Market drivers and catalysts
Equities: Tech weakness, profit warnings, financials pressure
Volatility: geopolitics, oil-driven inflation risk, Powell, heavy data week, elevated VIX
Digital Assets: crypto as risk asset, ETF outflows
Fixed Income: US Treasury yields fall as the economic outlook worsens.
Currencies: Dollar trades steady with intervention risk weighing on USDJPY
Commodities: Oil rises as conflict enters fifth week; gold finds support amid stagflation concerns
Macro events: Eurozone March Confidence, Germany March CPI & Fed's Powell Speaks
Macro headlines
As the Iran war entered its fifth week, investor doubts about a quick resolution grew after Iran-backed Houthis joined the conflict, and together with Tehran fired missiles across the Middle East at US allies, and threatened further attacks, while the US reportedly prepared for weeks of ground operations with more troops deployed to the region. Meanwhile Trump’s approval rating falls to a fresh low for his presidency with the President saying an agreement could come soon.
Despite repeated warnings from Tokyo, including Finance Minister Satsuki Katayama’s pledge to take “bold actions” against excessive FX moves, the yen remained under pressure from surging Middle East–driven oil prices that threaten Japan’s recovery, prompting the Finance Ministry to reportedly explore possible intervention in crude futures.
The Michigan Consumer Sentiment Index fell to 53.3 in March from 56.6 in February, near late-2025 lows, amid higher gas prices and market volatility linked to the Iran conflict. Short-term economic and personal finance expectations weakened sharply, while long-term views slipped slightly. Year-ahead inflation expectations rose to 3.8% and long-term expectations dipped to 3.2%.
Macro calendar highlights (times in GMT)
0600 – Sweden Feb Retail Sales
0830 – UK Feb Mortgage Approvals
0900- Eurozone March Confidence
1200 – Germany March CPI
1230 – Fed's Powell Speaks
G7 finance and energy ministers and central bankers hold an online call.
Earnings this week
Tuesday: Nike
For all macro, earnings, and dividend events check Saxo’s calendar.
Equities
USA: The S&P 500 fell 1.7% to 6,368.85, the Dow Jones dropped 1.7% to 45,166.64 and the Nasdaq Composite lost 2.2% to 20,948.36, all closing at multi-month lows as rising oil prices and escalating Iran tensions weighed on sentiment. Nvidia declined 2.2% as megacap tech remained under pressure, Amazon dropped 4.0% as discretionary stocks led losses, Carnival fell 4.3% after cutting its annual profit outlook, and Goldman Sachs slipped 2.4%, dragging financials lower. The VIX closed above 30, reflecting elevated hedging demand. Markets now look to whether sustained energy price pressure will further tighten financial conditions.
Europe: The STOXX 600 fell 0.9% to 575.37, the STOXX 50 dropped 1.1% to 5,508, and Germany’s DAX lost 1.4%, while the FTSE 100 edged slightly lower, as rising energy costs reinforced stagflation concerns. Banks declined as yields rose, while industrials extended losses amid growth worries. Pernod Ricard rose 8.0% on merger discussions with Brown-Forman, and AstraZeneca gained 3.4% after positive trial results, offering limited support. Spain’s inflation surprised to the upside, highlighting the early impact of higher oil prices. Investors now focus on whether inflation pressures will constrain ECB and BoE policy flexibility.
Asia: Asian markets ended Friday mixed before sharp Monday weakness as geopolitical tensions escalated. Japan’s Nikkei 225 fell 0.4% to 53,373.07 and South Korea’s Kospi slipped 0.4% to 5,300.61, while Hong Kong’s Hang Seng rose 0.4% to 24,951.88 and China’s CSI 300 gained 0.6% to 4,502.57. Financials supported Hong Kong after reports of potential regulatory easing, while energy-sensitive markets remained cautious. Singapore’s STI added 0.2% to 4,898.18. Focus now shifts to Monday’s sharp declines across the region as investors react to weekend developments in the Iran conflict.
Volatility
Volatility remains elevated, with markets still reacting primarily to geopolitics and energy prices rather than company-specific news. The VIX is holding near 31, while shorter-term measures such as VIX1D (34.3) and VIX9D (30.6) remain higher, signalling continued day-to-day uncertainty. The key driver is unchanged: tensions in the Middle East are keeping oil prices elevated, which matters for investors as it risks prolonging inflation and limiting central banks’ ability to ease policy. Today’s focus turns to comments from Fed Chair Powell, followed by a dense US data calendar this week, including JOLTS, ISM surveys, and Friday’s payrolls report.
From the options market, positioning still leans defensive. The SPX is pricing an expected move of roughly 101 points (1.6%) for today’s expiry, and about 180 points (2.8%) for the week into 2 April. At the same time, the options skew remains clearly tilted to the downside, with puts around the money carrying higher implied volatility than calls. In simple terms, investors continue to pay more for protection than for upside exposure.
Digital Assets
Digital assets are stabilising after last week’s weakness, but the broader tone remains cautious. Bitcoin is trading around $67,300 and ether near $2,040, both modestly higher on the day, while XRP and Solana are also seeing small gains. However, crypto continues to behave more like a risk asset than a safe haven, reacting to the same macro drivers as equities, particularly oil prices, interest rates, and geopolitical developments.
The ETF backdrop remains a key watchpoint. IBIT and ETHA both traded lower, and the latest available data for 27 March showed continued outflows, suggesting institutional demand remains cautious. This is also reflected in crypto-related equities such as COIN, MSTR, MARA, CLSK and CIFR, which have come under pressure. While the long-term narrative for digital assets remains intact, near-term direction is still likely to be driven by macro sentiment rather than crypto-specific catalysts.
Fixed Income
US Treasury yields extended their decline as investor focus shifted away from rising oil prices - which have fuelled inflation concerns over the past month - and towards mounting growth risks linked to the Middle East conflict. The benchmark 10-year yield, which had risen by around 50 basis points this month to a peak of 4.48%, has since eased back to 4.38% in early European trading. The move comes amid concerns that escalating tensions could derail global growth, a backdrop that has triggered the largest two-day decline in US equities in a year. At the front end, the US 2-year yield - closely tied to FOMC rate expectations - has retreated to 3.87% after briefly trading above 4% on Friday.
In Japan, shorter-dated government bond yields also edged lower after testing multi-decade highs at the end of last week. The benchmark 2-year yield declined 3 basis points to 1.36%, while markets continue to price in more than a 65% probability of a 25-basis-point rate hike at the Bank of Japan’s late-April meeting. Further out the curve, the 10-year JGB yield softened by 2 basis points after approaching similar multi-decade highs.
Commodities
Oil advanced as the Middle East conflict entered its fifth week, with tensions escalating further after Iran-backed Houthis joined the hostilities. Over the weekend, missile attacks by the Houthis and Tehran targeted Israel and US allies in the region. As the conflict becomes increasingly complex and harder to contain, risks to the global supply of crude, refined fuels, gas, fertilisers, aluminium and other Gulf-produced commodities continue to rise. In response, higher prices - and, ultimately, demand rationing - remain the primary mechanisms to rebalance a market that look set to become increasingly short of energy in the coming weeks.
Gold recorded its first weekly gain since the conflict started with the ability to rise together with crude prices, signaling a potential shift in investor focus away from rising inflation fears to the global economic fallout from the war which increasingly carries the risk of gold-supportive period of stagflation. Having seen a firm rejection at the 200-day moving average last week, the yellow metal needs a break above USD 4600 to further improve sentiment.
Aluminium prices jumped 4.2% after two Middle Eastern producers were hit by Iranian attacks on Saturday with one sustaining “significant damage”. The war has disrupted the region’s commodity industry, and with the Strait of Hormuz effectively shut, the regions production of energy-intensive products such as aluminium has been impacted tightening markets and shrinking global inventories.
The grains sector has rebounded sharply this month, driven by deteriorating US winter wheat conditions amid Plains drought, combined with geopolitical disruption to energy and fertiliser flows. The Bloomberg Grains Subindex trades up 12% YTD triggering short covering in wheat, while longs in corn, soybean meal and soybean oil have climbed to 12-month highs. Managed money positioning across six key contracts has flipped from a 258k net short in late January to a four-year high net long of 720k. Rising input costs, especially diesel and fertilisers, increase the risk of reduced planting and lower yields - pointing to tighter supply and higher global food prices.
Currencies
Currency markets are mixed in early Europe amid risk-off sentiment and geopolitical tensions, with USDJPY around 160 as the yen hovers near intervention levels following strong warnings from Japan’s top FX official about potential “bold” action. USD remains firm, hitting a 20-month high against the yen, while EURUSD 1.1510 and GBPUSD 1.3275 trades near unchanged after edging lower on Middle East concerns.
The latest COT update covering speculators positioning in eight IMM forex futures in the week to 24 March, showed continued demand for USD amid the Middle East conflict. While positioning flows turned more mixed and less one-sided, the gross dollar long rose to USD 7.53 billion, the highest level since early December. Speculators sold the euro for a sixth consecutive week. Since early February, the net long has collapsed from EUR 22.5 billion to a one-year low of 1.2 billion, highlighting a sharp reversal in sentiment.
