US stock markets fell sharply last week amid concerns about the war in the Middle East and a sharp rise in oil prices. The Dow Jones Industrial Average fell 0.95%, the S&P 500 fell 1.33%, and the Nasdaq Composite fell 1.59%.

The oil price surge, amid concerns about a prolonged war in the Middle East, has shaken global financial markets. Brent crude briefly rose to $119 a barrel on Monday before falling back to around $107.

European stock markets also fell sharply last week. The STOXX Europe 600 fell 5.5%, its worst weekly performance in almost a year. On Monday, it fell another 1.8% to its lowest level in more than two months. A more than 25% rise in oil prices has heightened concerns about inflation and economic risks, with shares in the banking, raw materials, and aviation sectors particularly hurt.

European bond prices fell last week, while yields rose sharply by about 30 basis points amid soaring oil prices and new inflation risks. The trend continued on Monday: The yield on two-year UK government bonds rose by about 25 basis points to 4.12%, while Germany’s was around 2.48%. Stock markets also came under pressure as high energy prices and geopolitical risks increase the risk of a slowdown in economic growth.

Global equity funds saw outflows of about $1.44 billion last week, the first outflow in eight weeks. US funds were hit hardest, with sales of $21.9 billion, while inflows into European funds fell to $8.8 billion, while Asian funds attracted $7.43 billion. Amid the US-Israel-Iran conflict and fears of further oil price hikes, capital is moving into safer assets: money market funds attracted $20.2 billion, while bond funds attracted $16.1 billion. Meanwhile, the MSCI World Index, the world stock index, is heading for its worst week since April 2025, falling more than 2.5%.

Broadcom shares rose nearly 3% after the company forecast that sales of artificial intelligence (AI) chips will surpass $100 billion next year, signaling growth in a market dominated by Nvidia. The company is designing AI-friendly processors, offering cheaper alternatives to Nvidia’s expensive chips. This demand is being driven by big tech companies like Alphabet, Microsoft, Amazon and Meta, which plan to spend more than $600 billion on AI infrastructure in 2026.

Moderna shares rose 9% after a long-running patent dispute over its COVID-19 vaccine technology was resolved. An agreement was reached that Moderna would pay $25 billion to Genevant and Arbutus Biopharma. Moderna’s shares had fallen by nearly 90% since 2021 as demand for a COVID vaccine faltered.

Among companies with a market capitalization of at least $10 billion, Venture Global, Inc. (VG), a producer and exporter of liquefied natural gas (LNG), posted the biggest gain last week. The company’s shares rose 28.79% for the week to $12.48 per share. The Trade Desk, Inc. (TTD), a digital advertising technology company, followed with a 22.92% gain ($29.28 per share). And Samsara Inc. (IOT), a developer of data analytics and management platforms for the Internet of Things (IoT), rounded out this top, three with a 22.35% gain ($35.36 per share).

The top three largest-cap companies with the biggest losses last week starts off with optical and photonics technology maker Lumentum Holdings Inc. (LITE), whose shares fell 20.33% to $558.44 per share. Energy drink maker Celsius Holdings, Inc. (CELH) followed, down 19.94% ($42.92 per share). And silver miner First Majestic Silver Corp. (AG) rounded out this top three, down 19.31% ($25.83 per share).

The US Federal Reserve faces a difficult choice as the US labor market shows signs of weakening while inflation remains above its target. The US unemployment rate rose to 4.4% in February, as employers unexpectedly cut jobs. US inflation is currently around 2.9%, well above the 2% target. The Federal Reserve is expected to leave the federal funds’ refinancing rate unchanged at its March 17-18 meeting. Investors believe the Federal Reserve could start cutting rates as early as June. Economists warn that the combination of slow job growth and high inflation could lead to stagflation.

Activity in the US services sector rose to its highest level in more than three years in February, signaling a strengthening economic growth. The services PMI index rose to 56.1, reaching its highest level since July 2022. The growth was contributed by strong demand and a surge in new orders. However, economists warn that the conflict in the Middle East, in particular the continued rise in oil prices, could pose risks to the economic outlook. The rise in oil prices due to the conflict could slow economic growth and increase inflation.

Inflation in the eurozone rose unexpectedly in February, raising concerns that rising energy prices due to tensions in the Middle East could push up prices even further. Eurostat data showed that inflation in the eurozone was 1.9% in February, compared with 1.7% in January. Core inflation, which excludes food and energy, also rose—to 2.4%. Economists warn that rising oil and natural gas prices could quickly weigh on consumer prices. Analysts say a 10% rise in oil prices could add about 0.1 percentage point to inflation over the next three months. The European Central Bank is expected to leave its refinancing rate unchanged. However, analysts say there is a 50% chance that interest rates could be raised this year if inflation continues to rise.

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