The latest spike in uncertainty comes after Iran attacked a fully-loaded oil tanker off Dubai early Tuesday. The incident follows threats from U.S. President Donald Trump, who warned that the United States would strike Iran’s energy infrastructure if it failed to open the Strait of Hormuz. A Wall Street Journal report, however, suggested Trump told aides he is willing to end military operations even if the strait remains largely closed, providing a modest lift to markets.
Equity Markets Navigate Volatility
At 1119 GMT, Europe’s STOXX 600 rose 1% on the day, with the FTSE 100 seeing a similar gain. Despite the daily uptick, the STOXX 600 is still set for its steepest monthly loss since June 2022, breaking an eight-month streak of gains.
Across the Atlantic, U.S. stock futures mirrored the European rally, with S&P 500 and Nasdaq e-minis both up roughly 1%. Colin Graham, head of multi-asset strategies at Dutch asset manager Robeco, noted that investors were “taking the U.S. administration at their word, that they’re going to end the war,” though he cautioned that the risk of a closed Strait of Hormuz remains.
Analysts also highlighted that the month-end and quarter-end portfolio rebalancing by major asset managers may have contributed to the observed market moves.
Oil Prices Surge to Record Monthly Gains
Oil markets continued to feel the full impact of the Iran conflict. Brent crude futures rose 2.4% to $115.50 per barrel, while U.S. West Texas Intermediate climbed 1.4% to $104.34, both heading for record monthly gains. The surge is linked to the effective closure of the Strait of Hormuz, a critical passage for about a fifth of global oil supply, pushing the average U.S. gasoline price to $4 a gallon.
The energy shock contributed to eurozone inflation exceeding the European Central Bank’s 2% target in March. Meanwhile, eurozone government bond yields remained steady, with Germany’s 10-year yield at 3.0292%. Investors are increasingly balancing the risk of higher energy costs with concerns over slower growth.
Broader Market and Currency Impacts
The European Union’s energy chief warned governments to prepare for “prolonged disruption” in energy markets, ahead of an emergency EU meeting. Developed market currencies were broadly steady, though the dollar remained on track for its largest monthly gain since July, while the euro tracked toward its worst month since July at $1.1474.
Japan’s finance minister reiterated Tokyo’s readiness to respond to foreign exchange volatility amid the yen’s recent decline.
Gold prices rose 1.5% to $4,578.67 per troy ounce, though they are on course for their largest monthly drop since 2008. Goldman Sachs continues to project that gold could reach $5,400 per troy ounce by the end of 2026.
The combination of geopolitical risk, oil market disruption, and end-of-quarter portfolio adjustments has left investors navigating a turbulent close to March, highlighting the fragility of global markets in the face of escalating tensions in the Middle East.