Latest News

Take Five: the fog of war

Next week, the U.S.-Israeli conflict over Iran will continue to dominate global financial markets.

The war is not only driving up oil, gas, and shipping prices but also other important indicators, such as the U.S. Inflation releases on Wednesday and Friday, which were compiled before hostilities began, are at risk of being "overshadowed".

In Latin America, Colombia will hold congressional elections and its presidential primaries ahead of the final presidential vote on May 31.

Here is all the information you need about this week's?markets from?Amanda Cooper in London and Alun in New York. Gregor Stuart Hunter, in Singapore, will provide you with?Lewis Krauskopf and Rodrigo Campos.

The fog of war

The Middle East conflict is a reminder of just how quickly energy prices can rise. Since Israel and the U.S. attacked Iran on February 28, crude oil has gained almost 20% while European natural gases are up nearly 60%.

Investors have been rushing to cover losses in other areas as they try to recover from the recent collapse of some of the biggest trades. The dollar has gained against nearly every major currency despite losing 10% of its value by 2025. Gold has temporarily lost its role as a safe-haven and has been used to cover losses elsewhere.

Investors expect that the conflict will last for only a couple of weeks, before a resolution is reached. But the potential for a surprise is huge.

2/ PRICES PRIOR TO WAR

The U.S. will release two sets of inflation data in the coming week, just as the Middle East turmoil casts new doubts on the Federal Reserve’s plans to cut interest rates and the overall resilience of the economy.

These figures will not capture the recent spikes in oil and gas prices, but they should still be interesting to read.

A poll shows that the Consumer Price Index for February is expected to rise 0.2% from January. This follows a moderated rent inflation rate and, wait for it, cheaper gasoline, which helped to produce a modest reading in January.

The second marker is the January personal consumption expenditures price index. Together, the reports will provide a snapshot of current inflation trends, ahead of the Fed meeting in late March.

Not a good place to be.

Next week, France will host a meeting of G7 finance ministers to discuss the Middle East Crisis.

As concerns grow that rising oil and gas costs could make major central banks more hawkish, the markets will be closely watching.

Investors now believe that a rate increase by the end of the year is more likely than ever before. This is a dramatic change from the last week when a further cut was still possible. Christine Lagarde is no longer in a "good place".

Germany's two-year rate sensitive yield is set to have its largest weekly increase in a whole year. This is due to the rapid repricing of the market. For UK gilts it's the biggest since late 2024. Traders are now betting that the Bank of England will not be able cut rates this month.

On Friday, there will be a slew of European sovereign ratings reviews. This includes Germany, Italy, and Spain. Turkey's central banks rate decision will be a cliffhanger on Thursday, given the problems next door.

CHINA KEEPS BUSY

Next week, China will provide new clues about the state of its economy.

Monday will bring the February inflation data, and Tuesday the trade figures for the first two months. The timing of lending data is also fluid.

These numbers will help put decisions made at the "Two Meetings", the annual session of the National People's Congress, the national legislature and the top political advisory body, the Chinese People's Political Consultative Conference in context.

The event that began on Thursday, and will run until the 12th of March, has already generated its biggest headline?with an announcement of a growth target between 4.5-5%. Next week's figures will reveal the difficulties in achieving it.

5/ PRE-ELECTION POSTURING

This weekend, Colombia will hold congressional elections. The vote is seen as a preliminary to the presidential race that takes place at the end May. It coincides with the inter-party primaries for presidential candidates that will clarify who has momentum.

The polls suggest that the presidential race has shifted, with Ivan Cepeda, a left-wing candidate from the ruling Pacto Historico, gaining more ground. Meanwhile, Abelardo de la Espriella, a right-wing outsider, could gain in a run-off second round as rivals drop away.

Investors are interested in how the results will affect the next president's capacity to govern.

Markets would remain stable if May's results were divided. A stronger opposition could lift Colombia's bonds and support the peso, while gains by the left may send them in the opposite direction if fiscal concerns return.

(source: Reuters)