U.S. inflation accelerated in February, with consumer prices rising 0.3 percent. This uptick, alongside a 2.4 percent annual increase, aligns with forecasts but raises concerns as the Middle East conflict intensifies.
Wall Street stocks reacted negatively, with the Dow Jones Industrial Average falling 0.9 percent, the S&P 500 down 0.3 percent, and the Nasdaq Composite dipping 0.1 percent. The inflation report did not account for recent sharp rises in gasoline prices following the outbreak of war in the Middle East.
Economists warn that the conflict could shift the path from potential deflation to inflation, particularly impacting food prices due to disruptions in the fertilizer market.
Oil prices experienced volatility, with Brent crude futures climbing around 4 percent to $91 a barrel. The International Energy Agency is reportedly preparing to recommend the release of 400 million barrels of oil, the largest amount in its history, to curb soaring prices. Japan and Germany have announced they will release reserves.
Global markets showed mixed reactions. The MSCI All-World index fell 0.3 percent, and European shares slid. However, Asia-Pacific shares outside Japan closed higher by 1 percent.
Investors remain wary of the Middle East conflict's potential to disrupt global energy trade and trigger a price shock. The safety of the Strait of Hormuz, a critical route for 20 percent of global fuel supply, is a major concern. Iran's military has warned of oil potentially reaching $200 a barrel.
Adding to market anxieties, bond yields have surged this week, driven by fears of sustained energy price pressures. This has amplified concerns about other market segments, including private credit and investments in AI projects, potentially overheating.
Vulnerabilities in private credit have been highlighted, with JPMorgan Chase reportedly marking down the value of some loans and tightening lending to the sector. Investor withdrawals from private credit vehicles, such as BlackRock's HPS Corporate Lending Fund, have also occurred.