Economic Weekly Wrap
09 Mar 2026 - 13 Mar 2026

Surge in global energy prices due to escalating geopolitical conflict in the Middle East has slowed the easing cycle of global central banks. Analysts are now pricing in a much lower probability of rate cuts given rising inflation concerns.

In the US, non-farm payrolls declined by 92,000 in Feb’26, worse than expected (50K) and lower than the revised 126K in Jan’26. As a result, unemployment rose to 4.4%, indicating weakness in the labour market. The labour force participation rate also declined to 62%. Job losses were partly attributed to healthcare strikes and the government shutdown.

In the UK, housing prices rose by 1.3% in Feb’26, marking the fastest annual growth since Oct’25, although uncertainty from the ongoing conflict remains a concern. Crude oil prices surged past US$ 110/bbl amid intensifying geopolitical tensions.

• Global stocks ended mixed as investors monitored Middle East developments.
• US indices declined due to weak payroll data and sell-off concerns.
• Sensex closed lower, dragged by banking and real estate stocks, and continues to trade weak.

Table 1 – Stock Markets

Source: Bloomberg, Bank of Baroda Research

Global currencies ended mixed. DXY declined by 0.3% due to weaker-than-expected US payroll data. GBP strengthened amid inflation concerns, which may prompt the Bank of England to hold rates steady. INR weakened but remained below 92/$, though it is trading at a record low today in line with other Asian currencies.

Table 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Except for the US (flat), 10Y yields across major economies rose. UK yields increased by 9bps due to inflation concerns amid the US-Iran conflict. Reports suggest Russia may divert gas supplies from Europe to India and China. India’s 10Y yield rose by 5bps and is currently at 6.77%.

Table 3 – Bond 10Y Yield

Table 4 – Short Term Rates

Table 5 – Liquidity

Table 6 – Capital Market Flows

Oil prices rose sharply by 8.5% as Middle East tensions escalated.

Table 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

As per revised data, Japan’s economy grew at a much faster pace of 1.3% in Q4CY25, revised upwards from 0.2% and compared to 2.3% growth in Q3CY25. Capital spending was a key driver, rising by 1.3% in Q4—the highest since Dec’23. However, household spending declined by 1% in Jan’26, raising concerns about private consumption.

In the UK, consumer spending growth slowed due to inflation concerns linked to the ongoing conflict. Meanwhile, early signs of de-escalation in the Middle East emerged after comments from the US President suggesting the war could be over soon. Following this, crude oil prices, which had crossed US$ 110/bbl, eased below US$ 100/bbl during intraday trading.

• Except for US indices, global markets ended lower amid geopolitical uncertainty.
• Nikkei declined the most by 5.2% due to rising crude oil prices.
• Sensex also fell, impacted by losses in auto, banking, and oil & gas stocks.
• However, markets are trading higher today in line with Asian peers.

Table 1 – Stock Markets

Source: Bloomberg, Bank of Baroda Research

DXY strengthened due to safe-haven demand. Among major currencies, EUR and GBP gained the most. CNY remained flat ahead of export data. INR weakened tracking oil prices and continues to trade lower in line with other Asian currencies.

Table 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Except for the US, 10Y yields softened ahead of CPI data. Yields in other major economies rose slightly amid expectations of easing geopolitical tensions. India’s 10Y yield rose by 3bps but is currently trading lower at 6.68%.

Table 3 – Bond 10Y Yield

Table 4 – Short Term Rates

Table 5 – Liquidity

Table 6 – Capital Market Flows

Amid ongoing Middle East tensions, crude oil prices moved higher.

Table 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

As per IIF data, portfolio flows to emerging markets slowed to US$ 22bn in Feb’26 across both debt and equity segments. This slowdown is attributed to worsening global risk sentiment amid the ongoing Middle East conflict. While global debt flows remained positive and well distributed across regions, equity flows were uneven.

On the domestic front, the Cabinet has approved the extension of the Jal Jeevan Mission till 2028 with an outlay of Rs 8.7 lakh crore. The scheme has been restructured to focus on service delivery, drinking water governance, and digital mapping to enhance transparency and accountability. Additionally, FDI guidelines have been eased for investments from countries sharing land borders, which is expected to boost inflows into start-ups and deep tech sectors.

• Except for US indices, global markets rebounded as oil prices slipped below US$ 90/bbl.
• Nikkei recorded the highest gains among global indices.
• Sensex also rose, supported by gains in auto and consumer durable stocks.
• However, markets are trading lower today, while other Asian markets remain mixed.

Table 1 – Stock Markets

Source: Bloomberg, Bank of Baroda Research

Except Asian currencies, most currencies depreciated against the US dollar. DXY declined by 0.4%. Lower oil prices eased inflation concerns and reduced expectations of rate hikes by major central banks. CNY strengthened following improved export data. INR also appreciated but is currently trading weaker, while other Asian currencies remain mixed.

Table 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Except for the US (higher) and China (flat), other 10Y yields softened. US yields rose due to stronger labour market and housing data. UK yields declined the most as expectations of rate hikes by the Bank of England eased. India’s 10Y yield fell by 4bps and is currently trading at 6.66%.

Table 3 – Bond 10Y Yield

Table 4 – Short Term Rates

Table 5 – Liquidity

Table 6 – Capital Market Flows

Crude oil prices declined following reports of reserve release by the IEA.

Table 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

As per the BLS, US inflation remained steady at 2.4% in Feb’26 (from 2.4% in Jan’26), in line with expectations. Core inflation also rose at a similar pace as in Jan’26 at 2.5%. With this, the energy index was up by 0.5% and food inflation inched up by 3.1% for the same period. On a MoM basis, CPI inched up by 0.3% from 0.2% in Jan’26. Gasoline prices during this period were up by 0.8% after declining for two straight months amidst expectations of possible Middle East conflict.

Separately, crude oil prices again crossed the US$ 100/bbl mark intraday before slipping below the US$ 95/bbl mark amidst uncertainty over the prolonged West Asia conflict. The increase has been noted despite the historic release of reserves by the IEA, given the closure of the Strait of Hormuz.

Global stock markets ended mostly lower as investors continued to monitor developments in the Middle East. US indices declined following inflation data. In India, Sensex slipped with significant losses in auto and banking stocks and is trading lower today in line with other Asian markets.

Table 1 – Stock Markets

Source: Bloomberg, Bank of Baroda Research

Global currencies mostly weakened against the US dollar. The DXY index rose by 0.4% as sticky inflation and rising oil prices suggest that the Fed is unlikely to cut rates anytime soon. EUR and JPY were among the worst performers. INR also depreciated, tracking higher oil prices, and is trading weaker today in line with other Asian currencies.

Table 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Bond yields moved higher globally, except in parts of Asia. UK’s 10Y bond yield rose the most, followed by the US and Germany, driven by inflation concerns. India’s 10Y yield declined slightly but is trading higher today in line with global trends.

Table 3 – Bond 10Y Yield

Table 4 – Short Term Rates

Table 5 – Liquidity

Table 6 – Capital Market Flows

Crude oil prices rose amidst uncertainty over the ongoing geopolitical conflict.

Table 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

US jobless claims declined by 1k to 213k for the week ending 7 Mar, signalling that the labour market has remained steady. Continuing claims for the same period slipped by 21k to 1.85mn. Separately, the US trade deficit narrowed more than expected to US$ 54.5bn in Jan’26 from US$ 72.9bn in Dec’25, supported by stronger exports.

Recent strikes by Iran on oil tankers pushed crude oil prices higher, raising concerns of elevated inflation. The US Fed is expected to meet next week and is likely to maintain status quo on rates. The summary of economic projections and PCE data may provide further cues. Additionally, the US Treasury Secretary indicated that the US would temporarily remove sanctions on Russia (30-day waiver), allowing crude purchases amid the ongoing West Asia conflict.

Global stock indices remained under pressure as investors tracked rising crude prices and concerns over supply chain disruptions. Among major indices, Dow Jones declined the most, followed by S&P 500. In India, Sensex slipped further with significant losses in auto and FMCG stocks and is trading lower today in line with other Asian markets.

Table 1 – Stock Markets

Source: Bloomberg, Bank of Baroda Research

Major global currencies depreciated further against the US dollar. DXY rose, supported by steady labour market data and an increase in multi-family housing starts. EUR and GBP were the worst affected. INR also weakened as oil prices hovered near the US$ 100/bbl mark and is trading lower today in line with other Asian currencies.

Table 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Bond yields inched up globally, except in China. UK’s 10Y yield rose the most as expectations of a rate cut diminished. US 10Y yield also increased amid reduced rate-cut expectations. India’s 10Y yield rose by 3bps due to elevated oil prices and is trading higher today.

Table 3 – Bond 10Y Yield

Table 4 – Short Term Rates

Table 5 – Liquidity

Table 6 – Capital Market Flows

Crude oil prices surged sharply as the IEA expects several weeks or months for production to return to pre-war levels in the Middle East.

Table 7 – Commodities

Source: Bloomberg, Bank of Baroda Research