MARKET WRAPS
European stocks fell Monday as the consequences of U.S. and Israeli strikes on Iran ripple across the world economy.
Europe's leading indexes fell sharply at the opening bell with airline , bank, insurance and consumer-sensitive stocks down while defense stocks rose . Citi said companies making air defense systems will likely attract interest from investors.
The moves follow a surge in Asian energy stocks as crude oil prices increased and gold surged .
Approaching midday the Stoxx 600, FTSE 100, the CAC 40 and the DAX were all in negative territory while energy companies rose.
Since the start of the hostilities, fighting has spread to involve Hezbollah in Lebanon, but Hong Leong Investment Bank said it expects the conflict will be short-lived . The lender estimates increases in oil prices will be temporary before normalizing to the $60/bbl-$70/bbl range.
Nevertheless, European retailers could feel the pinch from this conflict, RBC Capital Markets said, adding that higher oil and energy prices could act as a drag on consumer spending.
Fighting is also expected to add pressure onto Europe's luxury sector, Vontobel said. The sector's shares fell Monday.
"The main challenge at this stage is that both the duration and breadth of the conflict are impossible to predict, which means any attempt to quantify the impact remains highly uncertain."
A prolonged conflict could raise eurozone inflation by one percentage point and weigh on economic growth by a few tenths of a percentage point, according to Commerzbank. It would also threaten oil prices toward $100 per barrel, about 40% higher than in mid-February.
A sustained rise in oil prices would tighten financial conditions and squeeze company margins . It would also rekindle stagflation concerns across economies, Julius Baer said, adding that cyclicals, consumer-facing industries, chemicals and transport companies were most vulnerable to energy cost pressures.
A key question for investors is likely to be on whether the Strait of Hormuz be effectively closed for oil and gas exports for more than a few weeks, according to Berenberg.
On the topic of shipping, container shipping companies made gains and Maersk, Hapag-Lloyd and CMA CGM are among transport companies rerouting vessels around the southern tip of Africa as they avoid the Suez Canal and Strait of Hormuz.
The Middle East conflict could deliver a double blow to Asia through both supply- and demand-side disruptions, given the region's heavy reliance on energy trade as a net oil importer.
Market Insight
Any disruption to LNG flows through the Strait of Hormuz could have a major impact on Asian buyers, Kpler said.
"China, India, South Korea, Japan, Taiwan and Pakistan accounted for roughly 73% of LNG exports from Qatar, Abu Dhabi and Oman in 2025. Pakistan is particularly exposed to any disruption risk, with 99% of its LNG imports from Qatar."
Energy flow disruptions in the Middle East could lead to increased competition between Europe and Asia for LNG supplies, ING said.
Economic Insight
Beyond geopolitical tensions, Spanish, French, German and eurozone services PMI data are due Wednesday.
Eurozone unemployment figures for January are set for Wednesday and retail trade figures for the same month on Thursday. Eurozone inflation data will also come Tuesday and Germany will publish its manufacturing orders for January on Friday.
Final fourth-quarter GDP and employment data from the eurozone are due on Friday.
On Tuesday the U.K. will provide its spring budget update.
U.S. Markets:
Stock futures pointed to a lower open at the start of the week which will see a slew of economic data released including jobs and manufacturing and services activity figures.
Forex:
The euro fell to a five-week low against the dollar and it could fall further as energy prices rose due to the military strikes across the Middle East, ING said.
"Investors have been overweight the euro and European assets on the recovery story this year--a story that will naturally be challenged this week by higher energy prices."
The dollar rose to a five-week high against a basket of currencies amid demand for safe-haven assets.
The Swiss franc rose to its highest level against the euro.
The yen weakened against the dollar and SMBC said high oil prices could put further pressure on the Japanese currency.
Bonds:
Eurozone government bond yields rose as the conflict in the Middle East raised concerns about inflation.
"So far, markets are responding in a relatively orderly fashion to the escalation in the Middle East," Commerzbank said.
Treasury yields mostly rose in Asian trade, with risk aversion contained amid the geopolitical escalation in the Middle East.
The 10-year Treasury yield has been below 4% but it is unlikely to stay that low sustainably, Aptus Capital Advisor said.
"The defensiveness of bonds is unlikely to work as it did from 1981-2020, especially starting from a lower point now. Simply the fact that bonds lack the characteristics of being a hedge to stocks, the market should reprice the long end higher by at minimum 50 basis points."
Eurozone nations are expected to reduce the issuance of government bonds with maturities of 10 years and longer in March, compared to so far this year, LBBW said, adding separately that gross government bond issuance in the eurozone is expected to be between 130 billion euros and 140 billion euros in March
The movement in global government bond yields has been small so far despite the escalation of the U.S. and Israel's conflict with Iran, Danske Bank said.
Energy:
Crude oil prices rose and Wood Mackenzie said prices could hit $100 a barrel if transit flows through the Strait of Hormuz don't resume quickly.
Oil markets could see a short-lived spike similar to the one during last year's 12-day Israel-Iran conflict, when crude briefly carried a roughly $10-$15-a-barrel risk premium, Capital Economics said.
OPEC+'s decision to increase output by a modest 206,000 barrels a day in April reflects the need to safeguard its limited spare capacity , Kpler said.
Metals:
Spot gold prices rose and RHB said Comex gold futures were poised to test resistance at $5,500/oz.
EMEA HEADLINES
Iran Is Shooting at Some of the World's Busiest Airports
Iran has systematically targeted its Arab neighbors' airports since the start of its retaliatory strikes for U.S. and Israeli attacks, hitting commercial hubs as part of a strategy to build pressure to end the war.
With its survival at stake, the Iranian regime is taking aim at the globally connected nerve center of its Gulf neighbors, largely shutting down air travel in a region that depends on it as an economic lifeline. Those countries use their airports for much of their food imports and to fly in their largely expatriate workforces.
By Striking Its Neighbors, Iran Has Deepened the Gulf's Resolve to Fight Back
DUBAI-The Iranian regime, decapitated in the first hours of the U.S.-Israeli campaign that started on Saturday, has responded by striking at least nine countries across the Middle East, unleashing a truly regional war.
The apparent calculation was that, by targeting rich Persian Gulf monarchies that hold sway with the Trump administration, Tehran could force Washington and Israel into a rapid de-escalation.
The Big Bet on European Defense Stocks Is Getting Expensive
Forget AI. The big trade last year was to buy the idea that Europe has finally woken up to the need to spend big to defend itself.
But, after the best year ever for German defense stocks, investors now face the question of whether the trade is already over.
Ukraine Depended on Western Weaponry. Now That Script Has Flipped.
MUNICH-When the full-scale Russian invasion began, Western defense manufacturers rushed their modern weaponry into Ukraine, helping Kyiv drive back a much more powerful foe.
Four years on, the flow of battle-tested technology is going the other way.
Khamenei's Death Leaves Iran at Historic Turning Point-Without a Clear Successor
The death of Supreme Leader Ayatollah Ali Khamenei leaves Iran at a historic precipice, forcing it to navigate a difficult transition while weathering a massive military campaign from the U.S. and Israel and simmering unrest in the streets.
Through his 37 years in power, Khamenei more than any other single individual shaped the course of the modern Middle East. As the spiritual and political leader of the Middle East's second-largest nation, he projected power through Shiite militias across the region and survived waves of unrest as autocrats around him were toppled.
GLOBAL NEWS
Oil's Worst Case Scenario Is Here. $100 Crude Could Be Coming.
The war in Iran has led to a worst-case scenario for the oil market: the closure of the Strait of Hormuz, through which 20% of the world's oil flows. A prolonged closure could send international oil prices $100 a barrel, a level they haven't hit since 2022.
The Strait, the most important oil-shipping route from the Middle East to Asia and elsewhere, doesn't appear to be formally closed, but insurers have vowed to cancel policies for tankers traversing it. On Saturday, about 4 million barrels of crude made it through-virtually all of Iranian origin, according to JP Morgan strategist Natasha Kaneva. Normally, about 16 million barrels of crude move through the Strait a day, she writes.
Asian Manufacturers Show Resilience as Demand Rises
A gauge of manufacturing activity signaled continued improvement in some of Asia's top exporting economies midway through the first quarter, as demand for the region's goods defied a volatile global environment.
Purchasing managers index data from S&P Global showed a rise in factory activity in economies including Japan and Taiwan as Asia's exports continue to show resilience.
China's 'Two Sessions' to Shed Light on What Lies Ahead for Economy
One of the year's biggest policy events for China watchers is set to start this week, bringing the top brass together to chart the course for the world's second-largest economy.
At the National People's Congress, roughly 3,000 representatives are expected to approve a five-year economic blueprint that will prioritize turning China into a technological superpower that can rival the U.S.
How U.S. Businesses Are Shaving Billions Off Their Tariff Bills
A well-honed tariff-reduction playbook is giving businesses-and the lawyers who advise them-some confidence that they can deal with President Trump's latest tariffs.
One of the most effective plays is reducing the reported value of goods companies bring into the U.S. Importers may not be able to escape a tariff, such as the global 15% rate Trump announced after the recent Supreme Court ruling, but they can pay it on a smaller amount.
The Iranian Force Built to Defend the Regime Now Faces the Ultimate Test
U.S. and Israeli airstrikes killed many of Iran's top leaders in just hours, including Supreme Leader Ayatollah Ali Khamenei. But the huge security apparatus they oversaw to ensure the regime's survival is still intact.
The Islamic Revolutionary Guard Corps is best known as an armed force of nearly 200,000 paramilitary members. It also functions as a parallel government and economic force whose main mission is defending the Islamic regime formed after the 1979 Revolution and spreading its influence throughout the Middle East.
U.S. Races to Accomplish Iran Mission Before Munitions Run Out
When the U.S. military's top general laid out the risks to President Trump of launching a major and extended attack on Iran, one of the issues he flagged was America's stockpile of munitions.
Now that is being put to the test, as the U.S. races to destroy Iran's missile and drone force before it runs out of interceptors to fend off Tehran's retaliation, current and former officials and analysts say.
Write to pierre.bertrand@wsj.com
Write to us at newsletters@dowjones.com
We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to https://newsplus.wsj.com/subscriptions.
This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
March 02, 2026 05:06 ET (10:06 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
