War jitters hammer global markets; Wall Street logs worst losing streak in 4 years

New York/Tokyo: A wave of risk aversion swept global markets as US equities closed their fifth straight losing week, the longest such stretch in nearly four years, with escalating tensions in the Iran conflict rattling investor confidence and pushing oil prices sharply higher.

The S&P 500 fell 1.7 per cent on Friday, capping its worst weekly performance since the conflict began. The Dow Jones Industrial Average dropped 793 points, also down 1.7 per cent, and has now slipped more than 10 per cent from its recent peak—officially entering correction territory. The tech-heavy Nasdaq Composite declined 2.1 per cent, similarly extending losses beyond the 10 per cent mark from its highs.

Markets had oscillated through the week on shifting hopes of a diplomatic breakthrough. However, continued hostilities and mixed signals from Washington dampened optimism. US President Donald Trump extended a deadline for potential military escalation against Iran to April 6, briefly easing oil prices before fresh gains resumed amid ongoing conflict and threats of further escalation from regional players.

At the heart of market anxiety lies the Strait of Hormuz, a critical artery for global energy supplies. Any prolonged disruption risks constraining oil flows, intensifying inflationary pressures worldwide. Brent crude has surged past USD 105 per barrel, up sharply from around USD 70 before the war, while US crude is nearing the USD 100 mark.

Rising energy costs are fuelling fears of a renewed inflation spike, which could weigh heavily on global growth. Higher fuel prices are expected to cascade across supply chains, increasing transportation and production costs while eroding consumer purchasing power. Early signs of this strain are already visible, with US consumer sentiment weakening in March.

Equity losses were broad-based, with nearly three-quarters of S&P 500 constituents ending lower. Big Tech stocks led the declines, reflecting their sensitivity to rising interest rates and risk aversion. Meanwhile, consumer discretionary stocks—particularly those reliant on non-essential spending—also came under pressure amid concerns that elevated fuel costs could curb household spending.

Bond markets added another layer of complexity. The yield on the US 10-year Treasury climbed to around 4.43 per cent, up significantly from pre-conflict levels near 3.97 per cent. Elevated yields are tightening financial conditions, pushing up borrowing costs for households and businesses, and raising the risk of an economic slowdown.

The negative sentiment spilled over into Asia, where markets opened the week sharply lower. Japan’s Nikkei 225 plunged over 4 per cent, while South Korea’s Kospi and Hong Kong’s Hang Seng also posted steep declines. Regional markets are particularly vulnerable given their dependence on Middle Eastern oil supplies.

Investors are now bracing for prolonged volatility as geopolitical uncertainty persists. Analysts warn that if the conflict drags on and energy supplies remain disrupted, oil prices could spike further—potentially triggering a broader global economic slowdown.

With inflation risks rising, growth concerns mounting and policy uncertainty lingering, markets appear set to remain on edge in the near term.