Stocks Slide on Brent Surge as Fed, BOJ Hold Rates: Markets Wrap

(Bloomberg) — Global equities retreated for a second day as attacks on key energy infrastructure in the Middle East drove oil prices higher, fueling investor concern that an escalating war will add to inflation pressures.

MSCI Inc.’s gauge of world stocks slid 0.6%, while an Asian benchmark slumped 2.8% as investors trimmed risk. Japan’s Nikkei 225 tumbled more than 3%, with traders on alert for the yen’s potential breach of 160 against the dollar. Futures on the Euro Stoxx 50 Index were down 1.8%, while US contracts also edged lower after the S&P 500 and Nasdaq 100 both fell 1.4% on Wednesday.

Brent crude traded above $113 per barrel as strikes between Iran and Israel on critical energy facilities — which also caused extensive damage to the world’s largest liquefied natural gas export plant in Qatar — raised concerns of a more lasting impact from the conflict.

Oil’s surge already has global central bankers fretting about price pressures. The Bank of Japan kept interest rates unchanged on Thursday, following a hold by the Federal Reserve on Wednesday, with both signaling the Middle East conflict had clouded the policy outlook.

Rate decisions from the European Central Bank and Bank of England are due later today.

“Once again, it is developments in the energy complex that are driving cross-asset flows,” Chris Weston, head of research at Pepperstone Group, wrote in a note. “There is little doubt that higher oil prices are starting to have a broader impact, and with volatility elevated, headline risk remains ever present.”

Iran attacked the LNG site in Qatar, one of several energy assets it pledged to target following strikes on the Islamic Republic’s giant South Pars gas field. President Donald Trump said the US wasn’t involved in the attack, and added that Israel would refrain from further strikes on the field. However, he added that any additional attacks by Iran on Qatar’s LNG facilities would prompt the US to “massively blow up the entirety” of the South Pars field.

MSCI’s gauge of global equities has lost nearly 6% since a record high on Feb. 25, just days before the war began. The index of Asian stocks snapped a three-day advance on Thursday and headed for its worst session since March 9. Down over 8% this month, it has trailed peers in the US and Europe.

“Asia is more vulnerable than other regions to the ongoing interruption in oil, LNG and other input products,” Morgan Stanley strategists including Jonathan Garner and Kristal Ji wrote in a note, recommending investors to sell this week’s rally in the region’s stocks.

Fed officials continue to expect one rate cut this year, though Chair Jerome Powell emphasized that to resume lowering rates, they needed to see progress in reducing inflation. “If we don’t see that progress, then we won’t see the rate cut,” Powell said in remarks to reporters after the Fed’s decision.

His comments prompted traders to scale back expectations for rate cuts, reinforcing a higher-for-longer rate outlook amid volatility in energy markets. They are now pricing in only about 15 basis points worth of Fed easing this year, less than one full quarter-point cut.

In economic forecasts released with their decision, Fed officials raised their outlook for inflation in 2026 to 2.7% from 2.4%. Notably, they saw the core measure — which excludes volatile food and energy categories — also rising to 2.7%.

Bond Yields

Treasuries sold off across the curve on Wednesday, with the two-year yield jumping about 10 basis points. It rose another three basis points to 3.80% on Thursday.

Elsewhere in markets, the Philippine peso weakened past the key 60-per-dollar level as elevated oil prices weighed on the country’s economic outlook. A broader gauge of the greenback was flat after rising 0.5% on Wednesday.

Elevated oil prices could raise inflation expectations, while they might also weigh on economic activity if prolonged, BOJ Governor Kazuo Ueda said in a press briefing following the rate decision.

“The ongoing geopolitical conflict and a more pronounced energy supply shock leading to higher inflation and rates could challenge risk assets, with valuations remaining somewhat elevated,” said Thomas Poullaouec, head of Asia Pacific multi-asset solutions at T. Rowe Price. “That said, earnings momentum and economic growth remain favorable, underpinned by accommodative fiscal policies across many regions.”

Corporate Highlights:

HSBC Holdings Plc is weighing a wave of deep job cuts over the coming years as Chief Executive Officer Georges Elhedery bets on AI to shrink its middle and back office footprint, one of the first signs of how the technology could reshape Wall Street workforces. HDFC Bank Ltd.’s part-time Chairman Atanu Chakraborty resigned citing ethical differences, dealing a blow to India’s largest non-state lender that was just beginning to capture more loan market share following a challenging merger. Tencent Holdings Ltd. plans to at least double investments in AI to more than 36 billion yuan ($5.2 billion) in 2026, the company said in its results that included a December quarter revenue beat. Micron Technology Inc. warned that it will need to spend heavily on production to meet burgeoning demand, overshadowing a generally upbeat forecast from the largest US maker of computer memory chips. Elliott Investment Management has built a significant stake in Align Technology Inc., the maker of Invisalign teeth-straightening products, according to people familiar with the matter. Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.1% as of 6:56 a.m. London time Nasdaq 100 futures fell 0.3% Futures on the Dow Jones Industrial Average were little changed The MSCI Asia Pacific Index fell 2.8% The MSCI Emerging Markets Index fell 2.5% Hong Kong’s Hang Seng fell 2% The Shanghai Composite fell 1.4% Euro Stoxx 50 futures fell 1.8% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1462 The Japanese yen was little changed at 159.77 per dollar The offshore yuan was little changed at 6.9025 per dollar The British pound was little changed at $1.3264 Cryptocurrencies

Bitcoin fell 0.9% to $70,568.29 Ether fell 0.4% to $2,178.98 Bonds

The yield on 10-year Treasuries advanced one basis point to 4.27% Germany’s 10-year yield advanced three basis points to 2.94% Britain’s 10-year yield advanced four basis points to 4.74% Australia’s 10-year yield advanced eight basis points to 4.98% Commodities

Spot gold fell 1.3% to $4,756.37 an ounce West Texas Intermediate crude rose 1% to $97.32 a barrel This story was produced with the assistance of Bloomberg Automation.

–With assistance from Matthew Burgess, Richard Henderson, Aleksander Solum and Winnie Hsu.

©2026 Bloomberg L.P.