Weekly Recap: Week Concluding with Middle East Dramatic Escalation

In a week that witnessed a historic shift in the geopolitical balance, condcluding with the commencement of joint US-Israeli strikes on Iran on Saturday and the growing threats to close the Strait of Hormuz—the transit point for 20% of global oil trade—financial markets reflected a landscape of sharp volatility.

The accelerating tensions in the Middle East cast heavy shadows over most asset classes. This was compounded by disappointing US economic data, specifically inflation figures and the Producer Price Index (PPI) reading. The PPI for January recorded a 0.5% increase, compared to the previous 0.4%, exceeding market expectations of a 0.3% rise. The annual US PPI rose by 2.9% in January, compared to 3.00% in the same month last year. This increase came at a slower pace but was still higher than market expectations of 2.6%. The Core PPI (excluding food and energy) rose by 0.8% in January, compared to the previous 0.6%, which was also higher than the 0.3% market forecast.

The annual reading for the core index rose by 3.6% last July, surpassing the previous month’s 3.3% and exceeding market expectations of 3.00%. With continued cautious signals from Federal Reserve officials led by Jerome Powell, investors pivoted toward safe-haven assets.

The Dollar Index: Fragile Stability Under Geopolitical Risks

The Dollar Index (DXY) began the week near 97.85, then saw a slight 0.15% decline on Tuesday, February 25, to 97.70, settling at 97.61 by week’s end. Despite the relative impact of US data, global inflation fears—triggered by rising energy prices due to the Hormuz threats—weakened the Dollar against safe currencies like the Yen. The escalation in Iran temporarily bolstered the Dollar’s performance as a safe haven, but it did not prevent a slight 0.18% loss for the US currency. Fundamental analysis points to potential further pressure if other central banks, such as the Bank of Japan, continue tightening their monetary policies.

Gold: The Shining Star in Times of Turmoil

Gold was the biggest winner, surging 1.80% to reach $5,278 per ounce. The yellow metal started last week at $5,121 and climbed gradually as the strikes on Iran escalated. Inflows of up to $2.5 billion into Gold ETFs bolstered the rally, with gains reaching 1.94% in some sessions. Fundamental factors—high inflation and speculation regarding the Federal Reserve’s interest rate path—made it an ideal haven, despite the potential for a pullback if tensions ease through potential international talks.

Equities: Sharp Volatility Across Wall Street, Asia, and Europe

On Wall Street, the S&P 500 ended the week at 6,879 points, a 0.4% weekly decline, amid fears over the impact of AI and weak economic data. The Dow Jones closed at 48,977 points (down 1%), while the Nasdaq fell 0.30% to 24,960 points. Daily volatility was evident; sessions were marked by tech-led gains mid-week, followed by pressure from geopolitical fears.

In Asia, the Nikkei 225 rose to the 58,753–58,850 range (gains of up to 2.2% on some days), supported by a weak Yen, while the Hang Seng fell by up to 2%, affected by tense US-China trade relations. In Europe, the FTSE 100 rose to 10,910 points (0.59%), while the CAC 40 fell to 8,580 points (0.47%), and the DAX stabilized at 25,284 points amid German inflation at 1.9%. The Hormuz tensions overshadowed energy stocks, but portfolio diversification helped contain losses.

Cryptocurrencies: Dramatic Volatility as a Gold Alternative

Bitcoin saw a temporary 5.48% mid-week rise to $68,434 before retreating, supported by tensions as “digital gold.” Ethereum jumped 9.42% to $2,065 in certain sessions, with investment inflows of $1.2 billion. However, cryptocurrencies recorded monthly declines of 15–24%, affected by regulatory concerns and a potential recession.

Oil: Rally Driven by Hormuz Threats

WTI crude rose 7% to open the new trading week at $72 today, Monday, March 2, while Brent crude rose 2.87% to open at $78.37 today, climbing about 7% overall. The strikes on Iran and the Strait of Hormuz—through which 20-30% of global oil passes—raised risk levels, driving prices to an 8.16% monthly gain. Bloomberg analysts warn of a supply shortage of up to 15% if the escalation continues, with shipping companies partially suspending operations.

Treasury Bonds: Yields Fall on Recession Fears

The 10-year US Treasury yields fell to 3.95% on February 27, a decrease of 0.056%, reflecting investor concerns over slowing growth following weak GDP data and rising inflation.

Central Bank Signals: Cautious Dominance

Federal Reserve officials maintained a cautious tone sensitive to inflation and employment risks, suggesting a possible cut in March. ECB President Christine Lagarde warned of the impact of energy prices.

Fundamental and Geopolitical Factors: Intertwined Threats

Economic data revealed a drop in US consumer confidence to 87.6 and a rise in unemployment to 4.1%. Geopolitically, the strikes on Iran led to the temporary closure of Kuwait and Dubai airports, the targeting of a port in Oman, and Iranian counterattacks; vessel traffic was disrupted by 40-50%. In Ukraine, talks continued amid ongoing Russian attacks. These factors fueled global inflation and pushed investors toward caution.

Ultimately, this week proved that geopolitical factors—especially regarding the Strait of Hormuz—remain the dominant force in the economy. Experts expect further volatility, emphasizing the importance of maintaining caution and staying fully informed. The coming months are expected to determine whether the world moves toward de-escalation or a larger conflict.

Will AI negative impact expectations on the software and jobs sectors collapse soon?

AI continues to spark debate between wild optimism and extreme fear. On one hand, strong profits and rapid adoption show promising productivity potential; on the other, fears arise over excessive development, high capital costs, and the collapse of traditional business models. Consequently, major US tech stocks have moved sideways for four full months.

The trading range for the S&P 500 is among the narrowest in history, while gains in other sectors hide clear weakness in tech. Results from the leading AI infrastructure company widened the gap: record revenues and exceeded expectations, yet an immediate drop in share price followed. Investors see a problem, but panic overlooks a deeper truth: AI is more about reshaping sectors and jobs than destroying them.

The Infrastructure Race: Costly but Not a Bubble

Giant corporations are spending hundreds of billions on chips and data centers, with spending expected to reach $700 billion this year. Demand for AI agents is accelerating remarkably. Yet, the market reaction revealed growing doubts about the pace of spending and future returns. Observers see this caution as healthy, as it pressures valuations and prevents excessive euphoria—the opposite of traditional bubbles. Software valuations won’t return to previous peaks soon, but this doesn’t mean AI makes the sector obsolete. The gap between semiconductor and software stock performance has become so extreme that a tactical rebound is likely.

History Speaks: Integration Wins

Nowhere is the tension clearer than in the software sector, which has fallen 30% from its peak. New tools raise legitimate concerns about competition and pricing. However, recent developments confirm these models are designed to complement current systems, not replace them. Leading companies are investing heavily in their own AI strategies rather than waiting to be displaced. Concluding that an entire sector is finished is an exaggeration.

Labor Market Anxiety is Overblown

The debate has shifted to the labor market, with scenarios of office jobs disappearing. While some data shows faster unemployment growth in affected professions, AI caused only 7% of layoff plans in January and 4.5% for the full year—it is not the primary factor. The post-pandemic over-hiring explains much of this. History shows that major technological revolutions follow a “creative destruction” pattern: initial pain followed by massive productivity and growth. About 60% of current jobs did not exist in 1940. AI will replace some tasks but will lower prices and increase consumption, generating demand for new work.

Investment Diversification: The Secret Weapon

As AI progresses, market leadership is broadening. Industrials, healthcare, and finance—along with international markets—are benefiting. Value stocks are regaining the lead. The Fed still leans toward easing if data weakens. At this stage, diversification is the true bulwark protecting portfolios.

The pendulum swings between fear and enthusiasm, but rising profits and stable employment paint a brighter picture than headlines suggest. The wisest path remains reasonable caution, staying informed, and letting diversification do the heavy lifting.

The Week Ahead

During the trading week of March 2–6, 2026, global markets will closely monitor key U.S. economic releases. The spotlight will be on the S&P Global and ISM Purchasing Managers’ Indexes (PMI) for both manufacturing and services, offering an early snapshot of economic activity. Midweek, employment data including the ADP private payrolls report will set the tone ahead of Friday’s crucial Non-Farm Payrolls (NFP) release.

Alongside NFP, retail sales figures will provide insight into consumer spending strength, a major driver of U.S. growth. Together, these indicators represent a dual test for markets: industrial and service activity at the start of the week, followed by labor market and consumption data at the end. Any surprises could significantly reshape expectations for Federal Reserve policy and drive volatility in the dollar, bonds, and equities.