The war between the U.S. and Iran has entered its second week, with international oil prices soaring to their highest levels since 2022, and global markets facing a synchronized impact across stocks, bonds, and commodities. The dual shadows of inflation and stagflation loom over investors, with no clear path for when the conflict will end.
The Asia-Pacific benchmark stock index fell 5.2% on Monday, marking the largest single-day drop since April, with South Korea and Japan leading the decline; U.S. and European stock index futures also fell over 2%, indicating that the wave of selling is spreading to more markets. Reports suggest that the G7 plans to hold an emergency meeting on Monday to discuss a coordinated release of approximately 300 to 400 million barrels of strategic oil reserves. International oil prices have continued to retreat, with WTI crude oil's gains narrowing to less than 15%, and Brent crude oil currently up 14%.
In the bond market, the yield on the U.S. 10-year benchmark Treasury rose more than 7 basis points in a single day, marking the largest increase since January of this year; the yield on Australia's 3-year government bonds, sensitive to monetary policy, climbed to its highest level since 2011, while German federal bond futures fell to near a 15-year low. Market expectations for a Federal Reserve rate cut have been pushed from the previously fully priced July to September, with some bond options traders even betting that the Fed will remain on hold this year. Gold fell over 2%, and the U.S. dollar index hovered near a three-month high.
Analysts at SPI pointed out that oil prices breaking through $100 is not only a rebound in commodities but also amounts to a tax on the global economy, which has begun to prompt central bank officials to quietly discuss their most feared term: stagflation. A team led by Wedbush analyst Seth Basham warned that &#34;market risks are accumulating,&#34; and the market may need a de-escalation in the Middle East situation to regain its footing.
<blockquote>
U.S., European, and Asian stock indices all plummet:
<ul>
<li>All three major U.S. stock index futures fell, with Dow futures at one point down over 2%, while S&amp;P 500 and Nasdaq 100 index futures are currently down 1.6%.</li>
<li>European Stoxx 50 index futures fell 2.2%, and German DAX index futures fell 2.1%.</li>
<li>The Nikkei 225 index and Japan's Topix index both fell over 4%.</li>
<li>The South Korean KOSPI index fell 7% at the start, with Samsung and SK Hynix plummeting. The KOSPI 200 index futures fell 5%, and program trading was paused for 5 minutes.</li>
<li>Australia's S&amp;P/ASX 200 index's decline widened to 3.6%, closing at 8536.10 points, the lowest since November 25 of last year.</li>
<li>The MSCI Asia-Pacific index's decline widened to 3.1%.</li>
</ul>
Oil retreats, gold and silver plummet:
<ul>
<li>Reports indicate that the G7 plans to hold an emergency meeting on Monday to discuss a coordinated release of approximately 300 to 400 million barrels of strategic oil reserves. International oil prices have continued to retreat, with WTI crude oil's gains narrowing to less than 15%, and Brent crude oil currently up 14%.</li>
<li>Spot gold fell over 2% during the day, hitting a daily low of $5044.45 per ounce.</li>
<li>Spot silver's decline expanded to 4% during the day, falling below $81 per ounce</li>
</ul>
Global Bond Market Decline:
<ul>
<li>The yield curve of U.S. Treasury bonds rose across the board, influenced by inflation concerns.</li>
<li>German 10-year government bond futures fell to their lowest level since July 2011.</li>
<li>The yield on South Korean 10-year government bonds rose by 16 basis points to 3.78%.</li>
</ul>
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<h2>Global Bond Market in Crisis: Stagflation Shadows Weigh on Yields</h2>
The shock in oil prices has triggered a massive sell-off in the global bond market, with stagflation risks becoming the focal point. The bond market had initially benefited in late February from rising concerns over corporate credit risk, showing a demand for safe-haven assets. However, the U.S. and Israel's offensive against Iran triggered a completely different market reaction—government bonds not only failed to act as a safe haven, but their yields also surged sharply alongside rising oil prices.
Asian bond markets fell across the board, with benchmark yields in Australia, New Zealand, and South Korea climbing by double-digit basis points, while the Indonesian and Japanese bond markets also faced sell-offs. Rajeev de Mello, global macro portfolio manager at Gama Asset Management, stated that the bond market may continue to &#34;face downward pressure until we see oil prices stabilize.&#34; He pointed out that an oil price of $80 per barrel is still manageable for investors, &#34;but a rapid increase beyond $100 has shocked the market,&#34; reigniting concerns over surging inflation.
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The calculations by International Monetary Fund President Kristalina Georgieva further reveal the potential economic costs: a sustained 10% rise in energy prices could push global inflation up by about 0.4 percentage points within a year and drag down economic growth by about 0.2 percentage points. Bloomberg Intelligence noted that when oil prices rise to $133, it typically triggers demand destruction, highlighting the risks if prices continue to climb.
Cracks have also appeared in the U.S. domestic economy. In February, employers unexpectedly laid off workers, and the unemployment rate ticked up slightly, with weak signals in the labor market coinciding with intensified inflation pressures, making stagflation concerns increasingly realistic. Tim Murray, capital markets strategist at T. Rowe Price's multi-asset division, pointed out that &#34;oil can be said to be the most important single input variable for global inflation,&#34; and the current situation poses &#34;relative resistance&#34; in a risk-averse environment for most net oil-importing economies in Asia.
<h2>Oil and Energy Market</h2>
The spot premium in the oil market is rapidly expanding, highlighting extreme short-term supply tightness. According to Bloomberg data, the spot price spread for Brent crude (the difference between the two most recent contracts) broke above $8.50 per barrel in early trading, forcing traders to pay a hefty premium for the May contract. This is the highest level since 2013.
Stephen Innes, managing partner at SPI Asset Management, emphasized in a report on Sunday that the oil price surpassing $100 is not just a rebound in commodities, but effectively a tax on the global economy, which is starting to make central bank officials quietly discuss their most feared term: stagflation
The surge in energy prices has also prompted governments around the world to take countermeasures. According to Bloomberg, South Korea is considering restoring a cap on crude oil prices for the first time in nearly thirty years, a rare policy tool that indicates Seoul's seriousness regarding the latest energy shock.
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<h2>Stock Market and Macroeconomics</h2>
The rise in energy costs has directly suppressed the risk appetite in the stock market. Dow futures fell by more than 1,000 points, continuing the downward trend from last week. Last week, the Dow fell by 3.0%, marking the largest weekly decline in several months.
A team led by Wedbush analyst Seth Basham stated that the current conflict represents &#34;short-term volatility rather than structural market damage&#34; for the U.S. stock market. However, they also warned that &#34;market risks are accumulating,&#34; and the market may need a de-escalation of the situation in the Middle East to regain stability.
The warming of inflation expectations complicates the Federal Reserve's situation. This week, the market will face a series of inflation data, including the Consumer Price Index (CPI) for February to be released on Wednesday and the Personal Consumption Expenditures (PCE) price index for January to be released on Friday. This data will provide crucial references for the Federal Reserve's meeting on March 17-18.
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<h2>Safe-Haven Assets and Foreign Exchange Market</h2>
In terms of traditional safe-haven assets, the market logic has shown subtle differentiation. Although geopolitical conflicts typically drive up gold prices, the inflation expectations brought about by high oil prices seem to have offset some of the safe-haven demand. According to Bloomberg, spot gold fell by more than 1%, dropping below $5,120 per ounce. Silver, platinum, and palladium also faced sell-offs.
Meanwhile, the U.S. dollar index rose by 0.5%. The bond market also experienced sell-offs as investors anticipated that the continued rise in oil prices would stimulate global inflationary pressures.
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.DJI

The escalation of the situation in the Middle East has driven both WTI crude oil futures and Brent crude oil futures to rise above $110. The surge in energy prices has triggered market concerns about global economic "stagflation," leading to a sharp decline in European and American stock index futures, with Dow futures dropping over a thousand points. Asian markets opened sharply lower, with the Nikkei 225 falling over 5% and the Korean stock index dropping over 7%. At the same time, bonds fell across the board, the dollar strengthened, and assets such as gold and silver experienced a significant pullback due to rising inflation expectations

- The latest developments in Middle Eastern geopolitics are reshaping global asset pricing, with oil prices surging over $100, raising inflation fears and slowing economic growth concerns.  
- U.S. stock futures fell sharply, with the Dow dropping over 1,000 points, while WTI oil surged 22% to over $110, indicating severe short-term supply tensions.  
- In response to rising energy costs, governments, including South Korea, are considering measures like reinstating oil price caps, reflecting heightened urgency over the energy crisis.

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Middle East production halt impacts! Oil prices surge 20% to surpass $110, global stocks and bonds suffer double hits, South Korean stocks drop 7%, gold and silver plummet