Economic Weekly Wrap
23 Mar 2026 - 27 Mar 2026

Crisis in the Middle East escalated over the weekend. Civilian infrastructure has been targeted and there is a possibility that energy infrastructure may also get damaged. Given this backdrop, oil prices continue to rise and are currently trading at a 4-year high.

The increase in international prices has also led to higher domestic prices in India. Industrial diesel prices have been raised by Rs 22/lt and premium petrol by Rs 2/lt, while normal diesel and petrol prices remain unchanged to protect consumers.

Globally, investors are concerned that a prolonged war may impact the inflation trajectory. ECB and BoE delivered hawkish statements, while BoJ is expected to hike rates in Apr’26. Analysts now see a 50% probability of a Fed rate hike by end-CY26.

Global stocks ended lower as the war entered its fourth week. Rising geopolitical tensions and threats to Gulf infrastructure led investors to reduce risk exposure. Nikkei declined the most, followed by US indices. Sensex rose marginally but is trading lower today.

Table 1 – Stock Markets

Source: Bloomberg, Bank of Baroda Research

Global currencies depreciated against the US dollar. DXY rose by 0.4% supported by rising bond yields and safe-haven demand. INR and JPY declined the most, with INR hitting a record low.

Table 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Global bond yields rose significantly due to inflation concerns stemming from the prolonged conflict. UK yields rose the most, followed by US and Germany. India’s 10Y yield also increased and is trading higher.

Table 3 – Bond 10Y Yield

Table 4 – Short Term Rates

Table 5 – Liquidity

Table 6 – Capital Market Flows

Oil prices surged to their highest level since early July 2022 due to escalating tensions in the Middle East.

Table 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

In a surprise move, US President Donald Trump announced a 5-day pause on attacks on Iran’s energy infrastructure. He also stated that this was the result of positive talks held between the US and Iran to end the war. As a result, equity markets in the US rebounded, oil prices declined by ~11%, and 10Y yields in the US and Europe also eased. However, Iran has refuted the possibility of any talks, leading to heightened uncertainty and a rise in oil prices today.

On the macro front, flash manufacturing PMIs of both Japan (51.4 versus 53 in Feb’26) and Australia (50.1 versus 51) declined in Mar’26. Services activity in Australia fell into contraction (46.6 versus 52.8), due to rising cost pressures. Domestically, RBI noted that a prolonged war could hurt global growth, though India remains relatively resilient to external shocks.

Global equity markets were mixed as investors tracked developments in West Asia. US indices rebounded amid early signs of de-escalation. In contrast, Sensex declined by 2.5% due to losses in consumer durables, metal, and real estate stocks. It is, however, trading higher today in line with Asian markets.

Table 1 – Stock Markets

Source: Bloomberg, Bank of Baroda Research

Global currencies mostly appreciated against the US dollar. DXY weakened by 0.7% amid reports of postponement of US strikes. INR fell to a record low despite lower oil prices, but is trading stronger today.

Table 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Bond yields declined in US and Europe following the announcement of a pause in attacks. India’s 10Y yield rose by 10bps and is trading higher despite falling oil prices.

Table 3 – Bond 10Y Yield

Table 4 – Short Term Rates

Table 5 – Liquidity

Table 6 – Capital Market Flows

Oil prices declined sharply amid reports of potential talks between the US and Iran.

Table 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Given uncertainty around US and Iran peace talks, oil prices rebounded and bond yields also inched up. Analysts are increasingly concerned about the impact of war on global inflation. BoE’s Chief Economist has warned that the central bank stands ready to act in response to rising inflationary pressures. Other central banks may adopt a similar stance if oil prices remain elevated.

In Australia, RBA remains cautious as core inflation stayed sticky at 3.3% in Feb’26, unchanged from Jan’26, mainly due to housing inflation. In Japan, core inflation (excluding food and fuel) eased slightly to 2.5% in Feb’26 from 2.6% earlier. However, inflation prints are expected to rise across countries in Mar’26. In the US, flash services PMI dropped to an 11-month low of 51.1 in Mar’26 (vs 51.7 in Feb’26), reflecting weakening demand amid uncertainty and rising living costs.

Global equity markets mostly closed higher (except the US), despite ongoing uncertainty around ceasefire talks. Hang Seng outperformed, driven by banking and gold stocks. Sensex also rallied, led by gains in consumer durables and banking stocks. It is trading further higher today, in line with Asian markets.

Table 1 – Stock Markets

Source: Bloomberg, Bank of Baroda Research

Global currencies mostly weakened against the US dollar. DXY strengthened amid uncertainty over peace talks. INR appreciated slightly despite higher oil prices, though it is trading lower today.

Table 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Bond yields mostly edged higher, except in Japan and China. UK yields rose the most following hawkish commentary from BoE. India’s 10Y yield increased by 3bps due to rising oil prices, though it is trading slightly lower today.

Table 3 – Bond 10Y Yield

Table 4 – Short Term Rates

Table 5 – Liquidity

Table 6 – Capital Market Flows

Oil prices rebounded following conflicting remarks from the US and Iran regarding peace talks.

Table 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Disclaimer: The views expressed in this research note are personal views of the author(s).

As optimism fades around US-Iran peace talks, international oil prices have rebounded and treasury yields have also inched up, in anticipation of possible impact of war on inflation. On the macro front, jobless claims in the US rose by 5k in the week ending 21 Mar’26 to 210k from 205k in the previous week. However, 4-week moving average of continuing claims fell by 2k to 1.85mn—lowest since early Oct’24. Elsewhere in Asia, China’s data for Jan-Feb’26 shows that industrial profits rose by 15.2% (YoY), following 0.6% increase in CY25. This was helped by sectors such as computers, communication, non-ferrous metal smelting, and electronic equipment manufacturing. In India, to ease the burden of rising international oil prices on OMCs, central government has reduced special additional excise duty on petrol from Rs 13/lt to Rs 3/lt and on diesel from Rs 10/lt to zero.

 Global indices closed lower amidst contradictory statements pertaining to West Asia conflict. Crude prices jumped higher. Amongst other indices, Hang Seng dropped the most followed by deep losses in S&P 500. Sensex is trading lower in the opening session today, given subdued global cues. On other hand, other Asian indices are trading higher.

Table 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

 Global currencies closed lower. Dollar index continues to strengthen as US-Iran talks face uncertainty. Both GBP and EUR were down by 0.3% as investors monitored ongoing developments. INR is trading lower today given higher oil prices while other Asian currencies are trading mixed.

Table 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

 Barring China, other global yields inched up. UK’s 10Y yield rose the most as revival in oil prices is expected to impact inflation further. In the US as well, pressure on inflation and steady labour market is fuelling rate hike expectations. India’s 10Y yield rose by 1bps and is trading higher today.

Table 3 – Bond 10Y yield

Table 4 – Short term rates

Table 5 – Liquidity

Table 6 – Capital market flows

 Oil prices rose further, as optimism around US-Iran peace talks fade.

Table 7 – Commodities

Source: Bloomberg, Bank of Baroda Research