Week:
S&P500:-1.01 x% FTSE100: +0.49% Gold: -3.70% Bitcoin: +4.79%
YTD:
S&P500: -3.30% FTSE100: +3.50% Gold: +15.56% Bitcoin: -15.84%
Oil Shock and War Risk Drive Market Volatility
Source: Connect Weekly | Week ending 13 March 2026
Global markets endured another volatile week as the US-Israel-Iran conflict intensified and energy prices surged, forcing investors to reassess inflation and interest-rate expectations. Equities oscillated sharply as oil swings dictated risk sentiment, with the S&P 500 ultimately finishing the week lower while energy names outperformed. The spike in crude also triggered renewed stagflation fears, as higher fuel costs threaten to push inflation higher and delay the path to monetary easing.
What drove markets this week
Monday saw a tentative rebound as investors bought the dip, but sentiment stayed fragile with oil swinging sharply over the weekend and geopolitical risks lingering.
Midweek, the conflict escalated with attacks near the Strait of Hormuz, pushing oil from the mid-$80s to the mid-$90s and triggering a broad global equity sell-off.
The oil spike above $100 (the first time since 2022) hit inflation expectations hard. Market pricing for Fed rate cuts collapsed, and some traders began questioning whether hikes could return if energy costs stay elevated. Across asset classes, equities fell as much as 1.5-2% in the worst sessions while commodities and the US dollar rallied.
Late-week trading stabilises
Despite the turmoil, markets began to stabilise into the end of the week as oil pulled back from its highest levels and investors stepped in to buy the dip. The rebound in equities suggests that while geopolitical risk is elevated, investors are not yet pricing a prolonged energy shock similar to past oil crises.
Cryptocurrencies also showed resilience late in the week, bouncing alongside equities after holding key technical levels despite earlier volatility.
Looking ahead
Markets now face a pivotal week dominated by central bank decisions. The Federal Reserve and Bank of Canada are both expected to hold rates steady, though investors will be closely watching Jerome Powell’s guidance for clues about whether rising energy prices could alter the policy outlook. Several major central banks, including the ECB and Bank of England, are also set to announce decisions, creating one of the most event-heavy weeks of the year.
For now, oil remains the single most important variable. If crude stabilises below recent highs, markets may regain their footing. But any renewed surge tied to disruptions in the Strait of Hormuz could quickly revive stagflation fears and push volatility higher again.
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