Global markets are set to close the first week of March 2026 under the growing influence of geopolitical risk stemming from escalating military engagements in the Middle East under “Operation Epic Fury.” One of the most visible market responses has been the sharp appreciation of the US Dollar. The US Dollar Index climbed to a three-month high, approaching the 99.50 range, driven by both conventional safe-haven flows and also repricing of global monetary expectations. The effective disruption of the Strait of Hormuz has triggered a sharp energy shock, with WTI crude surging more than 20% during the week. This spike in oil prices has reinforced expectations of persistent cost-push inflation, forcing markets to reconsider the trajectory of US monetary policy. As a result, expectations for Federal Reserve rate cuts have been pushed back from mid-summer toward September, strengthening the dollar through the prospect of higher interest rates for longer.
Gold, traditionally a primary beneficiary of geopolitical stress, has displayed unusually volatile behavior in this environment. After an initial surge driven by risk aversion, the metal retraced gains and stabilized around $5,100 per ounce. The decline reflects a broader tug-of-war between its safe-haven status and the rising opportunity cost of holding non-yielding assets. As US Treasury yields climbed, with the 10-year approaching 4.15%, the strengthening dollar and rising real yields began to erode gold’s attractiveness. In addition, heightened volatility across commodities and equities has forced many institutional investors to liquidate portions of their gold holdings to meet margin requirements elsewhere, reinforcing the downward pressure despite persistent geopolitical uncertainty.
Meanwhile, global equity indices is largely ending the week in a soft tone, reflecting mounting fears of a stagflationary environment. Rising energy and fertilizer prices are increasing input costs for corporations, threatening profit margins and weakening consumer purchasing power. At the same time, the upward shift in yields has placed additional pressure on growth-oriented sectors, particularly technology stocks that are sensitive to higher discount rates. Despite the broad market decline, defensive sectors and aerospace-defense companies have shown relative resilience, supported by expectations of increased government military spending. Until energy supply stability returns to the Strait of Hormuz, markets are likely to remain dominated by inflation concerns and monetary policy uncertainty rather than traditional safe-haven dynamics.