16/03/2026 Daily Reports
Fed Rate Cuts Delayed as Middle East Tensions Cloud the Outlook
- Geopolitical Shock Reshapes Expectations
Markets previously expected two 25bp rate cuts in 2026, but rising geopolitical tensions in the Middle East have shifted expectations to barely one cut, with the next move likely delayed.
- Energy Prices Drive Inflation Risks
Military tensions affecting shipping through the Strait of Hormuz have pushed oil prices higher..
- Inflation Likely to Re-accelerate
Higher energy and logistics costs could spill over into fertilizers, food, airline fares, and plastics, pushing US inflation toward ~3.5% by summer, well above the 2% target of the Federal Reserve.
- Growth and Jobs Showing Early Weakness
The latest labor data showed the US economy lost 92,000 jobs, while unemployment rose to 4.4%, signaling that the labor market may already be cooling.
- Policy Response: “Delay, Not Cancel” Rate Cuts
Unlike the inflation surge after the COVID-19 pandemic stimulus period, today’s inflation shock is mainly supply-driven (energy) rather than demand-driven.
This means the Fed is more likely to delay easing, not abandon it.
- Dollar Strength Likely to Persist
Higher energy prices and cautious monetary policy could keep the US dollar supported, especially as Europe and emerging markets face a larger energy shock.
- What’s Next?
If energy prices remain elevated, the Fed will likely prioritize inflation credibility over growth concerns, meaning rate cuts could be pushed further into 2027. In this environment, the US dollar and energy-linked assets may stay supported, while risk assets could remain vulnerable to geopolitical headlines.
- Geopolitical Shock Reshapes Expectations
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Oil Above $105 After Iran Strike Rattles Markets; Nasdaq, DAX and Nikkei Weaken on Stagflation Fears
- Global markets opened the week under pressure as escalating Middle East tensions triggered a fresh energy shock and renewed fears of stagflation. In the U.S., the Nasdaq Composite lost 1.26% last week as rising oil prices and geopolitical uncertainty weighed on investor sentiment. However, U.S. futures edged slightly higher Monday morning as markets digested weekend military strikes on Iran’s Kharg Island oil hub and assessed the broader implications for global supply.
- European equities are also facing growing pressure. Germany’s DAX and other regional indices are struggling as the oil shock forces central banks to reconsider inflation and interest-rate expectations, raising concerns that Europe could slide into a stagflationary environment.
- In Asia, the Nikkei 225 declined more than 1.2% on Monday, falling below 53,200 and marking a third consecutive session of losses. The downturn was led by auto and electronics stocks as investors worried that prolonged conflict and higher energy costs could weaken global demand and corporate margins.
- Energy markets remain the focal point of global volatility. Brent crude surged above $104–$105 per barrel after U.S. strikes on Iran’s Kharg Island—responsible for roughly 90% of the country’s oil exports—combined with the continued closure of the Strait of Hormuz. In response, the International Energy Agency announced the immediate release of oil supplies in Asia from its record 400-million-barrel strategic reserve in an effort to ease supply disruptions and stabilize markets.
