Weekly Recap: From Hopes of De-escalation to New Escalation Risks, Markets Roiled by Volatility

Global markets staged a notable recovery last week after a period of sharp volatility, as investors responded to signals suggesting a potential easing of tensions in the Iran crisis. Equities rose and investor sentiment improved temporarily, yet uncertainty persisted due to the lack of a clear exit strategy and ongoing risks around the Strait of Hormuz, keeping oil prices elevated and market volatility high.


The market movements encompassed equities, bonds, oil, and cryptocurrencies, reflecting a cautious investor mood. Every geopolitical signal or military development was closely scrutinized, highlighting the fragility of current market conditions. Any hint of escalation or de-escalation had the potential to trigger significant market swings within hours, affecting both investor sentiment and global economic expectations.


Equity Markets: Optimism Driven by De-escalation Expectations


The week began with a positive market response as signs emerged that the crisis might gradually ease, including expectations of potential U.S. troop withdrawals from hot spots in the coming weeks. This optimism lifted U.S. and European equities, with the S&P 500 recording its first weekly gain after five consecutive weeks of losses, signaling partial relief among investors.


However, the gains were cautious, as official statements about ongoing military operations continued to feed uncertainty. Meanwhile, news of Iranian-Omani cooperation to monitor ships transiting the Strait of Hormuz received a guarded welcome, with expectations of possible tariffs or transit restrictions highlighting the fragility of market optimism.


Investor movements were not limited to U.S. equities; Asian and European markets also responded, with initial gains in Japanese and broader Asian indices at session open, before slipping amid mixed economic data from China and South Korea, demonstrating the close link between geopolitical developments and global economic performance.


Oil Markets: Balancing Shock and Expectations


Oil prices remained a key area of concern, as global economic stability heavily depends on supply stability:


Extended disruption scenario (3–4 months): Could trigger a sharp rise in oil prices, global supply shortages, and higher energy and food costs, potentially slowing growth in Asia and Europe and partially impacting the U.S. economy.
Shorter-term disruption (3–4 weeks): Would allow markets to adjust gradually, with WTI crude expected to stabilize around $70–80 per barrel by year-end, supporting U.S. GDP growth and easing inflation pressures.


Current futures prices indicate the shorter scenario is more likely, but any new escalation signals from Iran or the U.S. could suddenly push oil prices to record highs.


Medium-term demand fluctuations, particularly in Asia due to industrial recovery, add additional pressure, making the oil market highly sensitive to both political and economic shocks.


U.S. Economy: Resilient Amid External Pressures


Recent economic data show the U.S. economy’s resilience:

Retail sales, excluding autos, rose 0.5% month-on-month in February, surpassing expectations and reflecting continued consumer strength.
Manufacturing activity expanded, with the PMI at 52.7, signaling sustained production growth despite external pressures.

The private sector added 62,000 jobs in March, with preliminary GDP growth projected at 1.6% for Q1, following a weaker previous quarter.

These indicators suggest the U.S. economy can absorb short-term shocks, giving markets confidence that the geopolitical crisis is unlikely to derail economic momentum. This stability is crucial for global investors in assessing risk and managing portfolios.


Labor Market: Positive Signals Boost Confidence


U.S. labor market data for March highlighted further improvement:

Nonfarm payrolls rose 178,000, exceeding forecasts by 60,000, following a 133,000 decline the previous month.

The unemployment rate declined to 4.3%, down from 4.4%.
Average hourly earnings slowed, reaching $34.2 per hour, suggesting a balance between wage growth and inflation.


Labor force participation dipped slightly to 61.9%.


These metrics indicate a strong labor market capable of supporting growth despite external shocks, and provide reassurance regarding inflation containment, a key consideration for markets anticipating central bank policy decisions.


Currencies and Precious Metals: Volatility Under Pressure

Japanese Yen: Fell 0.4% against the U.S. dollar due to military escalation and rising oil costs, despite expectations of a BOJ rate hike.
Euro: Dropped 0.5% versus the dollar, pressured by a strong U.S. currency and higher energy costs in Europe, reflecting weak investor sentiment toward European assets.
Gold & Silver: Gold declined 2.9% to $1,394/oz, influenced by a strong dollar and bond yields, yet retained some safe-haven appeal. Silver showed a similar decline but benefited from short-term hedging demand, highlighting continued interest in precious metals amid geopolitical uncertainty.


Bitcoin and Cryptocurrencies: Broad Selloff Amid Rising Tensions


Cryptocurrencies experienced sharp declines on Thursday, with Bitcoin down 2.9% to $66,465.7, tracking wider losses in risk-sensitive assets following renewed Middle East escalation signals that dampened investor sentiment. Despite the pullback, Bitcoin remained range-bound, trading within levels observed for most of the year.


Investor confidence weakened after Donald Trump stated that the U.S. would intensify military operations against Iran over the next two to three weeks, warning that Iran must accept a deal or face strikes on its energy infrastructure. Iran denied direct negotiations with the U.S., rejecting ceasefire claims and reinforcing uncertainty about near-term diplomatic solutions.


The escalation triggered broad selloffs across risk-sensitive assets, including Asian equities and U.S. futures. Meanwhile, Bitcoin ETFs recorded $1.2 billion in inflows in March, the first monthly inflow since October, following four consecutive months of outflows and a 50% correction from its late-2025 peak.


Other major tokens also fell: Ether dropped 4.7% to $2,049.22, XRP fell 3.6% to $1.3139, while Solana, Cardano, and BNB declined between 4% and 7%. Among meme coins, Dogecoin lost 4.6% and $TRUMP fell 5.6%, reflecting the sector’s sensitivity to geopolitical and macroeconomic developments.


Major Tech Companies: Navigating Market Pressures


NVIDIA: Maintained global resilience despite declining market share in China, with expected quarterly revenues of $78 billion.
Amazon: Expanded AI and satellite internet projects, reinforcing its strategic positioning amid global market volatility.


These corporate strategies demonstrate the adaptability of the private sector, providing relative stability even amid geopolitical and macroeconomic pressures.


OPEC+: Managing Supply Challenges


OPEC+ convened last week amid rising tensions, approving a 206,000 barrel-per-day increase in May production to stabilize markets. The decision aims to mitigate potential supply shocks from disruptions in the Strait of Hormuz and send reassurance signals to investors that short-term crises will not destabilize oil markets.


Market Outlook: A Volatile Week Ahead


With the U.S. deadline to Iran approaching, the upcoming FOMC minutes, and inflation readings from the U.S. and China, markets are expected to remain under pressure from intersecting geopolitical and macroeconomic factors.


The key challenge will be how markets absorb oil shocks and military escalation risks. Cryptocurrencies remain particularly sensitive, while investors will closely monitor any de-escalation signals that could support sustained recoveries.


Short-term volatility is likely to continue, with increased trading activity in defense, energy, and technology sectors. Meanwhile, both traditional and digital asset markets will remain under close scrutiny by investors and hedge funds, reflecting heightened caution in the current investment environment.