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🗞️ Middle East Conflict Continues — Markets Enter “War Mode”

🗞️ Middle East Conflict Continues — Markets Enter “War Mode”

🌍 Market Theme

“War × Inflation × Volatility”

This week, military conflict between the United States–Israel alliance and Iran continues to intensify, with tensions spreading across the Middle East.

In addition:

  • Growing risk of a closure of the Strait of Hormuz

  • Sharp surge in oil prices

These developments are raising concerns about the global economic impact.

If the conflict becomes prolonged, it could simultaneously lead to:

  • Global inflation pressures

  • Supply chain disruptions

  • Economic slowdown

🛢 Middle East Developments

Yesterday, markets reacted sharply to a New York Times report stating that:

Iran had proposed negotiations regarding conditions for ending the war.

This triggered:

  • A sharp rebound in equity markets

  • A temporary reversal of risk-off positioning

However, shortly afterward:

  • Military attacks continued

  • The United States warned of “a much larger wave” ahead

  • Iran signaled its determination to continue fighting

As a result:

👉 Safe-haven demand for the US dollar has resurfaced.

Additionally:

  • Iran’s Revolutionary Guard reportedly attacked a U.S. tanker

  • Iran claims to have control over traffic in the Strait of Hormuz

These developments have further escalated tensions.

📉 Market Behavior

A common pattern during major geopolitical events is:

“Overreaction → Reversal → Renewed risk aversion.”

Typically:

1️⃣ Initial panic reaction
2️⃣ Short-term position unwind
3️⃣ Risk-off flows return

The current market environment is characterized by:

👉 Sharp declines and rapid rebounds

In other words, a high-volatility phase.

💱 Foreign Exchange Market

The core structure remains:

Safe-haven demand for the US dollar

However, several forces are interacting simultaneously:

  • Short-term speculative position adjustments

  • Hedging flows

  • Rebounds in risk assets

This makes the market directionally unstable.

The key is to distinguish between:

  • Depth of pullbacks

  • Timeframe of trends

📊 Key Economic Data Today

Europe

  • Sweden CPI

  • France Industrial Production

  • Eurozone Retail Sales

  • UK Construction PMI

  • Switzerland Employment Data

United States

  • Challenger Job Cuts

  • Initial Jobless Claims

  • Labor Productivity

  • Import / Export Price Index

The most important release:

Initial Jobless Claims

  • Forecast: 215K

  • Previous: 212K

This serves as a leading indicator ahead of tomorrow’s U.S. Non-Farm Payrolls.

🎙 Central Bank Speakers

Several officials from the European Central Bank will speak today:

  • Christine Lagarde

  • Luis de Guindos

  • Joachim Nagel

  • Olli Rehn

In addition, the ECB meeting minutes (February meeting) will be released.

🧭 Summary

Markets are currently operating in “war mode.”

Key themes include:

  • Safe-haven USD buying

  • Rising oil prices

  • Inflation concerns

  • Risk-off sentiment in equities

However, because overreactions and reversals occur simultaneously, the market environment is likely to remain:

Highly volatile and extremely sensitive

Going forward, headlines related to Middle East developments will remain the most important driver of markets.

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