Weekly Market Review – 23 March 2026

Global equity markets sell-off sharply as attacks on key energy infrastructure and concerns over a prolonged conflict in the Middle East sees energy prices rise. Global central banks are in wait and see mode, but traders have been ramping up bets for potential rate hikes, particularly in the UK.

US: US Federal Reserve keeps rates on hold amid increased uncertainty surrounding inflation

US equities ended the week lower after a volatile period driven by the Middle Eastern conflict, rising oil prices and renewed inflation concerns. Energy was the standout performer in the S&P 500 as oil moved higher. The Federal Reserve kept its policy rate unchanged for a second meeting at 3.5%-3.75%. Policymakers still expect one rate cut this year, while forecasts for inflation and growth were revised higher. Chair Jerome Powell highlighted the risk that Middle East tensions could fuel an energy shock and unsettle inflation expectations. Producer price inflation accelerated in February and exceeded expectations, adding to worries that inflation progress may stall. Gold fell approximately 10% last week, its worst weekly rout since 2011, amid rising concerns over the economic impact from the Iran war. Gold futures extended its losses this morning, falling a further almost 10% at one point.

Japan: Bank of Japan keeps rates on hold and warns inflation may rise again

Japanese equities declined in a holiday shortened week as investors reacted to rising oil prices and continued Middle East instability. The Bank of Japan left its policy rate unchanged, though one policymaker argued for a hike. The central bank warned that higher energy prices could lift inflation again and weigh on growth. The yen strengthened slightly but remained historically weak, supporting exporters but raising the cost of imports. Trade data showed modest export growth, with strong shipments to the European Union but declines to the United States and China.

China: Concerns over rising energy prices outweighs better-than-expected economic data

Chinese equities fell as elevated oil prices and ongoing concerns about weak domestic demand weighed on sentiment. January and February economic data was slightly better than expected, with industrial production, retail sales and infrastructure investment showing improvement. The property market displayed tentative signs of stabilisation, with smaller declines in both new and resale home prices. Trade tensions resurfaced as China criticised the new US Section 301 investigations into the manufacturing policies of major trading partners, which could result in new tariffs on a range of countries later this year.

Europe: European Central Bank holds rates steady and sharply increases 2026 inflation forecast

European markets fell sharply as the Middle East conflict intensified and attacks on key energy infrastructure, in particular the damage to natural gas terminals in Qatar, pushed oil and gas prices higher. Among major stock indexes, Germany’s DAX closed down 4.55%, Italy’s FTSE MIB fell 3.33%, and France’s CAC 40 Index retreated 3.11%. The European Central Bank held rates steady but warned that rising energy costs will push inflation higher in the near term. Its inflation forecast for 2026 was raised meaningfully to 2.6% (up from 1.9% in December). Trade data for the eurozone showed a widening deficit due to weaker exports, particularly in machinery, vehicles and chemicals. In Germany, producer prices fell more than expected, driven by lower gas and electricity costs.

UK: Bank of England keeps rates on hold, but traders ramp up bets of several rate hikes in 2026

UK equities were also sold off sharply, as global energy and geopolitical concerns outweighed domestic resilience. The Bank of England kept rates unchanged but signalled that a prolonged increase in energy prices could raise inflation risks and potentially justify future rate increases. The Prudential Regulation Authority proposed new rules to strengthen bank liquidity buffers during times of crisis. Industrial sentiment weakened according to Make UK, which cited softer domestic demand and rising costs. The yield on the UK 10-year gilt has risen 0.8% since the Middle East conflict began, which puts gilts on track for their worst month since the mini-budget crisis in 2022. The Financial Times reported that as of Monday morning, this implies that traders are ramping up bets for as many as 4 rate hikes in 2026.

What's Important Next: 23 March to 27 March 2026

Will Trump TACO?

Just before the weekend, President Trump expressed a desire to potentially step back in the Middle East. Better known as TACO, "Trump Always Chickens Out". Clearly, the rhetoric has shifted since then, and as the war progresses and the outcomes appear increasingly bleak, the temptation to step back may grow. Just recently he does appear to have indeed "TACO'd". We still have long way to go before all the impacts of this war are mitigated.

Why it's important:

It was no secret that Trump was under the illusion that this "excursion", as he calls it, would be short and perhaps even easy. We are now almost a month in, with very little to show in terms of gains but a great deal to show in terms of costs. Petrol prices have jumped, US stock markets have weakened, and US interest rates have risen sharply due to inflation fears.

All of this matters significantly because it weakens his prospects at the midterms. He is very likely to lose the House and may even lose the Senate. Either outcome would seriously raise the risk of impeachment, and that matters greatly to him. Any attempt to "step back" to mitigate these pressures would help him and would almost certainly be welcomed by markets too. The initial steps in this direction are indeed taking some of the above listed pressures off. However, the inflation pulse and the worry that hostilities might reoccur, will mean it will take some time for all this fully unwind. The likely long-term outcome is weaker global growth due to the inflationary impulse, reduced confidence and the general unbalanced shaped of the economy.

S&P Global Purchasing Managers Index (PMI) Data

On Tuesday we receive Manufacturing PMI data from India, Japan, Germany, France, the UK and the USA.

Why it's important:

These data releases offer some of the most up to date insights into regional economic conditions. While they will not yet reflect the recent rise in oil prices or the broader increase in inflation expectations, they remain important: they will show how robust these economies were heading into the Iran and US conflict.

Any signs that the figures come in weaker than expected will add to concerns that demand is under pressure, raising growth risks and increasing the likelihood of further weakness in global equity markets. Sentiment is extremely fragile at present and even small misses are likely to prompt additional selling by already anxious investors.

In summary, we still like to partially pivot away more from expensive equities into decently valued bonds.

*Source: Bloomberg. All performance measured in local currency.

Issued by Omnis Investments Limited. This update reflects Omnis’ view at the time of writing and is subject to change. The document is for informational purposes only and is not investment advice. We recommend you discuss any investment decisions with your financial adviser. Omnis is unable to provide investment advice. Every effort is made to ensure the accuracy of the information, but no assurance or warranties are given. Past performance should not be considered as a guide to future performance.

The Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC are authorised Investment Companies with Variable Capital. The authorised corporate director of the Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC is Omnis Investments Limited (Registered Address: Auckland House, Lydiard Fields, Swindon SN5 8UB) which is authorised and regulated by the Financial Conduct Authority.