March was dominated by the escalating US-Iran conflict, which sent shockwaves across global asset markets. The effective closure of the Strait of Hormuz drove Brent crude and natural gas up 63% and 59% respectively over the month. Brent oil experienced extraordinary intraday volatility — on March 9th, prices surged to a peak of $119.50/bbl before collapsing to as low as $83.66 in the US session, marking the largest intraday spike since the 1980s, according to Deutsche Bank.
The anticipated inflationary impulse from the surge in oil prices prompted markets to rapidly reprice the path of monetary policy. Investors largely priced out expectations of Federal Reserve rate cuts for 2026, from around 60bps prior to the onset of the conflict. Similarly, expectations for the European Central Bank shifted from 14bps of cuts to 71bps of hikes over the same period. This resulted in global yield curves to bear flatten. Global benchmark 10-year yields rose materially: US Treasuries by 38bps, German Bunds by 36bps, UK Gilts by 68bps and French OATs by 51bps.
Stagflation fears and the broader growth shock triggered a cross-asset slump. The S&P 500 posted four consecutive weekly declines, ending the month 5% lower. As the growth hit to Europe is more acute, European equities significantly underperformed, with the Eurostoxx 50 down 9% over the month. Gold and silver were both down 12% and 20% respectively.
Despite the equity sell-off, US cash credit proved relatively resilient, with investment-grade spreads widening only 5bps on the month — likely supported by more attractive absolute yields. Europe, however, underperformed, with European investment-grade spreads 15bps wider.
Primary market activity was robust in the US in March, with $242bn of investment-grade issuance, though Financials accounted for just 28% of supply, with the rest coming from Corporates, according to Bank of America. Notably, Amazon and Salesforce alone issued $62.5bn between them. Given the heightened volatility, the Amazon deal offered approximately 8bps of NIC across several tranches and saw 1.5-3bps tightening on the break.
