Countdown to Trump’s ultimatum! Global stocks and bonds encountered

# Zhao Ying, Ye Zhen, Zhang Yaqi  

Source: Wall Street CN  

The Middle East situation escalated sharply over the weekend, followed by U.S. Treasury Secretary Bessent’s remark that "escalation must come before de-escalation." Asian stock markets plummeted collectively on Monday: the Nikkei closed down 3.5%, South Korea’s KOSPI triggered a circuit breaker; spot gold fell below $4,100 per ounce, plunging nearly 9% intraday, erasing all gains for the year and marking the longest losing streak since October 2023; spot silver dropped nearly 8% to $62.49 per ounce. WTI crude oil rose 2% intraday to $100.25 per barrel.  

On Monday, as the U.S.-Iran conflict entered its fourth week, rhetoric from both sides intensified abruptly, sending global stocks, bonds, and gold lower in tandem. The dual impact of rising inflation expectations and deteriorating economic growth prospects is forcing investors to reassess the policy paths of major central banks, with market sentiment increasingly shifting toward defensiveness.  

According to CCTV News, on March 21 local time, U.S. President Trump posted on the social media platform Truth Social, demanding Iran fully reopen the Strait of Hormuz within 48 hours, or the U.S. would strike and destroy various power plants across Iran, "starting with the largest one." In an interview with The Paper on March 22, when asked about the Iran situation and whether Trump intended to de-escalate tensions, Secretary Bessent stated that the U.S. was destroying various Iranian facilities, adding that sometimes "escalation must come before de-escalation." He also explicitly noted that "all options are on the table," including deploying U.S. troops to seize Kharg Island, Iran’s oil hub.  

Precious metals suffered heavy losses: spot gold fell below $4,100 per ounce, dropping nearly 9% intraday, erasing all year-to-date gains and setting the longest losing streak since October 2023; spot silver declined nearly 8% to $62.49 per ounce. Copper prices fell to a more than three-month low; U.S. Treasury yields climbed to multi-month highs as markets began pricing in a potential shift to rate hikes by the Federal Reserve this year. The South Korean won slid to its lowest level since 2009, while the Indian rupee hit a record low.  

Asian stock markets extended their losing streak to three days, approaching a technical correction zone. The MSCI Asia Pacific Index fell 3.5%, with South Korean stocks plummeting 6.5% in a single day; futures contracts indicated that the Asian sell-off is likely to spread to European and U.S. markets. Martin Schulz, Head of International Equities at Federated Hermes, told Bloomberg TV: "This is a time for caution, not panic," but emphasized that the duration of the conflict is the key variable—"the longer it drags on, the worse things will obviously get." This assessment reflects a widespread market dilemma: amid extreme fundamental uncertainty, traditional portfolio hedging strategies are facing severe tests.  

The Nikkei 225 Index closed down 3.5% at 51,515.49 points. Japan’s TOPIX Index fell 3.4% to 3,486.44 points. South Korea’s KOSPI closed 6.5% lower at 5,405.75 points .  

Euro Stoxx 50 index futures dropped 1.1%, and Germany’s DAX futures fell 1.3%, indicating that risk aversion is spreading to Western markets.  

The Thailand Futures Exchange announced a temporary suspension of online gold futures trading.  

U.S. Treasuries extended their three-week decline, with the 2-year yield rising to 3.94% and the 10-year benchmark yield climbing to 4.41%.  

Japan’s 40-year government bond yield rose 5 basis points to 3.795%.  

The Australian dollar fell 1% intraday against the U.S. dollar to 0.6952.  

The South Korean won depreciated sharply against the U.S. dollar to its lowest level since March 10, 2009, reflecting significant upward pressure on capital outflows. Singapore’s Straits Times Index fell 2.2%.  

Spot gold broke below $4,100 per ounce, plunging nearly 9% intraday. New York gold dropped 7.0% intraday to $4,285.9 per ounce.  

Spot silver declined nearly 8% intraday to $62.49 per ounce. New York silver fell 10.0% intraday to $62.64 per ounce.  

Spot platinum slid more than 8% to $1,773.47 per ounce. Spot palladium dropped nearly 5% to $1,346 per ounce.  

WTI crude oil rose 3.0% intraday to $101.21 per barrel .  

## Sharp Hawkish Shift in Central Bank Policy Expectations  

The underlying logic behind this sell-off lies in a drastic repricing of market expectations for global monetary policy paths. According to Bloomberg, U.S. stock market declines accelerated last Friday as traders began betting that the Federal Reserve could shift to rate hikes this year to combat a new round of inflationary shocks from rising oil prices. Markets also expect the Bank of Japan, European Central Bank, and Bank of England to face similar pressures, even as the war suppresses global economic growth prospects.  

Garfield Reynolds, Bloomberg Strategist and Head of MLIV Asia, noted: "Asia’s dismal start to the week is largely due to a major repricing of global monetary policy prospects. The rapid shift toward hawkish rate expectations is telling investors that even if crude oil prices stabilize, the energy shock from the Iran war means financial conditions will tighten sharply."  

Federal Reserve Chair Jerome Powell previously stated that the central bank needs to see more progress on inflation before cutting rates again. In the bond market, short-term U.S. Treasuries led last week’s declines, with the 2-year yield rising to 3.94% and the 10-year yield climbing to 4.41%, both hitting multi-month highs.  

Spot gold fell 6.5% intraday to $4,197.17 per ounce. New York gold dropped 7.0% intraday to $4,285.9 per ounce. Spot silver declined nearly 8% to $62.49 per ounce. New York silver fell 10.0% intraday to $62.64 per ounce.  

## Multi-Asset Pressure and Fragile Market Sentiment  

Asia-Pacific stock markets had a heavy start to the week. The MSCI Asia Pacific Index fell 3.5%, Japanese stocks dropped 3.4%, and South Korean stocks plummeted 6.3%. The MSCI All-Country World Index, a measure of global stock performance, extended its year-to-date decline to 3.9%, while Asian stocks’ year-to-date gains narrowed to less than 1%.  

The foreign exchange market also came under pressure. The South Korean won slid to its lowest level since 2009, and the Indian rupee touched a record low. Silver closed lower for the fifth consecutive trading day, while the Bloomberg Dollar Index rose slightly by 0.2%.  

Martin Schulz, Head of International Equities at Federated Hermes, stated in an interview with Bloomberg TV: "Markets are increasingly uneasy about what’s happening in the Middle East. Our view is that this is a time to proceed cautiously, not panic. Duration is the core issue—the longer the conflict drags on, the worse things will obviously get."  

Japanese government bond yields rose again on Monday, approaching multi-decade highs. The 30-year bond yield climbed 6 basis points to 3.58%, the highest since February 9.  

## Volatile Market Performance  

Over the weekend, the Middle East conflict underwent a sharp shift from "de-escalation" to rhetoric of threats and "total destruction."  

In the early hours of March 22 local time, the Khatam al-Anbiya Central Command of the Iranian Armed Forces warned that, in line with previous warnings, if Iran’s fuel and energy infrastructure is attacked, all energy infrastructure, information technology systems, and desalination facilities of the U.S. and its allies in the region will become targets.  

Amid fierce rhetorical exchanges between the conflicting parties over the weekend and the impending expiration of President Trump’s 48-hour ultimatum on Monday evening Eastern Time, crude oil prices surged at the open, while U.S. stock futures fell sharply.  

Market reactions were intense in early Asian trading on Monday. WTI crude briefly rebounded above $100 at the open but then retreated from its opening high; Brent crude also edged lower from Friday’s highs.  

However, after the initial knee-jerk reaction, both oil prices and stock index futures recovered some of their volatility and are now hovering near flat levels, highlighting deep market hesitation and indecision as it assesses the duration of the war and its potential economic consequences.  

## Goldman Sachs: Everything Depends on How Long the War Lasts  

According to analysis by Goldman Sachs’ Kapa, the core contradiction in current market pricing is that while the interest rate shock has been largely digested, the pricing of growth risks remains limited. This contrasts with the 2022 energy shock, when real yields surged sharply from negative levels, delivering a larger negative interest rate impact.  

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