The Financial Damage of War – Markets Weekly Outlook
By Elior Manier
Date: 13 March 2026
Overview
This week's market outlook focuses on the significant financial impacts stemming from the ongoing US-Iran-Israel conflict, which has led to increased volatility in global markets. With the Federal Open Market Committee (FOMC) meeting approaching, expectations for improved market conditions remain low.
Week in Review
Oil Market Disruptions
The conflict has severely disrupted the energy commodity market, leading to soaring oil prices. As oil prices rise, inflation follows suit, which in turn reduces profitability for companies and creates a challenging environment for markets. The Strait of Hormuz, a critical shipping route, remains largely closed, exacerbating these issues.
WTI crude oil prices have surged from approximately $80 to $98, reflecting a 72% increase since early January. This volatility is reminiscent of the oil crises of the 1970s, which resulted in prolonged stagflation and economic downturns.
Market Reactions
As inflation expectations rise, market participants are adjusting their outlooks, with interest rate cuts being priced out in favor of potential hikes. The US Federal Reserve's stance is becoming increasingly hawkish, with rate cut expectations dropping significantly.
The correlation between the US dollar and oil prices is becoming more pronounced, indicating that traders should closely monitor the Dollar Index for insights into market flows.
Geopolitical Developments
On a somewhat positive note, the US and Israel have reportedly made significant military advances, destroying a large portion of Iran's missile capabilities. However, the market sentiment remains cautious, with fears of a prolonged conflict potentially leading to further economic strain.
Asset Class Performance
This week, metals performed poorly, and the overall market sentiment is heavily influenced by oil prices. As long as oil prices remain elevated, similar market trends are expected to continue.
Looking Ahead
Next week will be pivotal for several major central banks, including the Royal Bank of Australia, Bank of Japan, and the FOMC. Key economic data releases, particularly from the US and Canada, will also be crucial in shaping market expectations.
Traders should remain vigilant regarding geopolitical developments, especially those related to US-Iran negotiations, as these will likely continue to impact commodity and broader market dynamics.