview, Kent stated that before the war with Iran, Trump's decision-making information channels were restricted, with "many key decision-makers prohibited from offering opinions to the President." He claimed that intelligence assessments, which should have provided rational evaluations, were not fully utilized. He described the discussions as taking place in a closed environment, lacking dissenting opinions.
On the intelligence front, Kent pointed out that there was no evidence of an imminent, "9/11" or Pearl Harbor-level threat from Iran, differing from the "imminent threat" emphasized by the White House. He also stated that Iran was not close to possessing nuclear weapons and that its strategy was more about maintaining nuclear capability than achieving a breakthrough.
Regarding the conflict's origins, Kent believes Israel played a significant role in escalating the situation and exerted considerable influence on US Middle East policy. He questioned the logic behind the US assessment of the threat, suggesting that the perceived urgent risks stemmed more from regional dynamics than proactive Iranian actions.
Kent cited his "suppressed" opinions within internal processes, making it difficult to convey them to the White House decision-making level, as the reason for his resignation and public statements. He believes staying on would not change the policy direction. He confirmed he had communicated with Trump before his departure, and their exchange was relatively amicable.
His statements have generated controversy within US political circles. Some Republicans criticized his remarks as leaning towards conspiracy theories and deeming his views lacking policy relevance.
5. **US Intensifies Pressure on Cuba, Tensions Rise; Energy Crisis Impacts Livelihoods**
This week, US President Trump declared he would "take action" against Cuba soon, leading to renewed tensions. Cuban President Miguel Díaz-Canel responded by stating that any foreign aggression would be met with firm resistance, and accused the US of prolonged blockade and suppression.
Cuba contends that decades of US sanctions and isolation are a primary cause of its economic hardships. Díaz-Canel noted that the US, while attempting to control resources and the economy, simultaneously undermines developmental capacity through sustained pressure, inflicting a systemic economic blow on Cuba.
Recently, the US has intensified its pressure, including restricting oil supplies, exacerbating energy shortages. The UN reports that energy deficits have severely impacted livelihoods, leading to nationwide blackouts, with over 50,000 surgeries canceled in February alone due to insufficient power. The energy crisis is spilling over into residential life, with some households reverting to charcoal and firewood for cooking due to fuel shortages, driving up charcoal prices and tightening supply.
Geopolitically, the US continues its high-pressure policy, cutting off Venezuelan oil supplies to Cuba and impacting Mexican exports via tariffs, further constricting energy sources. Domestic Cuban oil production meets only about 40% of demand, making it highly reliant on external sources.
Cuba describes these measures as an "economic war," and Russia has expressed its support and condemnation of the sanctions. Despite the escalating tensions, voices within Cuba advocate for dialogue to de-escalate the conflict and prevent further escalation.
6. **Multiple Airlines Increase Fuel Surcharges on International Routes**
Amidst rising international oil prices, numerous airlines have aggressively increased fuel surcharges on international routes. Combined with currency fluctuations and rerouting factors, industry cost pressures are mounting.
Since mid-March, airlines such as Juneyao Airlines, Xiamen Airlines, Spring Airlines, and Hong Kong Airlines have successively adjusted their pricing. Juneyao Airlines raised surcharges on China-Southeast Asia routes from March 20, with Vietnam at ¥400, Indonesia at ¥600, and Thailand, Singapore, and Malaysia at ¥550. Previously, the China-Finland route surcharge reached a maximum of €150. Xiamen Airlines increased surcharges on Indonesia-Mainland China routes by approximately 15%. Spring Airlines raised its Pudong-Osaka route surcharge from ¥200 to ¥312, a 56% increase.
Hong Kong Airlines increased prices twice within a week, with short-haul routes rising from HK$212 to HK$290, and long-haul routes reaching a maximum of HK$1164. Additionally, China Eastern Airlines and China Southern Airlines have signaled price adjustments, advising early bookings. Thai Airways International also increased ticket prices by 10% to 15%, retaining room for further increases.
Industry insiders note that aviation fuel costs are the largest variable expense for airlines, and rising oil prices directly impact profit margins. Furthermore, rerouting on certain routes increases fuel consumption, which, coupled with exchange rate volatility, is gradually translating into higher ticket prices.
7. **South Korean Funds Increase A-Share and ETF Holdings; China's "Value for Money" Attracts Investment**
Amidst global capital market volatility and rising geopolitical risks, Chinese assets continue to attract foreign capital inflows due to their advantageous valuations and industry prospects. South Korean investors have recently significantly increased their allocations to A-shares and related ETFs, focusing on leading traditional manufacturing companies and sectors like semiconductors and robotics.
Data from Korea Securities Depository (SEIbro) shows that over the past month, South Korean funds have net-bought A-shares such as Sany Heavy Industry, China Power Construction, JCET, Gigalane, Meihua Holdings Group, Ganfeng Lithium, and Xuji Electric, with individual transactions exceeding $1 million USD each. Sany Heavy Industry saw over $6.3 million USD, and China Power Construction over $4.4 million USD, indicating concentrated investment in traditional leaders.
These companies are categorized by some institutions as "HALO" assets – infrastructure-oriented companies with low substitution risk and benefits from the energy transition and high-end manufacturing demand amidst the AI wave. Institutions believe these assets offer a "low substitution risk premium," though long-term performance hinges on their position within the AI value chain.
Simultaneously, there has been a notable increase in investment in the technology sector. JCET and Gigalane each received net purchases of no less than $1.5 million USD in the past month, with parallel interest in the robotics industry. In South Korea's thematic ETFs focused on humanoid robots, products investing in Chinese companies now approach the scale of domestic assets.
In terms of investment channels, South Korean funds predominantly access A-shares via ETFs. Over the last month, the AnTrust CSI Semiconductor Equipment ETF and the Huaxia CSI Semiconductor Chip ETF saw net inflows of approximately $1.2772 million USD and $864,800 USD, respectively.
8. **Tesla Plans to Procure ~$2.9 Billion in Equipment from China, Accelerating US Solar Manufacturing:** Multiple sources indicate Tesla is in discussions with Chinese suppliers to procure approximately 20 billion RMB (about $2.9 billion USD) worth of solar manufacturing equipment, primarily for expanding its solar panel and battery module production capacity in the United States. Relevant companies have confirmed such business discussions are underway.
Three individuals familiar with the matter revealed that Chinese suppliers are tasked with completing equipment delivery by autumn 2026, with some equipment expected to be shipped to Texas, USA. This procurement is closely linked to Tesla's plan to add 100 GW of solar capacity in the US. Elon Musk previously stated that solar power has the potential to meet all of America's electricity needs, particularly with the ongoing surge in data center energy consumption.
Tesla's job postings also suggest the company aims to achieve a domestic manufacturing capacity of 100 GW of solar products annually by the end of 2028, starting from raw materials. Sources indicate this capacity will primarily serve the company's own energy systems, with some electricity allocated to supporting SpaceX satellite operations.
Suzhou Maxwell Technology Co., Ltd., recognized as the world's largest manufacturer of solar cell screen printing equipment, is reportedly among the key potential suppliers and has applied for export licenses for the relevant equipment. Additionally, Shenzhen Jiejiaweichuang New Energy Technology and Laplus New Energy Technology are listed as potential partners.
9. **Nvidia GTC Unveils Inference-Specific Chip Architecture; Huang Expects $1 Trillion Revenue by 2027:** Nvidia CEO Jensen Huang announced at the annual GTC conference that the "era of inference" has arrived, unveiling new flagship products for inference.
The new products include the Groq LPU rack server, integrating 72 Vera Rubin servers and 256 LPU chips. Developed by Groq, the team was acquired by Nvidia in December of last year through a $20 billion transaction. This new system can generate 700 million tokens per second, offering 350 times the computational speed of the previous Hopper GPU and a 500-fold increase in high-bandwidth memory to alleviate memory bottlenecks.
Huang declared that the inference inflection point has been reached and raised chip sales projections to a cumulative $1 trillion USD by the end of 2027, a significant upward revision from the previous $500 billion target by the end of 2026.
In terms of business expansion, in the cloud computing sector, Nscale, an investment by Nvidia, will construct a 1.35 GW "Monarch Computing Park" in West Virginia, positioned as one of the world's largest AI computing facilities.
In the autonomous driving domain, BYD, Geely, Hyundai, and Nissan have joined the collaboration. For the software ecosystem, an alliance with Cursor, Mistral, Perplexity, and others has been formed to promote open-source model development and the transition of enterprise software to AI services, while strengthening cooperation in "digital twins" and simulation design.
EN
