MARKET INSIGHTS

Weekly market commentary

Mar 16, 2026

Pressure to shape Mideast conflict

Weekly video_20260316
Ehsan Khoman
Economist, BlackRock Investment Institute

Opening frame: What’s driving markets? Market take

Camera frame

The key issue is whether the sharp drop in shipping through the Strait of Hormuz lasts long enough to induce stagflation. We see a feedback loop between markets and geopolitics: the conflict boosts oil and gas prices, but the political and economic strain from higher prices may limit how long the conflict lasts.

Title slide: Pressures to shape Mideast conflict

1: A historic supply disruption

Shipping traffic through the Strait of Hormuz has plummeted due to attacks on energy transport and facilities in the Persian Gulf. Oil and gas prices have surged.

This goes beyond spiking prices. It’s a supply shock to energy flows with spillover risks to the broader economy.

2: Regional vulnerabilities

That said, the impact varies by region. Equity markets in Europe and Asia have fared worse than the U.S. since the conflict began. They import much of their energy from the Gulf, while the U.S. has strong domestic supply – helping insulate it from the shock.

3: Markets and geopolitics

We see a feedback loop at work: the conflict is driving prices, but prices could shape the conflict – and potentially lead to de-escalation. Limiting shipping gives Iran leverage, but it also hurts them economically. Higher U.S. gas prices, meanwhile, may heighten political sensitivity.

We think risk assets could recover over a six-to-12-month horizon if a clear end to the conflict emerges. In the meantime, we favor U.S. assets.

Outro: Here’s our Market take

A protracted conflict could tighten financial conditions and raise stagflation risks. Yet the same pressures driving the energy shock could also catalyze de-escalation.

Closing frame: Read details: blackrock.com/weekly-commentary

A potentially sustained shock

Markets are grappling with the potential for a sustained shock to energy flows – but we think rising economic and political pressures could limit the disruption.

Market backdrop

Brent crude oil settled around $100 after historic volatility. Major government bond yields jumped, while stocks slumped with the U.S. outperforming.

Week ahead

Central banks, including the Fed, are expected to hold rates steady. We look to updated economic projections for any signs of their view on the energy shock.

The Mideast conflict has effectively closed the Strait of Hormuz – a world energy chokepoint – and is rippling out across markets and supply chains. We think this is a visible global macro shock no matter the endgame, with higher inflation and bond yields. Yet if the closure drags on, we think a feedback loop could emerge: the conflict drives prices, but the political and economic fallout could limit the conflict. We prefer U.S. stocks and see classic portfolio diversifiers as challenged.

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Shipping stoppage
Daily Strait of Hormuz voyages, Feb.-March 2026

The chart shows the decline in shipping activity through the Strait of Hormuz as the Middle East conflict continues.

Source: BlackRock Investment Institute with data from IMF PortWatch, Lloyd's List, Seasearcher and BlackRock Hormuz Strait Dashboard, March 2026. Notes: General trade includes containers, general cargo and roll-on/roll-off ships. Shadow voyages are estimates inferred from ships sending at least one AIS ping inside the Persian Gulf since the outbreak of the conflict on Feb. 28.

The flow of energy and goods through the Strait of Hormuz – the conduit for a fifth of the world’s oil and liquefied natural gas (LNG) – is key for how this feedback loop plays out. A record release of about 400 million reserve barrels by the International Energy Agency gave limited relief to oil prices. Yet the conflict drives more than just energy prices. The supply chain shock ups production costs, hurting growth. It also exacerbates pre-existing inflationary pressures and pushes up yields – making it harder for investors and central banks to ignore those pressures. The longer supply is disrupted, the greater the global macro impact. That’s why we monitor directly for any signs of shipping activity. See the chart. A tool from our Fundamental Equities team tracks observable and “shadow” traffic – ships with their transponders off. As of Sunday, weekly voyages are around 7% of their previous 12-month average.

We see the impacts of conflict-driven energy price spikes playing out very differently across different regions. A key difference in oil and LNG makes North Asia particularly vulnerable, we think. Oil can be re-routed, but LNG is tied to regional infrastructure – and North Asia relies on strait imports for both. Our analysis shows that Japan, for example, gets about 70-90% of its oil and about 10-15% of its LNG via the strait. Some Asian countries are stockpiling – a move that shrinks supply and may amplify volatility. Europe is also exposed, with the supply shock from a months-long strait closure potentially twice that in the U.S. Only about 4-8% of the U.S.’s oil comes from the strait – far less than major economies like France, Italy and Germany (roughly 20-45%). We see this reflected in performance: equities in Europe and Asia have fallen more than the U.S.

Energy infrastructure in focus

But here the other part of the feedback loop kicks in: knock-on effects like this create economic and political pressures for de-escalation. We saw this play out in one day last Monday. Oil experienced its sharpest intraday swing on record after U.S. President Donald Trump said the war could end “very soon.” Brent crude oil has since surged back around $100 as Iran’s strikes on energy shipping and facilities intensified. Limiting strait shipping gives Iran leverage but hurts them economically – an incentive to end the conflict. Growing frustration with higher gas prices in the U.S. could also act as an incentive. If current crude oil prices persist for six months, we see a notable drag on global growth and boost to inflation.

There are few places to hide from this near-term supply shock in our view. Government bonds and gold are not providing ballast as equities fall. That’s because – as we’ve long said – investors are demanding more compensation for the risk of holding long-term bonds given persistent inflation and high debt levels. This latest supply shock only intensifies that dynamic, flipping the recent market narrative on disinflation and putting more upward pressure on bond yields. Yet over a six to 12-month horizon, we think risk assets could recover if an endgame emerges. We still prefer U.S. equities on the AI theme. We also like emerging market hard currency debt, where indexes lean towards commodity exporters like Brazil.

Our bottom line

What matters is the duration of the conflict – and the knock-on impact to supply chains. Our tactical views hinge on the strait reopening in a few weeks due to economic and political pressures, even if we see a near-term deterioration.

Market backdrop

Brent crude ended the week above $100 a barrel after a historically large intraday swing last Monday on hopes of a near-term resolution to the Mideast conflict. Markets expect prices to decline by year-end, indicating optimism for a nearer-term resolution. European natural gas prices are up about 60% since the day before U.S.-Israeli strikes on Iran. The S&P 500 fell roughly 2% on the week, with government bonds offering little refuge: 10-year U.S. Treasury yields rose to 4.28%.

We eye how major central banks respond to the energy shock from the Mideast conflict – especially given the sharp shift in pricing to potential rate hikes from rate cuts apart from the Federal Reserve. The consensus expects all major central banks including the Fed to keep rates on hold this week. We will watch updated economic projections on how they are viewing the energy shock on policy.

Week ahead

he chart shows that gold is the best performing asset year-to-date among a selected group of assets, while bitcoin is the worst.

Past performance is not a reliable indicator of current or future results. Indexes are unmanaged and do not account for fees. It is not possible to invest directly in an index.
Sources: BlackRock Investment Institute, with data from LSEG Datastream as of March 13, 2026. Notes: The two ends of the bars show the lowest and highest returns at any point year to date, and the dots represent current year-to-date returns. Emerging market (EM), high yield and global corporate investment grade (IG) returns are denominated in U.S. dollars, and the rest in local currencies. Indexes or prices used are: spot Brent crude, ICE U.S. Dollar Index (DXY), spot gold, spot bitcoin, MSCI Emerging Markets Index, MSCI Europe Index, LSEG Datastream 10-year benchmark government bond index (U.S., Germany and Italy), Bloomberg Global High Yield Index, J.P. Morgan EMBI Index, Bloomberg Global Corporate Index and MSCI USA Index.

March 16

U.S. Empire State survey

March 18

Federal Reserve policy decision; Bank of Japan policy decision

March 19

Bank of England policy decision; ECB policy decision

March 20

Euro area trade balance

Read our past weekly market commentaries here.

Big calls

Our highest conviction views on six- to 12-month (tactical) and over five-year (strategic) horizons, March 2026

  Reasons
Tactical  
Still favor AI We see the AI theme supported by strong earnings, resilient profit margins and healthy balance sheets at large listed tech companies. Continued Fed easing into 2026 and reduced policy uncertainty underpin our overweight to U.S. equities.
Select international exposures We like Japanese equities on strong nominal growth and corporate governance reforms. We stay selective in European equities, favoring financials, utilities and healthcare. In fixed income, we prefer EM due to improved economic resilience and disciplined fiscal and monetary policy.
Evolving diversifiers We suggest looking for a “plan B” portfolio hedge as long-dated U.S. Treasuries no longer provide portfolio ballast – and to mind potential sentiment shifts. We like gold as a tactical play with idiosyncratic drivers but don’t see it as a long-term portfolio hedge.
Strategic  
Portfolio construction We favor a scenario-based approach as AI winners and losers emerge. We lean on private markets and hedge funds for idiosyncratic return and to anchor portfolios in mega forces.
Infrastructure equity and private credit We find infrastructure equity valuations attractive and mega forces underpinning structural demand. We still like private credit but see dispersion ahead – highlighting the importance of manager selection.
Beyond market-cap benchmarks We get granular in public markets. We favor DM government bonds outside the U.S. Within equities, we favor EM over DM yet get selective in both. In EM, we like India which sits at the intersection of mega forces. In DM, we like Japan as mild inflation and corporate reforms brighten the outlook.

Note: Views are from a U.S. dollar perspective, March 2026. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any particular funds, strategy or security.

Tactical granular views

Six- to 12-month tactical views on selected assets vs. broad global asset classes by level of conviction, March 2026

Legend Granular

We have lengthened our tactical investment horizon back to six to 12 months. The table below reflects this and, importantly, leaves aside the opportunity for alpha, or the potential to generate above-benchmark returns – especially at a time of heightened volatility.

Asset   Tactical view Commentary
Equities      
United States   United States: tactical Overweight +1 We are overweight. Strong corporate earnings, driven in part by the AI theme, are supported by a favorable macro backdrop: continued Federal Reserve easing, broad economic optimism and less policy uncertainty, particularly on the trade front.
Europe   Europe: tactical Neutral 0 We are neutral. We would need to see more business-friendly policy and deeper capital markets for recent outperformance to continue and to justify a broad overweight. We stay selective, favoring financials, utilities and healthcare.
UK   UK: tactical Neutral We are neutral. Valuations remain attractive relative to the U.S., but we see few near-term catalysts to trigger a shift.
Japan   Japan: tactical Overweight +1 We are overweight. Strong nominal GDP, healthy corporate capex and governance reforms – such as the decline of cross-shareholdings – all support equities.
Emerging markets (EM)   Emerging markets: tactical Neutral We are neutral. Economic resilience has improved, yet selectivity is key. We see opportunities across EM linked to AI and the energy transition and see the rewiring of supply chains benefiting countries like Mexico, Brazil and Vietnam.
China   China: tactical Neutral We are neutral. Trade relations with the U.S. have steadied, but property stress and an aging population still constrain the macro outlook. Relatively resilient activity limits near-term policy urgency. We like sectors like AI, automation and power generation. We still favor China tech within our neutral view.
Fixed income      
Short U.S. Treasuries   Short U.S. Treasuries: tactical Neutral We are neutral. We see other assets offering more compelling returns as short-end yields have fallen alongside the U.S. policy rate.
Long U.S. Treasuries   Long U.S. Treasuries: tactical Neutral We are underweight. We see high debt servicing costs and price-sensitive domestic buyers pushing up on term premium. Yet we see risks to this view: lower inflation and better tax revenues could push down yields near term.
Global inflation-linked bonds   Global inflation-linked bonds: tactical Neutral We are neutral. We think inflation will settle above pre-pandemic levels, but markets may not price this in the near-term as growth cools.
Euro area government bonds   Euro area government bonds: tactical Neutral We are neutral. We agree with market forecasts of ECB policy and think current prices largely reflect increased German bond issuance to finance its fiscal stimulus package. We prefer government bonds outside Germany.
UK gilts   UK gilts: tactical Neutral We are neutral. The recent budget aims to shore up market confidence through fiscal consolidation. But deferred borrowing cuts could bring back gilt market volatility.
Japanese government bonds   Japanese government bonds: tactical Underweight -1 We are underweight. Rate hikes, higher global term premium and heavy bond issuance will likely drive yields up further.
China government bonds   China government bonds: tactical Neutral We are neutral. China bonds offer stability and diversification but developed market yields are higher and investor sentiment shifting towards equities limits upside.
U.S. agency MBS   U.S. agency MBS: tactical Overweight +1 We are overweight. Agency MBS offer higher income than Treasuries with similar risk, and may offer more diversification amid fiscal and inflationary pressures.
Short-term IG credit   Global investment grade: tacticalOverweight +1 We are neutral. Corporate strength means spreads are low, but they could widen if issuance increases and investors rotate into U.S. Treasuries as the Fed cuts.
Long-term IG credit   Global investment grade: tactical Underweight -1 We are underweight. We prefer short-term bonds less exposed to interest rate risk over long-term bonds.
Global high yield   Global high yield: tactical Neutral We are neutral. High yield offers more attractive carry in an environment where growth is holding up – but we think dispersion between higher and weaker issuers will increase.
Asia credit   Asia credit: tactical Neutral We are neutral. Overall yields are attractive and fundamentals are solid, but spreads are tight.
Emerging hard currency   Emerging market-hard currency: tactical Underweight We are overweight. A weaker U.S. dollar, lower U.S. rates and effective EM fiscal and monetary policy have improved economic resilience. We prefer high yield bonds.
Emerging local currency   Emerging market-local currency: tactical Neutral We are neutral. A weaker U.S. dollar has boosted local currency EM debt, but it’s unclear if this weakening will persist.

Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Note: Views are from a U.S. dollar perspective. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast or guarantee of future results. This information should not be relied upon as investment advice regarding any particular fund, strategy or security.

Euro-denominated tactical granular views

Six to 12-month tactical views on selected assets vs. broad global asset classes by level of conviction, March 2026

Legend Granular

We have lengthened our tactical investment horizon back to six to 12 months. The table below reflects this and, importantly, leaves aside the opportunity for alpha, or the potential to generate above-benchmark returns – especially at a time of heightened volatility.

Asset Tactical view Commentary
Equities    
 Europe ex UK Europe ex UK: tactical Neutral We are neutral. We would need to see more business-friendly policy and deeper capital markets for recent outperformance to continue and to justify a broad overweight. We stay selective, favoring financials, utilities and healthcare.
Germany Germany: tactical Neutral We are neutral. Increased spending on defense and infrastructure could boost the corporate sector. But valuations rose significantly in 2025 and 2026 earnings revisions for other countries are outpacing Germany.
France France: tactical Neutral We are neutral. Political uncertainty could continue to drag corporate earnings behind peer markets. Yet some major French firms are shielded from domestic weakness, as foreign activity accounts for most of their revenues and operations.
Italy Italy: tactical Neutral We are neutral. Valuations are supportive relative to peers. Yet we think the growth and earnings outperformance that characterized 2022-2023 is unlikely to persist as fiscal consolidation continues and the impact of prior stimulus peters out.
Spain Spain: tactical owerweight +1 We are overweight. Valuations and earnings growth are supportive relative to peers. Financials, utilities and infrastructure stocks stand to gain from a strong economic backdrop and advancements in AI. High exposure to fast-growing areas like emerging markets is also supportive.
Netherlands Netherlands: tactical neutral We are neutral. Technology and semiconductors feature heavily in the Dutch stock market, but that’s offset by other sectors seeing less favorable valuations and a weaker earnings outlook than European peers.
Switzerland Switzerland: tactical Neutral We are neutral. Valuations have improved, but the earnings outlook is weaker than other European markets. If global risk appetite stays strong, the index’s tilt to stable, less volatile sectors may weigh on performance.
UK UK: tactical neutral We are neutral. Valuations remain attractive relative to the U.S., but we see few near-term catalysts to trigger a shift.
     
Fixed income    
Euro area government bonds Euro area government bonds: tactical Neutral We are neutral. We agree with market forecasts of ECB policy and think current prices largely reflect increased German bond issuance to finance its fiscal stimulus package. We prefer government bonds outside Germany.
German bunds German bunds tactical Underweight -1 We are neutral. Markets have largely priced in fiscal stimulus and bond issuance, and expectations for policy rates align with our view.
French OATs French OATss: tactical Underweight -1 We are neutral. Political uncertainty, high budget deficits and slow structural reforms could stoke volatility, but current spreads incorporate these risks and we don’t expect a worsening from here.
Italian BTPs Italian BTPss: tactical Neutral We are neutral. Demand from Italian households is strong at current yield levels. Spreads tightened in line with its sovereign credit upgrade, but a persistently high debt-to-GDP levels means they likely won’t tighten further.
UK gilts UK gilts: tactical neutral We are neutral. The recent budget aims to shore up market confidence through fiscal consolidation. But deferred borrowing cuts could bring back gilt market volatility.
Swiss government bonds Swiss government bonds: tactical tactical Neutral We are neutral. We don’t think the Swiss National Bank will slash policy rates to below zero, as markets expect.
European inflation-protected securities European inflation-protected securities: tactical Neutral We are neutral. Our medium-term inflation expectations align with those implied in current market pricing.
European investment grade European investment grade: tactical Neutral We are neutral. We favor short- to medium-term debt and Europe over the U.S. An intense re-leveraging cycle to support the AI buildout could put upward pressure on U.S. spreads, making Europe relatively more attractive.
European high yield European high yield: tactical owerweight +1 We are overweight. Spreads hover near historic lows, but credit losses have been limited in this cycle and better economic growth in 2026 could reduce them further.

Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Note: Views are from a euro perspective, March 2026. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast or guarantee of future results. This information should not be relied upon as investment advice regarding any particular fund, strategy or security.

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Meet the authors
Jean Boivin

Jean Boivin

Head – BlackRock Investment Institute
Wei Li

Wei Li

Global Chief Investment Strategist – BlackRock Investment Institute
Paolo Puggioni

Paolo Puggioni

Head — Fundamental Equities Data Analytics, BlackRock
Ehsan Khoman

Ehsan Khoman

Economist — BlackRock Investment Institute