The international market backdrop is being tested by renewed violence in the Middle East and a packed economic and policy calendar that could dictate the near-term trajectory of risk assets.
U.S. Energy Secretary Chris Wright told Fox News that the conflict with Iran - which has killed hundreds and disrupted oil shipments in the region - would be a "small price" to pay to secure American military objectives. That stark assessment contrasts with warnings from Kristalina Georgieva of the International Monetary Fund, who cautioned that the war - triggered by U.S. and Israeli air strikes that killed Iran's supreme leader - may usher in an extended period of instability that challenges global economies.
Diplomatic solutions or a clear improvement in security for vessels navigating the Strait of Hormuz have not emerged. Instead, a political development in Washington heightened tensions: the Republican-led Senate voted to block a resolution aimed at stopping the air war on Iran, which launched a fresh wave of missiles at Israel. The stalemate in Washington and continuing military exchanges have left markets to weigh whether the shock is a transient disruption or the start of sustained uncertainty for global trade.
Market reactions were mixed. Asian equities advanced, with a rebound in South Korea's KOSPI led the gains. Commodity markets reflected heightened risk of supply disruption - oil prices continued to climb, and gold, the traditional safe-haven asset, also rose.
Meanwhile, China's National People’s Congress convened, producing a set of announcements that moved markets. Chinese shares responded favourably to a slightly lower growth target that market participants interpreted as signalling a policy tilt toward rebalancing the economy and placing more emphasis on boosting consumption.
Futures for European and U.S. stocks opened the session higher but later turned and pointed to declines at the time domestic markets prepare to trade, underscoring the day-to-day volatility investors are navigating.
Developments to watch
- Euro zone retail sales for January
- European Central Bank President Christine Lagarde speaks
- France - industrial output for January and reopening of 10-year, 17-year and 20-year government debt auctions
- United Kingdom - reopening of a 3-year government debt auction
- U.S. releases: weekly jobless claims, Challenger layoffs for February, preliminary Q4 productivity and January import prices
- Speeches by Federal Reserve Bank of Chicago President Austan Goolsbee and Fed Vice Chair for Supervision Michelle Bowman
Traders will also monitor the flow of geopolitical developments closely, given the direct implications for energy shipping routes and commodity prices.
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