Global Weekly Outlook: Global Focus on Middle East Conflict Trajectory; Super Central Bank Week with Major Events Ahead

Cailian Press, March 15 (Editor: Niu Zhanlin) Investors will seek clear signals over the next week to determine how much the Middle East conflict has disrupted this year’s expectations for rate cuts by the Federal Reserve and other central banks. They are also preparing for the latest developments in Iran’s war that could shake the markets.

Amid the ongoing escalation of the Iran conflict, which has triggered a surge in oil prices and a chain reaction across global assets, Federal Reserve policymakers will hold a meeting next week.

During the two-day meeting, Fed officials will assess the impact of this energy shock on inflation and economic growth, and will release their latest economic forecasts. Currently, due to the war, market expectations for rate cuts this year have significantly cooled, after previously being a key factor supporting bullish sentiment in stocks.

Edward Jones Senior Global Investment Strategist Angelo Kourkafas said, “The Fed will be the focus of the market, especially given that expectations for rate cuts have already been sharply lowered.”

Since the outbreak of the Iran war, US stock indexes have continued to decline, and market volatility has risen sharply. Investors are closely watching oil price swings; earlier this week, US crude oil prices surged close to $120 per barrel, but by Friday, they retreated to around $100, a level of high market concern.

Iran has stated that the world should prepare for oil prices to rise to $200. On Friday, the US bombed Iran’s oil export hub at Kharg Island, targeting military facilities only. Trump threatened that if Iran continues to interfere with ships passing through the Strait of Hormuz, he will destroy the island’s oil infrastructure.

Analysts note that Kharg Island is a key source of revenue for Iran’s government and military. Losing control of the island’s energy facilities would pose serious difficulties for the country’s operations. Therefore, strikes on the island’s energy infrastructure could have significant economic impacts.

Iranian Foreign Minister Amir Abdollahian said that if Iran’s energy facilities are attacked, Iran will respond. He claimed that if Iranian facilities are targeted, Iran might strike US business facilities in the region or companies in which the US holds shares.

TD Wealth Chief Investment Strategist Sid Vaidya said, “Markets are highly volatile, and traders will react quickly to any news about the Iran conflict—whether positive or negative.”

Markets widely expect the Federal Reserve to keep interest rates unchanged in its policy statement scheduled for Wednesday local time, marking the second consecutive meeting with no change.

Last year, the Fed cut rates to support a weakening labor market, but paused its easing cycle in January this year, as employment and inflation risks appeared to ease.

Investors previously expected more rate cuts this year, which was generally seen as positive for stocks and other risk assets. However, with energy prices surging and potentially pushing up inflation, market expectations for rate cuts have been lowered.

As of Friday, federal funds futures prices indicate the market expects a rate cut of slightly less than 25 basis points by December. Before the outbreak of war, in late February, markets had expected two rate cuts this year.

At this meeting, the Fed will also release updated economic forecasts from policymakers, including their outlooks for future interest rates, inflation, and employment.

Murphy & Sylvest Market Strategist Paul Nolte said, “This meeting is likely to set the tone for policy this year, especially regarding inflation pressures driven by rising oil prices.”

For Powell, this will be his penultimate Fed meeting as chair, with his term ending in May.

The next rate adjustment may only occur after the nomination of Jerome Powell’s successor, former Fed Governor Kevin Warsh, who is expected to take over the central bank.

In addition to the Fed, the European Central Bank, Bank of Japan, Bank of Canada, Reserve Bank of Australia, and Bank of England will all release interest rate decisions. The Middle East war has caused a sharp rise in energy prices, making central bank policymakers worldwide anxious.

In earnings news, only a few companies such as Alibaba, Xpeng Motors, Micron Technology, FedEx, and Accenture are worth noting.

From Monday to Thursday next week, Nvidia will hold its annual GTC conference, likely shifting market focus back to AI-themed trading. Earlier this year, AI concepts caused significant volatility in tech stocks and other equities.

Nvidia is expected to unveil new details about its CPU optimized for intelligent AI at GTC, with a pure CPU rack likely to be showcased.

According to Nvidia, besides the two-hour keynote by Jensen Huang on Monday, the GTC park will host a “Lobster Building” activity where attendees can deploy an always-on AI assistant on-site.

However, investors generally expect geopolitical news related to Iran to remain the dominant market driver.

LPL Financial Chief Technical Strategist Adam Turnquist wrote, “Market movements will continue to be driven by headlines, as investors await clearer signals on when the US will exit the Middle East conflict.”

Next Week’s Key Events Overview:

Monday, March 16: China January-February retail sales, China January-February industrial added value, Canada February CPI monthly rate, US March New York Fed manufacturing index, US February industrial production monthly rate, State Council press conference on national economic operation

Tuesday, March 17: Australia rate decision (until March 17), Eurozone March ZEW economic sentiment index, US February Conference Board leading indicator monthly rate, US February existing home sales index

Wednesday, March 18: US API crude oil inventories for the week ending March 13, Eurozone February CPI final, US February PPI annual rate, US February PPI monthly rate, Canada rate decision (until March 18), US January factory orders monthly rate, US EIA crude oil inventories for the week ending March 13, US Strategic Petroleum Reserve inventories for the week ending March 13

Thursday, March 19: US Federal Reserve rate decision (until March 18), Fed Chair Powell’s monetary policy press conference, China February SWIFT RMB share in global payments, UK February unemployment rate, Swiss National Bank rate decision, US initial jobless claims for the week ending March 14, European Central Bank rate decision, US EIA natural gas inventories for the week ending March 13, Bank of Japan target interest rate, Bank of Japan Governor Ueda Haruhiko’s monetary policy press conference

Friday, March 20: Tokyo Stock Exchange closed for a day, China March 20 one-year Loan Prime Rate, Germany February PPI monthly rate, Russia Central Bank rate decision

(Cailian Press, Niu Zhanlin)