Global stock indices continue sell-off due to Middle East conflict

The US stock market declined sharply on Tuesday. By the end of the day, the Dow Jones (US30) fell by 0.83%. The S&P 500 (US500) dropped by 0.94%. The tech-heavy NASDAQ (US100) closed lower by 1.09%. A turning point came with President Trump’s announcement that the US Navy would provide military escort for tankers through the Strait of Hormuz. This promise not only checked the speculative peak in Brent crude prices but also calmed the bond market, allowing Treasury yields to stabilize and providing a breather for the technology sector. Nevertheless, previous growth leaders such as Nvidia and Tesla ended the day in the red, down 1.3% and 2.7% respectively, remaining under pressure from high borrowing costs.

The Mexican peso (MXN) weakened to 17.7 per dollar, hitting a six-week low amid catastrophic foreign trade data and intensifying geopolitical risks. In January, Mexico recorded a historic trade deficit of $6.48 billion, driven by a 33.5% collapse in oil exports and a 9% reduction in vehicle shipments to the US. The situation is exacerbated by a new 10% global US import tax introduced on February 24, which threatens Mexico’s key export chains and offsets the positive impact of the Q4 GDP revision to 0.9%.

Stock markets in Europe continued their plunge on Tuesday. The German DAX (DE40) fell by 3.44%, the French CAC 40 (FR40) closed down 3.46%, the Spanish IBEX 35 (ES35) dropped 4.55%, and the British FTSE 100 (UK100) closed down 2.75%. The primary driver of the sell-off was the fear of a massive energy shock: due to the blockade of the Strait of Hormuz and the suspension of production at Qatari plants, natural gas prices in Europe soared by more than 40%, exceeding €60/MWh. This jeopardizes the region’s energy-intensive industrial sector. Additional pressure came from fresh Eurozone inflation data for February, which unexpectedly accelerated to 1.9% (against an anticipation of 1.7%), while core inflation jumped to 2.4%. This spike, amplified by the Milan Winter Olympics and rising service prices, forced traders to revise ECB rate expectations – the probability of rate cuts in 2026 has practically vanished, giving way to prognosis of potential policy tightening.

Silver prices (XAG) suffered a crushing collapse on March 3, plummeting by more than 10% and falling below the psychological mark of $80 per ounce. Much like gold, silver fell victim to the phenomenal strengthening of the US dollar, which has displaced all other safe-haven assets amid the full-scale military conflict with Iran. Investors preferred the liquidity of the US currency, while silver, possessing a significant industrial component, faced double pressure: as a precious metal, it suffered from rising bond yields, and as an industrial metal, it was hit by global recession risks due to expensive energy.

WTI oil prices demonstrated extreme volatility decreasing to $73.8 per barrel after an initial morning surge of over 8%. The initial panic jump was caused by massive drone attacks on strategic sites: the Ras Tanura refinery in Saudi Arabia and the oil hub near the port of Fujairah (UAE). However, the market reversed sharply following President Trump’s emergency statement regarding US Navy escorts in the Strait of Hormuz. Despite the correction from daily highs, quotes remain at their peak levels since June of last year due to ongoing logistical paralysis. Even with US Navy support, shipping in the Persian Gulf is effectively paralyzed as leading insurers (Lloyd’s of London, etc.) continue to refuse war risk coverage or set prohibitive rates. Investor attention is now fixed on the effectiveness of air defense systems in the Emirates: any successful breach by Iranian missiles targeting export terminals could instantly return prices to levels above $80.

Asian markets traded lower yesterday. The Japanese Nikkei 225 (JP225) fell by 3.06%, the FTSE China A50 (CHA50) dropped 0.14%, the Hong Kong Hang Seng (HK50) lost 1.12%, and the Australian ASX 200 (AU200) showed a negative result of 1.34%. On Wednesday morning, the Hang Seng plunged to 25,098 (-2.6%), its third consecutive decline, nearing an 11-week low. Investors fear the blockade will trigger a prolonged energy shock that will accelerate global inflation.
The Australian dollar (“aussie”) dropped to the $0.700 level, hitting a four-week low. Paradoxically, even brilliant Q4 2025 GDP data (Australia’s economy grew by 0.8% against a 0.7% prediction, with the annual rate accelerating to a three-year high of 2.6%) could not stop the fall. The currency became a hostage to the global flight to safety as investors ignored domestic economic success in the face of a looming full-scale war in the Middle East.

The New Zealand dollar (“kiwi”) made a weak attempt to rise to $0.589 but remained near a six-week low. As a “risk” currency, the kiwi is highly sensitive to the escalation in the Persian Gulf. The main pressure factor is New Zealand’s critical dependence on imported refined fuel: the blockade of the Strait of Hormuz and the halt of exports from Qatar threaten the country with a sharp spike in gasoline prices. Amid the external chaos, the RBNZ maintains a surprisingly calm stance. New Governor Anna Breman confirmed a soft monetary policy path, stating the economy is capable of recovering without creating excessive inflationary pressure.