Global markets weakened over the week as escalating Middle East tensions drove a sharp energy-led inflation shock, pushing U.S.
yields higher (~4.4%) and weighing on risk assets, particularly equities and crypto. Volatility spiked (VIX ~31.1), triggering broad riskoff positioning, while commodities led by oil, remained the primary outperformers amid supply disruption concerns.
Key Themes
- Energy Shock Driving Macro Repricing: Oil surged on Strait of Hormuz disruption risks, feeding into higher inflation expectations and driving cross-asset volatility.
- Rates Reset Higher (“Higher for Longer”): U.S. yields rose as markets repriced Fed expectations amid persistent inflation and reduced rate cut outlook.
- Risk aversion rose (VIX ~31), triggering deleveraging and broad-based selloffs across equities and crypto, with rate-sensitive growth segments (technology, semiconductors, and digital assets) underperforming.
- USD Strength and EM Pressure: Stronger dollar and higher oil prices weighed on import-dependent economies, driving currency depreciation and capital outflows.
- Liquidity Stress in Private Markets: Redemption pressures in private credit and widening spreads signaled tightening financial conditions beyond public markets.
