North America
Last week, U.S. stock markets ended lower in a volatile environment, as investors reacted to geopolitical tensions, rising oil prices, and ongoing inflation concerns. The Dow declined the most, followed by the Nasdaq, while mid-sized stocks held up relatively better but still fell. Energy stocks were the top performers as oil prices moved higher due to supply risks in the Middle East, boosting the sector despite broader market weakness. U.S. Treasury yields also rose, with the 10-year yield reaching around 4.38%, reflecting investor caution amid uncertainty. The Federal Reserve kept interest rates unchanged for the second straight meeting but indicated only one potential rate cut this year, while raising its outlook for inflation and economic growth. Fed Chair Jerome Powell highlighted that geopolitical developments and the risk of an energy shock could affect inflation expectations, and inflation pressures remained evident with producer prices rising more than expected in February. In the housing market, builder sentiment and pending home sales improved slightly, showing modest resilience, but new home sales fell to their lowest level since 2022, underscoring ongoing affordability challenges. Overall, the week reflected a cautious market mood, with investors balancing strong sector performance in energy against broader economic and geopolitical uncertainties.

Europe & UK
Last week, European stock markets fell sharply as investors focused on escalating tensions in the Middle East, including attacks on oil tankers in the Strait of Hormuz and damage to natural gas terminals in Qatar. The STOXX Europe 600 Index declined 3.79% in local currency terms, with Germany’s DAX down 4.55%, Italy’s FTSE MIB down 3.33%, France’s CAC 40 retreating 3.11%, and the UK’s FTSE 100 losing 3.34%. The European Central Bank (ECB) kept interest rates on hold but warned that soaring energy costs would have a “material impact” on near-term inflation, raising its 2026 inflation forecast to 2.6% from 1.9%. Eurozone trade data showed the region’s goods trade deficit widened to EUR 1.9 billion in January, driven by weaker exports in machinery, vehicles, and chemicals, while German producer prices fell 3.3% year-on-year due to lower gas and electricity costs. In the UK, the Bank of England held its key interest rate at 3.75% but cautioned that a prolonged energy shock could push inflation higher, with the Prudential Regulation Authority proposing measures to strengthen bank liquidity. Business confidence in the UK was also pressured, as Make UK reported declining domestic orders and rising costs weighing on the manufacturing sector.

Japan
Last week, Japanese stock markets slipped amid ongoing Middle East tensions and volatile oil prices, with the Nikkei 225 Index declining 0.83% and the broader TOPIX Index down 0.54% in a holiday-shortened week. Investor concerns persisted despite the government releasing oil from strategic reserves to stabilize domestic supply and limit price increases. The Bank of Japan (BoJ) kept its policy rate at 0.75%, noting the need to monitor geopolitical developments, market volatility, and rising energy costs, which could push inflation higher despite expectations of a temporary moderation below the 2% target. BoJ Governor Kazuo Ueda highlighted that higher oil prices could weigh on economic growth and inflation, with wage negotiations and firms’ pricing behavior being key factors for future policy decisions. In fixed income markets, the 10-year Japanese government bond yield rose to 2.26%, while the yen strengthened slightly to around JPY 159.2 per U.S. dollar but remained weak by historical standards, supporting exporters and adding imported inflation pressures. On the trade front, Japan’s customs exports rose 4.2% year-on-year in February, exceeding estimates, with strong shipments to the EU and Asia, while imports increased 10.2%, resulting in a modest trade surplus and extending a six-month run of export growth.