This report covers macroeconomic and market developments in February and March 2026. In the US, the labor market weakened, with payrolls declining by 92,000 and unemployment rising to 4.4%, although wage growth remained firm. Inflation held steady at 2.4%, but rising oil prices are expected to push inflation higher. The Fed kept rates unchanged at 3.5%–3.75%, signaling caution as it balances stronger growth with rising inflation risks driven by energy prices.
Geopolitical tensions dominated markets, as the US and Israel attacked Iran, triggering retaliation and the closure of the Strait of Hormuz. This severely disrupted global energy supplies and sent oil prices sharply higher. Brent surged above $100, with risks of further spikes depending on the duration of the conflict.
Euro area inflation rose slightly to 1.9%, while the ECB held rates steady but signaled a potential shift toward rate hikes as inflation risks increase. Markets are now pricing in multiple ECB hikes in 2026 if energy-driven inflation persists.
Global equities declined amid rising oil prices and geopolitical uncertainty. The S&P 500 fell 4.2%, while European markets dropped more sharply due to higher energy dependence. Bond yields rose significantly in both the US and Europe as inflation concerns re-emerged.
Gold fell despite geopolitical stress, as investors liquidated positions amid rising yields, while Bitcoin rebounded by over 10%. The US dollar strengthened, while the euro and sterling weakened.
European bank stocks declined sharply due to concerns over economic slowdown and rising credit risks linked to higher energy costs.
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