【International Finance Brief】Hormuz Strait Risks Reignite...Financial Markets Rise "Amid Unease" as Oil Prices Surge

Middle Eastern geopolitical risks are once again highlighted, with oil prices rising while financial markets show a “rising amid instability” trend.

On the 18th, according to international financial centers, despite concerns over the March FOMC and oil price fluctuations, the U.S. still experienced a complex pattern of rising stock prices and falling interest rates. Especially, the S&P 500 climbed due to strong performance in large tech stocks and declining Treasury yields. European stock markets also rose in line with expectations of easing tensions over the Strait of Hormuz.

The most critical variable is Middle Eastern risk. President Trump strongly criticized NATO over the protection of the Strait of Hormuz, while Iran intensified attacks on and retaliations against energy facilities in neighboring countries, escalating tensions. In fact, drone attacks have already occurred at major energy hubs in the UAE, Oman, and Iraq, turning supply concerns into reality.

International oil prices responded immediately. WTI crude rose 2.9% to $96.2, reflecting a geopolitical risk premium. Major global institutions also raised their oil price forecasts, suggesting that upward pressure on energy prices may persist.

Within financial markets, risk appetite and caution coexist. The US dollar showed weakness, with the 10-year Treasury yield dropping to 4.20%, indicating some funds flowing into safe assets. Meanwhile, the VIX index declined, signaling a short-term easing of volatility.

On the macroeconomic front, signs of recovery appeared in the US real estate market. The pending home sales index for February increased by 1.8% month-over-month, but the outlook remains uncertain due to potential further rises in mortgage rates.

In contrast, Europe shows increasingly obvious signs of economic slowdown. Germany’s ZEW economic expectations index plummeted to –8.5, indicating weakened growth prospects amid inflation pressures. The Bank of Japan plans to maintain its policy tone of moderate wage and price increases.

At the market structure level, alternative risks are also becoming more prominent. The expansion of large corporate bond issuance driven by AI investments has heightened concerns about bond market supply and demand imbalances, while increased repurchase pressures in the private lending market are seen as potential risks.

Overall, the current global financial markets are in a complex situation driven by geopolitical risks, rising energy prices, and monetary policy uncertainties. Although stock prices remain on an upward trend, some assessments suggest that the foundation is becoming increasingly fragile.