Global Economy & Markets, Weekly Roundup 31/03/26
Markets brace for the possibility of more aggressive monetary policy due to higher energy prices
The escalation of the conflict in the Middle East has quickly become a key source of uncertainty for policymakers and investors, introducing another major supply shock to global energy markets in under five years.
As a result, upwards pressures in oil prices continue, with Brent crude at $113/barrel on Monday 30th, up by +56% since end-February. Convincing signs of prospects of a de-escalation of the conflict and an easing of supply disruptions, remain elusive entering the 5th week of the war.
At the same time, the growing participation of the Iran aligned Houthi group in Yemen heightens the risk that maritime trade through the Red Sea, covering both energy shipments and broader commercial flows, may also come under strain.
The global macroeconomic impact will depend heavily on the persistence of the shock. According to the OECD, the conflict could trim world GDP growth by around –0.3% in 2026, with global activity projected to expand by 2.9% in 2026 and 3.0% in 2027, following a 3.3% increase in 2025. Inflation would see a more immediate and pronounced effect, as global consumer prices could accelerate by an additional 1.2% to 4.0% in 2026, compared with 3.4% in 2025.
The projections represent the OECD’s baseline scenario, with technical assumptions based on futures curve pricing for major international energy commodities as of March 20th (e.g. “spot” Brent at $112/barrel and $85/barrel on average in the next 2 years and “spot TTF” at €60/Mwh and €50/Mwh, respectively).
Early data from the euro area illustrate how quickly the inflation impulse can filter through. Indeed, headline CPI rose to 2.5% yoy in March from 1.9% yoy in February, driven entirely by the energy component which rose by +6.8% mom, leading its annual growth to +4.9% from -3.1% in February. The core CPI came out at +2.4% yoy from +2.5% yoy in February.
Forward looking indicators such as price components in the PMIs and the European Commission’s sentiment surveys (ESIs) have also moved higher, signaling a broader buildup in price pressures.
Government bond markets have adjusted accordingly. German 10 year Bund yields have risen by +39 basis points month to date to 3.04%, reflecting increased expectations of ECB tightening as early as June alongside a higher inflation risk premium. In the US, 10-Year Treasury yields have increased by +41 bps to 4.35%, slightly off their intra-month highs as Chair Powell demonstrated no rush to hike interest rates with long-term inflation expectations, so far, anchored.
Global equity markets are heading for double-digit monthly losses in March (MSCI ACWI: -9%). Equity multiples based on 12-month forward price to earnings ratios have declined across the board, remaining though circa one standard deviation above their historical mean values.
Corporate profits’ estimates for 2026 are broadly unperturbed (Eurostoxx50: €360/share or +12% annual growth, S&P500: $317/share or +17% annual growth). However, caution is warranted, as corporate profitability estimates respond with a lag, likely more so in the current juncture of extraordinary uncertainty and tail risks.
The escalation of the conflict in the Middle East has quickly become a key source of uncertainty for policymakers and investors, introducing another major supply shock to global energy markets in under five years.
As a result, upwards pressures in oil prices continue, with Brent crude at $113/barrel on Monday 30th, up by +56% since end-February. Convincing signs of prospects of a de-escalation of the conflict and an easing of supply disruptions, remain elusive entering the 5th week of the war.
At the same time, the growing participation of the Iran aligned Houthi group in Yemen heightens the risk that maritime trade through the Red Sea, covering both energy shipments and broader commercial flows, may also come under strain.
The global macroeconomic impact will depend heavily on the persistence of the shock. According to the OECD, the conflict could trim world GDP growth by around –0.3% in 2026, with global activity projected to expand by 2.9% in 2026 and 3.0% in 2027, following a 3.3% increase in 2025. Inflation would see a more immediate and pronounced effect, as global consumer prices could accelerate by an additional 1.2% to 4.0% in 2026, compared with 3.4% in 2025.
The projections represent the OECD’s baseline scenario, with technical assumptions based on futures curve pricing for major international energy commodities as of March 20th (e.g. “spot” Brent at $112/barrel and $85/barrel on average in the next 2 years and “spot TTF” at €60/Mwh and €50/Mwh, respectively).
Early data from the euro area illustrate how quickly the inflation impulse can filter through. Indeed, headline CPI rose to 2.5% yoy in March from 1.9% yoy in February, driven entirely by the energy component which rose by +6.8% mom, leading its annual growth to +4.9% from -3.1% in February. The core CPI came out at +2.4% yoy from +2.5% yoy in February.
Forward looking indicators such as price components in the PMIs and the European Commission’s sentiment surveys (ESIs) have also moved higher, signaling a broader buildup in price pressures.
Government bond markets have adjusted accordingly. German 10 year Bund yields have risen by +39 basis points month to date to 3.04%, reflecting increased expectations of ECB tightening as early as June alongside a higher inflation risk premium. In the US, 10-Year Treasury yields have increased by +41 bps to 4.35%, slightly off their intra-month highs as Chair Powell demonstrated no rush to hike interest rates with long-term inflation expectations, so far, anchored.
Global equity markets are heading for double-digit monthly losses in March (MSCI ACWI: -9%). Equity multiples based on 12-month forward price to earnings ratios have declined across the board, remaining though circa one standard deviation above their historical mean values.
Corporate profits’ estimates for 2026 are broadly unperturbed (Eurostoxx50: €360/share or +12% annual growth, S&P500: $317/share or +17% annual growth). However, caution is warranted, as corporate profitability estimates respond with a lag, likely more so in the current juncture of extraordinary uncertainty and tail risks.