Weekly Macro Storm: US-Iran Conflict Escalation Roils Global Markets, Rate Hike Expectations Reignite, Energy and Gold Surge Together

March 28 — Global markets were rocked by severe volatility this past week, driven by the double whammy of geopolitical tensions and monetary policy shifts. The U.S.-Iran standoff has shifted into a phase of simultaneous military pressure and diplomatic maneuvering, with restrictions in the Strait of Hormuz emerging as a key variable. This has pushed crude oil prices back to elevated levels, sharply lifting global inflation expectations. Against this backdrop, there’s been a sharp pivot in Federal Reserve policy expectations. Multiple Fed officials have struck hawkish tones, prompting markets to abruptly swing from pricing in rate cuts this year to “higher rates for longer” — and even reopening the door to potential hikes. The U.S. dollar index has climbed back above 100, U.S. Treasury yields have moved higher in lockstep, and expectations for global liquidity have tightened. Major asset classes have diverged sharply: - Gold has held steady in a narrow, elevated range amid the volatility; - Crude oil has emerged as the top-performing asset; - U.S. equities came under pressure, with all three major indices posting weekly losses (led by the tech sector); - In forex markets, the Japanese yen has continued to weaken, approaching a key intervention threshold, while non-U.S. currencies face broad pressure. Global policy and fund flows have also shifted notably: - Japan has tapped its strategic oil reserves and is weighing intervention in oil prices via the futures market; - Singapore is ramping up efforts to build a gold trading hub; - Turkey has deployed its gold reserves in a major move to ease liquidity strains. Overall, markets are now in a high-volatility cycle fueled by three interlinked forces: geopolitical conflict-driven inflation, monetary policy repricing, and asset reassessment. Near-term focus remains centered on developments in the Middle East and the path of global central bank policy.