Global Highlights for Next Week: Middle East Conflict Continues to Disrupt Global Markets; Major U.S. Inflation Report to Be Released

The focus of global investors is still centered on the U.S.-Israel military actions against Iran. Although this war has been ongoing for more than a month, its impact on the market has not faded, and the prices of global major asset classes continue to fluctuate largely in response to developments in the situation.

According to reports, U.S. President Trump issued another 48-hour ultimatum on Saturday regarding the Iran issue. “Remember, I gave Iran 10 days to reach a deal or reopen the Strait of Hormuz. Time is running out—after 48 hours, hell will rain down on their heads.”

Subsequently, a senior Israeli defense official said that Israel is preparing to launch attacks on Iran’s energy facilities, but it still needs to wait for U.S. permission for now. He also said that such attacks are very likely to be carried out within the coming week. This means the conflict could further escalate.

Meanwhile, the diplomatic negotiations that the market is expecting have, so far, made no substantive progress. Over the past 10 days, the U.S. and Iran have conducted indirect talks via Pakistan, Egypt, and Turkey in an effort to reach a ceasefire agreement on the condition of opening the Strait of Hormuz. However, two sources involved in the talks said that the intermediaries are still trying to bring the U.S. and Iran to meet directly, but so far the results have been minimal.

One of the sources said that Iran has, to date, rejected any proposals for a temporary ceasefire and has demanded a permanent end to the war, while also requiring the U.S. to provide a clear guarantee that it will not launch attacks again.

As for U.S. stocks, the S&P 500 index rose this week, ending five consecutive weeks of declines. Since late February, the benchmark index has been weighed down by the war and the resulting surge in energy prices.

Matthew Miskin, Co-Chief Investment Strategist at Manulife John Hancock Investments, said: “It’s hard for the market to shift attention away from the Middle East situation, oil prices, and the risks arising from them. The market is currently closely watching geopolitical risk, and how events will ultimately unfold.”

The war’s impact on oil supply and energy prices remains the core focus for investors, especially the situation in the Strait of Hormuz—this key Middle East oil shipping passage is currently seeing disruptions to shipping.

U.S. WTI crude oil prices on Thursday briefly broke above $110 per barrel. Doug Huber, Deputy Chief Investment Officer at Wealth Enhancement Group, said: “The core driver of what the market is pricing right now is oil prices. Inflation expectations, the bond market—almost everything runs around the trajectory of oil prices.”

Next week, the U.S. Consumer Price Index (CPI) will be released. This key inflation indicator will become an early litmus test for assessing the impact of energy shocks. The U.S. March CPI is expected to rise 0.9% month over month; excluding food and energy, core CPI is expected to rise 0.3%.

So far this year, U.S. WTI crude oil prices have risen by more than 90%. At the same time, the average U.S. gasoline price this week has climbed to above $4 per gallon, the highest level in more than three years.

In its outlook on the CPI data, BNP Paribas said: “We believe that the first stage of pass-through from higher oil prices to inflation will be reflected in March through motor fuel prices.”

Miskin said he will watch for the “ripple effects” that the war and the surge in energy prices could have on other commodities and services, adding that the March data may still be insufficient to show broader inflation impacts. “The current priority is to obtain as much real-time data as possible to judge where inflation and economic growth trends are headed.”

Meanwhile, due to inflation concerns driven by the war, the market has largely ruled out the Federal Reserve cutting interest rates this year, even though rate-cut expectations had previously been one of the key logics supporting the rise in the stock market.

Patrick Ryan, Chief Investment Strategist at Madison Investments, said: “The market is already highly sensitive to inflation. If CPI data comes in significantly above expectations, it could create a negative shock to the market.”

Another inflation indicator will also be released next week—the U.S. February Personal Consumption Expenditures Price Index (PCE). However, because this data reflects conditions before the war fully escalated, its reference value for the current inflation situation is relatively limited.

In addition, the U.S. fourth-quarter economic growth data will be revised, and the Federal Reserve will also publish the minutes of its March meeting. Investors will look for clues about the future path of interest rates from these.

Overview of key events next week:

Monday (April 6): U.S. March ISM Non-Manufacturing PMI, U.S. March Global Supply Chain Pressure Index, multiple European securities exchanges will close due to Easter Monday, and A-shares and Hong Kong stocks will also be closed for one day

Tuesday (April 7): Eurozone March Services PMI (final), Eurozone April Sentix Investor Confidence Index, U.S. February Orders for Durable Goods (month-on-month), U.S. March New York Fed 1-year inflation expectations, China March foreign exchange reserves

Wednesday (April 8): U.S. April 3 week API crude oil inventories, Japan February trade balance, New Zealand to April 8 Fed interest-rate decision, U.K. March Halifax seasonally adjusted house price index (month-on-month), Eurozone February PPI (month-on-month), Eurozone February retail sales (month-on-month), U.S. to April 3 week EIA crude oil inventories, U.S. to April 3 week EIA strategic petroleum reserve inventories, remarks by Chicago Fed President Goolsbee on monetary policy, India’s central bank releases its interest-rate decision

Thursday (April 9): U.S. to April 8 10-year Treasury auction, U.S. to April 4 week initial jobless claims, U.S. February core PCE price index (year-on-year), U.S. February personal spending (month-on-month), U.S. to April 3 week EIA natural gas inventories, the Federal Reserve releases minutes of its monetary policy meeting, remarks by Swiss National Bank President Schlegel, IMF Managing Director Georgieva delivers opening remarks at the IMF/World Bank Spring Meetings

Friday (April 10): China March CPI (year-on-year), Germany March CPI (month-on-month, final), U.S. March CPI (not seasonally adjusted, year-on-year), U.S. March CPI (month-on-month, seasonally adjusted), U.S. April one-year inflation expectations initial value, initial value of the University of Michigan consumer sentiment index in the U.S. for April, U.S. February factory orders (month-on-month), China March M2 money supply (year-on-year), South Korea’s central bank releases its interest-rate decision

(Source: Caixin)