Jean Boivin – Head of BlackRock Investment Institute together with Wei Li – Global Chief Investment
Strategist, Natalie Gill – Senior Portfolio Strategist, Ehsan Khoman – Economist, all forming part of the BlackRock Investment Institute and Mark Hume – Portfolio Manager from the Thematics and Sectors Team of BlackRock Fundamental Equities share their insights on global economy, markets and geopolitics. Their views are theirs alone and are not intended to be construed as investment advice.
Key Points
Supply chain shock : The Middle East conflict is causing a supply chain shock. Energy prices have spiked, and we don’t see a basis to disagree given what we know now.
Market backdrop : U.S. stocks ended the week lower, outperforming sharp equity declines elsewhere. U.S. 10-year Treasury yields climbed, defying their role as a haven.
Week ahead: U.S. inflation data this week could test whether energy-driven price pressures broaden, shaping the Fed’s policy flexibility amid rising inflation risk.
The Middle East conflict is causing an energy-led supply chain shock, with very different effects around the world. Market pricing suggests weeks of disruptions, not days or months. The episode adds to inflation risk in a world shaped by supply factors. That’s why long-term Treasury yields have edged up, defying their role as a haven. There’s a risk of a stagflationary shock but it’s not a given, as market pricing indicates. We stay underweight long-term Treasuries and favor U.S. stocks.
The conflict is upending recent trends and well-established relationships in global markets. International equities had walloped U.S. stocks until the U.S.-Israeli strikes on Iran, driven largely by AI-related disruption fears in industries the U.S. is exposed to. See the bars on the left side of the chart. That leadership has reversed abruptly: equity markets in regions most dependent on energy imports have sagged sharply whereas the MSCI U.S. has been steady (right set of bars). Prices of liquified natural gas (LNG) showed similar trends, rocketing upward in regions that rely heavily on imports such as Europe and staying mostly put in the U.S. Long-term U.S. Treasury yields jumped even as stocks pulled back, showing their supposed diversification properties can be a mirage. The yield increase aligns with our view that we are at risk of an inflationary supply shock, rather than a demand-driven growth slowdown.
How big will the shock be? It comes down to supply chain disruptions, in particular for energy. Months of disruptions could push up inflation and materially hurt growth. Oil futures pricing indicates disruptions could last for weeks, not months. This is reasonable because economic and political pressures will likely provide strong incentives to contain the conflict. And disruptions could ease in the meantime if U.S. naval escorts and shipping insurance prove effective in preventing a prolonged closure of the world’s energy aorta – the Strait of Hormuz. The net result of all this: a short-term supply squeeze with disparate regional effects.
Energy infrastructure in focus
The conflict is a disruption at the heart of LNG infrastructure, very different from the Europe-centric, pipeline-driven energy crunch in 2022. Back then, LNG prices tightened through competitive bidding and stockpiling. Today, the strain on energy starts at export terminals and shipping posts. We see Europe and parts of Asia as most vulnerable given their reliance on imported LNG for power and industrial production. These markets have underperformed the more shielded U.S. as a result, and we see no reason to push back on that. The performance divergence reflects an asymmetrical energy market structure: oil can be rerouted globally, but LNG infrastructure, shipping and pricing are very regional.
The episode fits a pattern of geopolitical shocks creating supply constraints in a fragmenting world. Structurally sticky inflation remains the risk if the disruption endures. This makes growth-inflation trade-offs more acute than in the pre-fragmentation era – and reinforces our long-held view of a world shaped by supply. Markets are reflecting this in rising bond yields and upward pressure on term premia, or the extra compensation investors demand to hold long-term bonds. Even absent a prolonged closure of the Strait of Hormuz, we could see the shock upend the “low inflation, lower interest rates” narrative that has powered markets until recently. This reinforces our view that inflation could surprise to the upside.
Our bottom line
The situation is fluid, and the risks are real. For now, we believe the shock is likely to be short-lived. We see disruptions measured in weeks, rather than in months or days. We stay underweight long-term U.S. Treasuries and favor U.S. and Japanese stocks. In Europe, we like the financial, pharma and infrastructure sectors.
Market backdrop
The Middle East conflict had disparate market effects last week, with energy-importing markets hit hardest. European natural gas spiked nearly 70% in stark contrast to the 8% gain in U.S. gas prices. The S&P 500 fell 2%, holding up better than international peers: Europe’s Stoxx 600 shed 6%, alongside Japan’s Topix. South Korea’s Kospi fell 11%. Yields on the U.S. 10-year Treasury climbed to 4.11% on inflation fears, defying its role as a haven in geopolitical conflicts.
We focus this week on U.S. inflation data, with CPI and PCE likely to reinforce the persistence of underlying price pressures on sticky services inflation and solid wage growth. In China, CPI and PPI data are expected to remain subdued, underscoring weak domestic demand and lingering deflationary pressures.
Week Ahead
March 8 : Japan trade balance; China CPI, PPI
March 11 : U.S CPI
March 12 : U.S. trade balance
March 13 : U.S. PCE; University of Michigan consumer sentiment survey; UK GDP
BlackRock’s Key risks & Disclaimers:
This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of 9th March, 2026 and may change. The information and opinions are derived from proprietary and non-proprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This material may contain ’forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.
The information provided here is neither tax nor legal advice. Investors should speak to their tax professional for specific information regarding their tax situation. Investment involves risk including possible loss of principal. International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation, and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are often heightened for investments in emerging/developing markets or smaller capital markets.
Issued by BlackRock Investment Management (UK) Limited, authorized and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL.
MeDirect Disclaimers:
This information has been accurately reproduced, as received from BlackRock Investment Management (UK) Limited. No information has been omitted which would render the reproduced information inaccurate or misleading. This information is being distributed by MeDirect Bank (Malta) plc to its customers. The information contained in this document is for general information purposes only and is not intended to provide legal or other professional advice nor does it commit MeDirect Bank (Malta) plc to any obligation whatsoever. The information available in this document is not intended to be a suggestion, recommendation or solicitation to buy, hold or sell, any securities and is not guaranteed as to accuracy or completeness.
The financial instruments discussed in the document is intended for retail clients however, it may not be suitable for all investors and investors must make their own informed decisions and seek their own advice regarding the appropriateness of investing in financial instruments or implementing strategies discussed herein.
If you invest in this product you may lose some or all of the money you invest. The value of your investment may go down as well as up. A commission or sales fee may be charged at the time of the initial purchase for an investment. Any income you get from this investment may go down as well as up. This product may be affected by changes in currency exchange rate movements thereby affecting your investment return therefrom. The performance figures quoted refer to the past and past performance is not a guarantee of future performance or a reliable guide to future performance. Any decision to invest in a mutual fund should always be based upon the details contained in the Prospectus and Key Information Document (KID), which may be obtained from MeDirect Bank (Malta) plc.
