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Heightened volatility and selling pressure swept across all asset classes as the war in the Middle East entered its third week. The International Energy Agency described the war in Iran as “the biggest threat to energy security in history,” while attacks on critical energy infrastructure from both sides stoked fears of a prolonged oil supply shock. WTI Crude continued to hover close to the $100 per barrel level. Global equities fell 2.8% in euro terms, with European stocks particularly exposed to inflation concerns and falling 3.9%.

On Saturday, US President Trump gave Iran a 48-hour deadline to reopen the Strait of Hormuz, warning he would “obliterate” the country’s power plants if the demand was not met. Iran in turn said it would “irreversibly destroy” essential water and energy infrastructure in response to any such attack. By Monday morning, however, Trump had ordered a five-day halt to military strikes following what he described as “productive” talks with Iran.

Central banks in Europe, the US, the UK and Japan all held rates steady at their respective meetings last week, adopting a “wait-and-see” approach amid current inflationary pressures. Bond yields continued to climb: the US 10-year treasury yield rose from 4.28% to 4.38%, while the German 10-year bund yield climbed from 2.98% to 3.04%.

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