The situation in the Middle East is reshaping the global asset landscape, with market pressures rising sharply to last year's &#34;tariff shock&#34; levels.
On March 12, Bank of America’s cross-market risk indicator, which measures implied volatility in the global options market, rose to 0.79, approaching last April's peak of 0.89 during the so-called &#34;reciprocal tariffs.&#34; Mandy Xu, head of derivatives market intelligence at Cboe Global Markets, stated:
<blockquote>
This is the first time since the significant drop in reciprocal tariffs last year that implied volatility across major asset classes has risen above the long-term average, which is typically a signal of macroeconomic crisis.
</blockquote>
According to CCTV News, on the afternoon of March 13 local time, U.S. President Trump stated that the U.S. and Israel differ on the issue of &#34;ending the current war.&#34; Trump mentioned that military operations are progressing &#34;far ahead of schedule&#34; and will continue &#34;as long as necessary.&#34;
The intensity of the U.S.-Iran conflict continues to escalate, with no signs of a ceasefire from either side, leading to soaring oil prices, rising financing costs, and a continuous decline in U.S. stock indices, creating a triple pressure that is affecting nearly every corner of the financial market.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/bd0dd370-4ce2-4c92-a354-09a1c0fd2319.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/bd0dd370-4ce2-4c92-a354-09a1c0fd2319.png"/> (Comparison of U.S. stocks, U.S. bonds, and U.S. oil trends since March)
<h2>Volatility is in crisis across the board, with multiple indicators hitting yearly and even historical extremes</h2>
Current market pressures are not limited to the stock market but are showing a comprehensive resonance across asset classes.
Bank of America’s cross-market risk indicator aggregates the implied volatility of global stocks, interest rates, exchange rates, and commodity options markets into a single reading, reflecting traders' expectations of global market turbulence in real-time. The reading on March 12 reached 0.79, indicating that market pressures have significantly exceeded normal ranges.
This week, the MOVE index, which tracks expected bond volatility, surged to its highest level since June of last year, while the Cboe oil volatility index earlier this week even touched historical highs from 2020. The Cboe index tracking junk bond volatility has nearly tripled from its level in January this year.
Rocky Fishman, founder of research firm Asym 500, pointed out:
<blockquote>
Looking solely at the volatility of the S&amp;P 500 underestimates the overall volatility level of the current global market. The volatility of commodities, especially oil, is exceptionally high, and the implied volatility of oil relative to realized volatility shows a high premium, reflecting market concerns about further deterioration of the situation.
</blockquote>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/ecb473f4-cd77-4337-a18f-51932ac0fded.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/ecb473f4-cd77-4337-a18f-51932ac0fded.png"/> (In the past nine trading days, U.S. stock ETFs accounted for over 35% of total trading volume, but U.S. stock volatility is significantly lower)
<h2>Easing Buffer Fades, Fragile Exposures Surface</h2>
Over the past year, exceptionally loose financial conditions have provided some support for stock prices. However, this buffer is rapidly disappearing.
Unlike last year's tariff shocks, the root of this round of market turmoil lies in the Middle East energy supply. Saudi Arabia, Iraq, the United Arab Emirates, and Kuwait have collectively cut production, and the Strait of Hormuz is nearly at a standstill, causing oil prices to surge sharply.
Analysis suggests that while the previous situation was a policy shock, this time it is a geopolitical supply crisis, which has a more direct and lasting impact on the commodity markets.
Moreover, the situation in the Middle East has revealed multiple vulnerabilities accumulated during calmer periods, particularly in the high-leverage asset sector, where investors are increasingly uneasy about the erosion of profitability in some companies due to artificial intelligence.
Wallstreetcn mentions that the index of the seven tech giants closed down over 10% from its October peak on Friday, officially entering a technical correction zone, with all seven companies experiencing losses this year, including Microsoft, which fell over 18%.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/5a0b25aa-7779-4819-88df-85306fad084c.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/5a0b25aa-7779-4819-88df-85306fad084c.png"/> (Weekly chart of the tech giants index versus the remaining 493 S&amp;P components)
This collective decline marks a phase of the super bull market cycle for large tech stocks that has lasted for the past two years. At the same time, the increasing cracks appearing in the private credit market are further exacerbating overall market anxiety.
This week, investment-grade credit spreads sharply diverged from stock risks, with cracks in the credit market gradually spreading to broader financial sectors. Alternative credit and business development companies (BDCs) are under pressure, beginning to drag down the overall performance of the financial sector.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/05e38fcf-a6dc-4d98-b479-01b61e8bc03f.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/05e38fcf-a6dc-4d98-b479-01b61e8bc03f.png"/> (This week, investment-grade credit spreads diverged from stock risks)
Analysis indicates that multiple risk exposures are synchronously manifesting under external shocks, and the market, after experiencing a period of low volatility honeymoon, is transitioning to a state of pressure at a faster pace.

The escalating situation in the Middle East has significantly increased pressure on global markets, with Bank of America’s cross-market risk indicator rising to 0.79, approaching last April's peak of 0.89, known as the "equivalent tariff." The MOVE index, which tracks expected bond volatility, has surged to its highest level since June of last year, while oil price volatility reached historical highs from 2020 earlier this week. The volatility of junk bonds has nearly tripled from levels seen in January of this year

- The Middle East situation is reshaping the global asset landscape, with market pressures surging to levels akin to last year's "tariff shock."  
- As of March 12, Bank of America’s cross-market risk indicator rose to 0.79, indicating significant market stress, while oil prices and financing costs skyrocketed due to escalating U.S.-Iran tensions.  
- Current market pressures affect multiple asset classes, revealing vulnerabilities as financial conditions tighten and concerns grow over high-leverage assets and the implications of geopolitical supply crises.

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Crisis signs! The global market "pressure index" approaches the level of "tariff shock" in April last year