Stocks, Oil & Markets: Iran War Concerns Ease, Alibaba Slides (March 20)

Stocks Waver, Oil Retreats as Middle East Tensions Remain High

Global stock markets experienced a volatile week, closing choppy heading into the weekend as investors assessed evolving efforts to de-escalate the conflict between Israel, and Iran. While oil prices retreated from recent highs, concerns about a potential global energy crisis and persistent inflationary pressures continue to weigh on investor sentiment.

The MSCI Asia Pacific Index fluctuated on Friday, following a 2.6% decline on Thursday triggered by strikes on energy assets in the Middle East. S&P 500 futures initially climbed, recovering from a 1% drop in the previous session that ultimately left the benchmark down 0.3%. Trading in Japanese markets was closed for a holiday, resulting in no cash trading in Treasuries during Asian hours.

Brent crude oil experienced a significant pullback, declining approximately 3% to trade below $106 per barrel after reaching its highest level since July 2022 in the prior session. This easing of oil prices followed comments from Israeli Prime Minister Benjamin Netanyahu, who stated Israel would no longer target energy infrastructure and expressed optimism that the conflict would resolve more quickly than anticipated, suggesting Iran’s ability to enrich uranium and manufacture ballistic missiles was being curtailed. US President Donald Trump also indicated he had no plans to deploy ground troops to the region.

Despite these developments, analysts remain cautious. “The narrative from the US side looks slightly more promising, but the consensus changes by the day,” noted Anna Wu, a cross asset strategist at Van Eck Associates Corp. In Sydney. The situation remains fluid, and geopolitical risks continue to drive market volatility.

Corporate News Adds to Market Uncertainty

Adding to the market’s unease, shares of Alibaba Group Holding Ltd. Tumbled as much as 6.4% in Hong Kong after the Chinese tech giant reported sales that fell short of expectations, hampered by sluggish growth in its core e-commerce business. This decline weighed on the broader Asian benchmark. Conversely, AIA Group Ltd. Saw a nearly 5% jump in its stock price following positive results and the announcement of a share buyback program.

In the US, Micron Technology Inc. Cautioned that substantial investment in production would be necessary to meet growing demand, overshadowing an otherwise positive earnings forecast. Alibaba announced plans to quintuple its cloud and AI revenue to $100 billion annually within five years, signaling a significant commitment to these emerging technologies. Eli Lilly & Co. Reported promising results from an experimental diabetes medication that demonstrated unprecedented weight loss in patients. Darden Restaurants Inc. Raised its full-year outlook, anticipating increased sales driven by promotional activities at Olive Garden. Uber Technologies Inc. Plans to invest up to $1.25 billion in Rivian Automotive Inc. To support the launch of a robotaxi fleet across the US, Canada, and Europe.

Inflationary Pressures and Central Bank Responses

The conflict in the Middle East has significantly disrupted the energy supply chain, leading to surges in gasoline and jet fuel prices. Shortages of cooking gas have even sparked unrest in India, highlighting the widespread impact of the crisis. The International Energy Agency has characterized the situation as the largest supply disruption in the history of the oil market.

Treasury Secretary Scott Bessent indicated the US is considering lifting sanctions on Iranian oil to alleviate rising energy prices. The White House has ruled out a ban on oil and gas exports. However, the risk of a global inflation shock has complicated the policy outlook for central banks worldwide. Investors are increasingly betting on higher interest rates as energy prices climb.

The UK’s two-year rate jumped 31 basis points to 4.40% after the Bank of England signaled its readiness to act against accelerating inflation. While the US Treasury 10-year yield fell slightly to 4.25%, the policy-sensitive two-year yield rose two basis points to 3.79%. The prospect of sustained inflation is diminishing expectations for near-term US interest rate cuts.

Safe Haven Assets Under Pressure

As the war reduces the likelihood of a US interest-rate cut, gold is poised for its largest weekly loss in six years. The precious metal, traditionally viewed as a safe haven asset, has declined for consecutive weeks since the initial attacks on Iran last month. The slump in gold is also impacting mining stocks.

The Bloomberg Dollar Spot Index rose 0.1% on Friday after a 0.7% decline in the previous session. Bank of America strategist Michael Hartnett observed, “The market is looking for an off-ramp, the market is looking for a ceasefire.” He added that financial conditions are tightening, but the Federal Reserve faces a difficult challenge in addressing this squeeze while oil prices remain elevated.

Investors will continue to closely monitor geopolitical developments in the Middle East, as well as central bank responses to rising inflationary pressures. The trajectory of oil prices and the potential for further escalation of the conflict will be key factors influencing market performance in the coming weeks.