A wave of central bank decisions saw the Federal Reserve, European Central Bank (ECB), Bank of England (BoE), Bank of Japan (BoJ), Swiss National Bank (SNB), and Bank of Canada (BoC) all hold interest rates steady this week, with most signaling a hawkish tilt due to surging energy prices and escalating geopolitical risks from the ongoing US-Israel-Iran conflict [1][2][3][4]. The Fed kept its benchmark rate in the 3.50%-3.75% range in an 11-1 vote, with Stephen Miran dissenting in favor of a 25-basis-point cut [2][4]. The updated Summary of Economic Projections (SEP) showed policymakers expect only one rate cut in 2026 and another in 2027, while seven FOMC members see no cuts this year; core PCE inflation for 2026 was revised up from 2.5% to 2.7% [2][4]. Chair Jerome Powell stated that higher energy prices would likely lead to inflation, delaying rate cuts, and described US growth as 'solid' despite rejecting the term 'stagflation' [1][4].
The US Dollar Index (DXY) dropped below 100, trading near 99.40–99.52, as the Greenback weakened against most major currencies following the Fed's hawkish hold [1][2]. EUR/USD and GBP/USD surged to one-week highs, while USD/JPY fell to an eight-day low after the BoJ also held rates [1]. US Treasury yields spiked, with the 10-year note rising to 4.289% [2].
Commodity markets saw sharp moves: Gold (XAU/USD) plunged over 4.5% to $4,588, its lowest since February, as rising yields and delayed Fed cut expectations undermined bullion despite safe-haven demand [2]. Silver (XAG/USD) fell about 5% to $71.50, hitting its lowest since February 6, with technicals signaling persistent bearish momentum and downside risks remaining intact [3]. Both metals were pressured by the 'higher-for-longer' rate outlook and surging oil prices [2][3].
Equity markets reacted negatively: the Dow Jones Industrial Average (DJIA) fell below 46,000, the S&P 500 dropped around 0.8% (slipping below its 200-day moving average for the first time since May), and the Nasdaq Composite lost roughly 1% [4]. The Russell 2000 approached correction territory, down nearly 10% from its 52-week high [4]. The selloff was attributed to stagflation fears as Brent crude surged past $118 per barrel before settling near $112, and West Texas Intermediate neared $97, following Iranian strikes on Qatari and Saudi energy infrastructure that disrupted global supply chains and spiked European natural gas prices by as much as 35% [4].
Geopolitical developments further fueled demand for FX safe havens like the Japanese Yen (JPY) and Swiss Franc (CHF) [2]. Iran's attacks on Qatari gas facilities led QatarEnergy to warn of possible force majeure on LNG contracts for up to five years, affecting supplies to Italy, Belgium, Korea, and China [2]. US Defense Secretary Pete Hegseth announced the Pentagon would seek up to $200 billion in supplemental war funding and warned of the 'largest strike package yet' against Iran [4].
Micron (MU) shares fell around 7% despite record quarterly results, as increased capital expenditure guidance for fiscal 2026 spooked investors. The company reported EPS of $12.20 (vs. $8.73 consensus) on $23.86 billion in revenue, a 196% year-over-year increase driven by demand for high-bandwidth memory used in Nvidia (NVDA) AI accelerators [4].
CONCLUSION
Markets were rattled by a combination of hawkish central bank stances, surging energy prices, and escalating geopolitical tensions. The prospect of delayed rate cuts, higher inflation, and supply shocks triggered sharp declines in equities and precious metals, while safe-haven currencies and yields surged. Investors remain cautious as the outlook for monetary easing dims and geopolitical risks persist.