Markets Focus on Mideast Energy Infrastructure

For the week ending 20 March 2026

As of midday Friday, global equities were lower on the week as the energy shock from the war in the Middle East continues to reverberate through the markets. The yield on the US 10-year Treasury note rose 8 basis points from a week ago to 4.32%, the highest level since August. The price of a barrel of West Texas Intermediate crude oil rose $3.50 to $97, but traded close to $101.50 earlier in the week. Volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), was unchanged at 23.8.

IRAN CRISIS

Hostilities escalate after infrastructure targeted

Iranian attacks on regional energy infrastructure intensified this week after Israel attacked a natural gas facility in Iran in an effort to undermine the country’s leadership by worsening living conditions. Iran responded by striking facilities across the Middle East, including Qatar’s Ras Laffran liquified natural gas plant, which is the world’s largest and accounts for about 17% of Qatar’s LNG exports. Qatari officials estimate it could take three to five years to repair the damage. US President Donald Trump called for a pause on attacks on energy infrastructure and threatened to destroy Iran’s South Pars gas field if Iranian strikes don’t stop.

A US Marine expeditionary force is heading to the Middle East, and there has been a great deal of speculation that the US may reopen the Strait of Hormuz by force. While US aircraft have been working to sink Iran’s fleet of small attack boats and destroy missile launchers near the Strait, President Trump downplayed reports that he is considering putting troops on the ground in Iran. On Thursday evening, Israeli Prime Minister Benjamin Netanyahu said that the war will end “a lot faster than people think” and that Israel will help the US open the Strait of Hormuz. Oil prices remain volatile, though they have fallen from peak levels of roughly $119 (Brent). Gold and silver prices dropped this week after traders shifted expectations from rate cuts to hikes.

Mideast oil exports not completely cut off

While oil production in the Middle East has been severely disrupted, some barrels continue to reach global markets. Iranian tanker loadings at Kharg Island are reportedly averaging between 1.1 million and 1.5 million barrels per day, in line with their pre-war average. Most of those shipments are heading for China, though the US is considering lifting sanctions on Iranian oil so those barrels can be redirected elsewhere, potentially lessening shortages. Saudi Arabia is reportedly routing about half of its usual daily production to the Red Sea via pipeline, bypassing the Persian Gulf, and Iraq is said to be shipping about one quarter million barrels per day via pipeline to Turkey. Meanwhile, the US has reportedly ruled out a crude oil export ban to avoid worsening the global supply disruption. The administration has also ruled out intervening in the oil futures market.  

MACRO NEWS

US–China summit delayed

President Trump requested that the March 31 summit with China in Beijing be postponed by “a month or so” so that he can remain in Washington to coordinate military efforts. In preparation for the now-delayed summit, US and Chinese negotiators met in Paris this week. Chinese Vice Commerce Minister Li Chenggang said the US and China have both agreed to maintain stable tariff levels and have discussed setting up a framework to promote trade.

CENTRAL BANK ROUNDUP

The Federal Reserve held interest rates unchanged on Wednesday and maintained its projection for one rate cut in 2026 and another in 2027; Chair Jerome Powell emphasized that it was too soon to assess the impact of the Middle East war on the economy and that rate cuts will depend on whether inflation cools again. Powell added that he will stay on as chair pro tempore if his successor is not confirmed before his term ends in May, and that he will remain on the board as a governor if the legal proceedings against the Fed are unresolved. He is undecided, however, on whether to remain on the board once the case is resolved.

The European Central Bank held its benchmark deposit rate unchanged at 2% on Thursday but warned that the war in the Middle East has made the economic outlook significantly more uncertain, citing higher inflation risks from elevated energy prices and lower growth prospects. Several hours after Thursday’s meeting, Bloomberg reported that policymakers discussed a potential rate hike in April, though June is seen as a more likely outcome if signs of second-round inflation effects are detected.

The Bank of Canada held its key policy rate unchanged at 2.25% on Wednesday, warning that the war will boost global inflation through higher energy prices, but added that it will “look through” the immediate inflation impact while focusing on downside growth risks.

The Bank of England held its key interest rate unchanged at 3.75% on Thursday in a unanimous 9-0 vote, warning that it “stands ready to act” against any inflation surge triggered by the war or higher energy prices.

The Bank of Japan held its short-term interest rate unchanged at 0.75% on Thursday, flagging increased oil-driven inflation risks from the Middle East conflict; BoJ Governor Kazuo Ueda indicated the central bank refrained from raising rates due to heightened risks.

The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.10% on March 17, marking the second consecutive monthly increase, driven by persistent domestic inflation pressures and sharply higher fuel prices.

QUICK HITS

US household net worth rose $2.17 trillion in Q4 2025 to $184.1 trillion.

Retail sales in China rose 2.8% year-over-year in February, while industrial production rose 6.3%. Both measures exceeded forecasts. The country’s unemployment rate rose to 5.3% from 5.1%.

The US Securities and Exchange Commission prepared a proposal to eliminate quarterly reporting requirements for publicly held companies.

Analysts at Morgan Stanley estimate that private credit fund default rates will reach 8% as AI disruption hits software company revenues. However, they argue that while the broader risks in private credit are significant, they are not systemic and are unlikely to spill over into the wider market.

The ZEW expectations survey tumbled to -8.5 in March from 39.4 in February as European firms faced the fallout from the Iran conflict and increased energy prices.

Japan’s Finance Minister Satsuki Katayama warned this week that recent foreign exchange moves are not in line with fundamentals, and that Japan is prepared to respond at any time. The yen weakened toward 160 to the dollar earlier this week amid surging energy prices. Japan imports nearly all of its crude oil, natural gas, and coal.

The European Parliament’s trade committee voted overwhelmingly, 29-2, to advance the EU–US trade deal to a vote of the full parliament next week.

President Trump signed a 60-day waiver to the Jones Act, which requires only US-owned and operated ships are allowed to move cargo between US ports. This move will facilitate the transport of oil, gas, and fertilizers, alleviating some supply bottlenecks.

US new home sales fell 17.6% in January due to exceptionally harsh winter weather in much of the country.

THE WEEK AHEAD

Monday: Eurozone consumer confidence

Tuesday: Global preliminary PMIs; US unit labor costs, productivity

Wednesday: UK CPI

Thursday: US weekly jobless claims

Friday: UK retail sales 

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Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research.