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Market Insight 12-03-2026

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  • Market Insight 12-03-2026

Market Update: Thursday, 12 March 2026

The global markets remain on edge as the conflict in the Middle East reaches its most intense phase since the start of hostilities. Volatility is high as traders weigh the dual impact of an escalating regional war against coordinated international efforts to stabilise energy prices.

Geopolitical Crisis and Energy Markets

The situation in the Middle East has worsened significantly, with fresh disruptions to maritime logistics and a surge in military operations.

  • Intensified Operations: Tehran has commenced its most intense military operation since the beginning of the war, significantly increasing efforts to block the Strait of Hormuz. In response to the escalating threat, Oman has evacuated all vessels from its major oil export terminal at Mina Al Fahal as a precaution.
  • Energy Stabilisation Efforts: To counter soaring prices, the International Energy Agency (IEA) has agreed to release approximately 400 million barrels of oil from strategic reserves. While this has helped cool some of the immediate panic, the structural threat to supply remains a primary concern for investors.
  • Inflationary Warnings: Senior officials at the Office for Budget Responsibility (OBR) have warned that these energy shocks could push consumer prices at least 1% higher by the end of the year if the current price levels persist.

Currency Market Overview

The US Dollar (USD) continues to find support from its status as a safe haven, though its momentum is being balanced by shifting inflation expectations across major economies.

  • GBP/EUR: Sterling has strengthened against the Euro for a fifth consecutive day, trading near 1.1540. This move is driven by the divergence in central bank expectations; while the Eurozone faces severe growth risks, fading bets for a Bank of England rate cut are providing a floor for the Pound.
  • GBP/USD: The pair is trading with a firmer tone around 1.3415. The Pound is benefiting from the recalibration of UK interest rate expectations, as traders move away from the idea of an imminent cut in light of oil-driven inflation risks.
  • EUR/USD: The Euro remains under sustained pressure, trading near 1.1560. The currency is being hit by a combination of weak growth outlooks for the bloc and a reassessment of ECB policy in the face of the ongoing energy crisis.
  • AUD/USD: The pair is hovering around 0.7140. The Australian Dollar remains sensitive to global risk appetite and commodity price fluctuations, with the broader “risk-off” sentiment limiting any significant recovery.
  • USD/CAD: The pair is trading near 1.3590. The Canadian Dollar continues to see relative strength due to its link to energy exports, though the IEA’s reserve release has checked some of the recent upside in oil-linked gains.
  • USD/CHF: The pair has gathered strength to around 0.7800. While the Swiss Franc remains a preferred safe haven during geopolitical turmoil, the US Dollar is currently outperforming as soaring oil prices suggest the Federal Reserve may need to remain hawkish for longer.

Central Banks and Economic Outlook

  • Bank of England (BoE): Markets have dramatically repriced the outlook for next week’s policy decision. The probability of a rate cut has fallen from 80% prior to the conflict to almost zero, as policymakers shift focus toward containing energy-driven inflation.
  • European Central Bank (ECB): Traders are pricing in a higher probability of an ECB rate hike despite clear risks to economic growth. The bank is caught between a stagnant economy and the need to address the inflationary shock of the war.
  • US Federal Reserve: The Fed is widely expected to hold rates steady at its meeting on 17-18 March. Hawkish sentiment is growing, with many economists now predicting that the first rate cut will be delayed until at least June or July 2026.

Final Summary

The market narrative is currently dominated by the struggle between escalating geopolitical violence and the international response to the resulting energy crisis. While the IEA’s massive reserve release has offered a temporary reprieve for oil prices, the “most intense” military operations to date by Iran suggest that the threat to global supply chains is far from over. This environment has created a sharp divide in the currency markets: the US Dollar and Sterling are finding support from hawkish shifts in central bank expectations, while the Euro remains the primary laggard due to its acute vulnerability to regional instability. All eyes now turn to Friday’s US PCE inflation and GDP reports for further clues on the global economic trajectory.