Middle East tensions combined with Fed rate hike expectations have led to a four-week decline in US stocks, with global bond markets experiencing a "bloodbath," and gold posting its largest single-week drop in 43 years.

The Middle East situation has entered its 21st day without signs of easing, while market bets on Fed rate hikes have suddenly intensified. U.S. stocks declined for the fourth consecutive week, marking the longest weekly decline in a year. The bond market experienced a heavy sell-off, and gold prices this week saw their largest drop since 1983. Brent crude oil rebounded to around $110, with Dubai crude futures soaring 16.48%.

Wall Street Insights reported that after hours, CCTV News quoted Trump on his social media platform “Real Social” saying that as they consider gradually downgrading major military operations against the Iranian regime in the Middle East, they are very close to achieving their set goals. U.S. stock ETFs rose by 1% at one point after hours.

On Friday, U.S. stocks accelerated their decline amid multiple negative news, with the Nasdaq dropping 2% intraday, leading the three major indices lower. Since the U.S.-Iran conflict began, the Dow and small-cap indices have fallen nearly 7%.

During Friday’s trading, the Middle East situation continued to escalate. Wall Street Insights mentioned that the U.S. may send thousands more troops to the Middle East. Trump initially said he did not want a ceasefire, then considered gradually downgrading military actions against Iran. Iran threatened to deliver a “destructive blow” to U.S. and Israeli “evil officials.”

According to reports cited by CCTV from U.S. media, the Trump administration is also evaluating the possibility of occupying or blockading Hormuz Island in Iran to pressure Tehran into opening the Strait of Hormuz. This island accounts for about 90% of Iran’s oil exports, but no final decision has been made.

WTI crude recovered from yesterday’s decline, Brent rose back near $110, and Dubai crude futures surged 16.48%. Energy shocks are no longer limited to crude oil; European natural gas prices soared sharply this week, with the European TTF gas contract reaching its highest level since January 2023.

U.S. diesel prices again surpassed $5 per gallon this week. According to Bloomberg’s Nathan Risser, diesel-driven machinery—from farm tractors to cross-state freight trucks—will have to start raising prices to cope with higher fuel costs, ultimately passing through to everyday consumer goods like food.

Goldman Sachs analyst Joseph Briggs estimates that if energy prices remain high, global GDP could be dragged down by about 0.3 percentage points over the next year, with overall inflation rising by 0.5 to 0.6 percentage points, and core inflation rising modestly by 0.1 to 0.2 percentage points.

Another major variable on Friday was the sharp shift in expectations for monetary policy. The market is now pricing in a 50% chance of a Fed rate hike by 2026. Bloomberg reports that bond traders previously betting mainly on rate cuts are now forced to revise strategies, with market sentiment rapidly shifting in a short period.

Gennadiy Goldberg of TD Securities said:

We disagree with the market’s rate hike expectations. The surge in oil prices should lead the Fed to delay rate cuts amid stagflation pressures, but if oil prices rise enough, it could cause a financial conditions shock, forcing the Fed to cut rates instead.

Bloomberg macro strategist Michael Ball stated:

The Iran conflict has caused a sudden repricing of monetary policy expectations, tightening financial conditions, which risks turning the S&P 500 from a controlled pullback into a full correction.

Valuation pressures are weighing on U.S. stocks, with the seven major tech giants all declining, underperforming the remaining 493 components of the S&P 500.

Energy stocks declined that day, but their overall weekly performance remains strong.

Additionally, structural market factors increased intraday volatility.

Friday marked the largest-ever March options expiration, with about $5.7 trillion in options expiring. Coupled with the S&P 500 remaining in a negative gamma state, market makers were forced to chase price movements over a wider range, amplifying daily volatility systemically.

According to SpotGamma, after options expiration, the 6,475 put options position has become a key reference point, about 30 points below the current market price, and is expected to continue providing support or magnetic attraction to the index through the end of March.

From a capital flow perspective, Goldman Sachs trading desk data shows that the combined leverage ratio of U.S. long and short funds has decreased for the second consecutive week, as active risk reduction continues amid ongoing market volatility. U.S. stocks have experienced net selling for five consecutive weeks, driven by both individual stock shorts and macro product shorts.

Interactive Brokers’ Jose Torres said:

Investors initially thought the Iran war would end quickly, but as the confrontation escalates and no end in sight, Wall Street’s pain continues.

Historical data since 1939 shows that over 30 geopolitical shocks, the U.S. stock market typically bottoms around the 15th trading day after the shock, with an average decline slightly over 4%.

Since the conflict began, the S&P 500 has fallen about 5.5%, around the 13th trading day, aligning with the period when “worst news flow” and “maximum market damage” often occur. David Laut of Kerux Financial commented:

The stock market remains in negative territory this year and hit a new low in 2026 this week, suggesting it may not have bottomed yet and is still digesting the ongoing Middle East conflict’s uncertainty.

Expectations for rate hikes have suddenly surged, leading to a “bloodbath” in global bond markets. The 10-year U.S. Treasury yield soared 13.4 basis points, and the 5-year yield broke above 4% for the first time since July. The yield curve has sharply flattened.

UK 10-year government bond yields hit 5% for the first time since 2008, and German 10-year Bund yields reached their highest since 2011.

The U.S. dollar rebounded strongly, rising by up to 0.5%. The yen depreciated nearly 1%, returning close to 159. The Bitcoin dipped slightly by 0.6%, ending the week down about 1%, supported near $70,000, and has outperformed gold for three consecutive weeks.

Gold rebounded briefly but then sharply reversed, with an intraday V-shaped decline of over 5%, breaking below the critical $4,500 support. It plummeted over 10% this week to a seven-week low, marking the largest weekly decline since March 1983.

The trigger for the 1983 gold crash was also an oil crisis: Middle Eastern oil producers, suffering revenue declines due to falling oil prices, sold gold reserves for cash, causing gold prices to plunge. The current market draws parallels to this “repeat of history.”

Behind this gold decline, some analysts attribute it to rising dollar funding pressures. Cross-currency basis swaps widened significantly this week, indicating potential dollar liquidity tightness. Gold has also re-established its negative correlation with real interest rates—rising real rates have pressured gold lower.

On Friday, all three major U.S. stock indices declined, marking the fourth consecutive week of declines—the longest in a year. The Nasdaq fell 2% intraday, with Microchip dropping over 33%. Utility ETFs declined 4%, leading sector ETFs lower.

Major U.S. stock indices:

• S&P 500 closed down 100.01 points, down 1.51%, at 6,506.48, approaching the September 8 close of 6,495.15. This week’s decline is 1.90%.

• Dow Jones Industrial Average fell 443.96 points, down 0.96%, at 45,577.47, down 2.11% for the week.

• Nasdaq dropped 443.08 points, down 2.01%, at 21,647.61, down 2.07% this week.

• Nasdaq 100 declined 457.122 points, down 1.88%, at 23,898.16, down 1.98% weekly.

• Russell 2000 fell 2.26%, at 2,438.45, down 1.68% for the week.

• VIX fear index rose 11.22%, to 26.76, down 1.58% this week.

Sector ETFs:

• Utilities ETF down 4.06%, global tech ETF, semiconductor ETF, global airline ETF, and tech sector ETF fell up to 2.92%, energy ETF down 0.08%, financial ETF up 0.18%.

(March 20 U.S. sector ETFs)

The Magnificent 7 Tech Giants:

• The Magnificent 7 index fell 2.03%.

• Tesla down 3.24%, Nvidia down 3.15%, Meta down 2.15%, Google A down 2.0%, Microsoft down 1.84%, Amazon down 1.62%, Apple down 0.39%.

• This week, Tesla declined 5.94%, Nvidia 4.06%, Microsoft 3.46%, Meta 3.18%, Amazon 1.11%, Apple 0.85%, Google A 0.42%.

Chip stocks:

• Philadelphia Semiconductor Index down 2.45%, at 7,670.61, up 0.31% for the week.

• TSMC ADR down 2.85%, AMD down 1.92%.

Chinese concept stocks:

• Nasdaq Golden Dragon China Index down 2.92%, at 6,742.84, down 5.67% for the week, continuing its decline.

• Among popular Chinese stocks, Xpeng down 8.3%, Xiaomi down 7.9%, NIO down 7.8%, Baidu down 3.99%, Alibaba down 1.9%, and Futu Inc. up 2.17%.

Other stocks:

• Circle down 1.82%.

• Microchip plunged over 33%.

European markets declined about 3.8% this week, with insurance sector down over 7.6%, oil and gas sector up over 3.2%. Germany’s stock market fell 2%, down over 4.5% for the week.

Pan-European indices:

• STOXX 600 down 1.78%, at 573.28, down 3.79% for the week, third consecutive weekly decline.

• Euro Stoxx 50 down 2.00%, at 5,501.28, down 3.77% this week, also three weeks down.

Country indices:

• DAX 30 down 2.01%, at 22,380.19, down 4.55% weekly.

• CAC 40 down 1.82%, at 7,665.62, down 3.11% for the week.

• FTSE 100 down 1.44%, at 9,918.33, down 3.34% this week. (March 20 European and US major indices performance)

Sector and individual stocks:

• In Eurozone blue chips, Hermès down 4.94%, Safran down 3.96%, SAP down 3.86%, UCB down 3.84%, Asml Holdings down 3.46% (fifth largest decline).

• All components of STOXX 600: Bechtle down 14.25%, K+S down 9.90%, Smith Group down 9.87%, Italy’s wireless infrastructure public company down 7.54%, Maersk B shares down 6.31% (fifth largest decline).

• This week, sectors: STOXX 600 Insurance down 7.66%, Media down 6.39%, Basic Resources down 6.15%, Technology down 6.13%, Food & Beverage down 6.06%.

Middle Eastern crude oil futures rose about 16.5% on Friday, NY diesel futures increased approximately 14.8% this week. The CFTC speculative positioning report shows that for the week ending March 17, net long positions in NYMEX WTI crude increased by 11,442 contracts to 147,861 contracts, a new eight-month high.

Crude Oil:

• WTI April futures up $2.77, nearly 2.90%, at $98.32/barrel, up about 1.53% this week.

• Brent May futures up $3.54, nearly 3.26%, at $112.19/barrel, up over 8.77% this week.

(Comparison of WTI and Brent weekly trends)

• Abu Dhabi Murban crude futures up 16.48%, at $144.52/barrel, up 26.37% this week, continuing its upward trend.

Natural Gas:

• NYMEX April natural gas futures at $3.0950/MMBtu, up nearly 1.15% this week.

Spot gold fell over 3.2% on Friday, with a weekly decline of about 11.1%. Spot silver dropped about 6.5% on Friday, down roughly 16.3% this week, while NY silver futures fell about 7.9%. Copper futures declined about 7.9%, with London copper dropping below $11,000 for the first time since 2011.

Gold:

• NY spot gold down 3.25%, at $4,499.36/oz, down 10.37% weekly.

• COMEX gold futures down 2.16%, at $4,505.70/oz, down 11.07% this week, with a low of $4,478.40 on March 21 at 02:30.

Silver:

• NY spot silver down 6.49%, at $68.0995/oz, down 15.55% weekly.

• COMEX silver futures down 4.54%, at $67.98/oz, down 16.28% this week.

Other metals:

• COMEX copper down 3.05%, at $5.3020/lb, down 7.88% weekly.

• Spot platinum down 2.21%, at $1,929.43/oz, down 4.94%; spot palladium down 2.67%, at $1,413.01/oz, down 9.18% this week.

• LME copper down $217, at $11,930/ton. LME tin down $261, at $43,279/ton, down over 8.03% this week. LME aluminum down $37, at $3,215/ton, down 6.54%.

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