Middle East conflict deals a heavy blow to global stock markets! South Korea experiences its largest drop in 210 months, U.S. stocks fall over 7%. Can it rebound in April?

Ask AI · How Middle East conflict triggers a rare synchronized drop in global assets?

This article is sourced from The Times Weekly, written by Ma Huan

The U.S.-Iran conflict between the U.S., Israel, and Iran has already entered its second month, and global stock markets are also in a “relentless downtrend.”

The “MSCI Global Index,” which is made up of major large-cap stocks worldwide, fell by about 9% over this past month, marking the largest drop since September 2022.

By industry, with the exception of the energy sector, which benefits from rising oil prices, nearly all other sectors are down.

In terms of specific countries and regions, all three major U.S. stock indexes have already fallen by more than 7%. Among them, the Nasdaq index is down 7.91%, the S&P 500 is down 7.45%, and the Dow Jones index is down 7.64%.

Europe has suffered an even bigger decline. The STOXX Europe 600 index fell nearly 9.2% over this past month, the largest monthly drop since the global economic shock from the 2020 COVID-19 pandemic.

In Asia, in the month from February 28 to March 28, Japan’s 225 index fell by more than 9%. The Korea KOSPI index dropped by over 800 points, a decline of 12.9%. China’s three major stock indexes have also seen declines of varying degrees: the Shanghai Composite’s cumulative decline is close to 6%, the Shenzhen Component is down about 5%, and the ChiNext (GEM) index is down about 0.4%.

The U.S.-Iran conflict has entered its second month, but global stock markets still show no rebound.

On March 31, Asian stocks opened lower and drifted down through the session. By market close, they all finished lower collectively. The Nikkei 225 fell 1.58% to 51,063.72 points, down 822 points; the TOPIX index closed down 1.26%; the Korea KOSPI index closed down 4.26% at 5,052.6 points. In March alone, the KOSPI fell 19.1%, the largest monthly decline since October 2008.

As of the close on March 30 local time, the three major U.S. indexes traded mixed. The Dow rose 0.11%, the S&P 500 fell 0.39%, and the Nasdaq fell 0.73%. On a month-to-date basis, for the entire month of March, the Dow is down 7.54%, the S&P 500 is down 7.82%, and the Nasdaq is down 8.59% cumulatively.

Global stock markets show increasingly tense signs. Investors can’t help wondering: can stock markets rebound in April?

Global assets falling, falling, falling

From February 28 to March 28, as the conflict between the U.S., Israel, and Iran escalated, the resulting energy shock pushed global financial markets into a rare case of synchronized collapse.

Whether stocks, bonds, or gold, they all fell in sync in March. Defensive tools in traditional investment portfolios almost failed, leaving global investors facing the most severe risk-aversion situation in recent years.

The MSCI Global Index, which covers stocks in both developed and emerging markets worldwide, has fallen about 9% in March. In the U.S., over the one-month period from February 28 to March 28, the Nasdaq index fell 7.91% cumulatively; the Dow Jones index fell 7.64% cumulatively; the S&P 500 fell 7.45%, setting the longest streak of consecutive declines since 2022.

In the bond market, the yield on 10-year U.S. Treasuries once climbed to 4.48%, the highest level since July, and the 30-year yield also approached 5%. This trend reflects the market’s concerns about persistent inflation—an inflation pattern closely related to geopolitical tensions and elevated commodity prices.

Meanwhile, European bond yields also reached highs seen only since the outbreak of the conflict.

Among them, Italy’s 10-year government bond yield once rose to 4.14%, the highest level since mid-2024. It gained roughly 80 basis points over the whole of March, and the scale of bond selling was comparable to during the 2022 energy crisis. France’s 10-year government bond yield once neared 3.9%, the highest level since 2009. Spain’s 10-year government bond yield also rose rapidly in March, approaching 3.7%, the first time it has reached such a high level since the end of 2023.

Gold has long been considered a stable safe-haven asset, and it surged strongly over the past year. But since March, the spot gold price has tumbled by about 22%, retreating more than 25% from its historical peak.

In the stock market that investors focus on most, most sector stocks are falling.

Among them, airline stocks are leading the declines. Over the past month, the share price of GE Aerospace (GE Aerospace, the maker of aircraft engines) fell cumulatively by 17%. In addition to flights in and out of the Middle East being canceled in large numbers, soaring jet fuel prices led to higher fuel surcharges, and market concerns also caused travel demand to cool.

Consumer spending is also seeing widespread declines. U.S. retailer Dollar General, the country’s second-largest retailer, fell 16% over the month; Nike fell 17%. In France, luxury brand LVMH fell 16%, and Hermes International Group fell 20%.

“Now what is useful to invest in? Nothing is useful. This is truly one of the worst scenarios you could imagine—managing an investment portfolio has been extremely difficult over the past few weeks.” Raphael, a spokesperson for investment firm Tikehau Capital, said bluntly.

“Where can people go to hide this month? You can’t put money into stocks, and you can’t put money into bonds. Even credit spreads are starting to widen. Iran’s situation has turned the whole world upside down,” said George Cipolloni, a senior portfolio manager. “If this energy crisis lasts longer, we’ll start seeing some very bad consequences.”

Right now, it seems only oil prices are steadily rising. Benefiting from this, within the MSCI Global Index, only the energy sector is in the green.

As of the close on March 30, New York Mercantile Exchange May-delivery light sweet crude futures rose $3.24 to close at $102.88 per barrel, an increase of 3.25%; May-delivery London Brent crude futures rose 21 cents to close at $112.78 per barrel, up 0.19%.

At the same time, U.S. stock index futures fell. S&P 500 index futures fell 0.6%, continuing the selloff trend from last weekend’s stock market.

April approaching—bottoming out and rebounding?

As April approaches, will global financial markets rebound?

Multiple institutions are trying to calm investor sentiment. Some analysts believe that things are already near the low point, and that in April, financial markets have a chance to “make up for lost ground.”

Deutsche Bank strategist Jim Rea reviewed how U.S. stocks performed after 30 major geopolitical events. He believes the S&P 500 typically hits a low point about three weeks after an international event, and the market is currently nearing that time window. “Markets usually recoup most of what they’ve lost within 34 days after a shock.”

Research firm Variant Perception believes that the recent synchronized plunge in gold and stocks is a signal of de-risking and forced deleveraging in the market, which often indicates that a market bottom is near.

But not everyone fully agrees with this view.

BofA strategist Hartnett pointed out that the market hasn’t fully capitulated yet, but it is close to a critical moment. He believes the best time to buy the dip is when about 88% of global indexes fall below both their 50-day and 200-day moving averages. The S&P 500 is already at that level, but the global market may still need to fall another 3% to 5% before a buy signal is triggered.

Hartnett estimates that if oil prices fall below $100 per barrel, the market will be more confident about re-buying risk assets.

But clearly, the direction of oil prices depends on how the U.S.-Iran conflict evolves.

On March 28, U.S. Secretary of State Rubio predicted that the fighting would end in weeks rather than months, but the market barely reacted.

Larry, head of Instinet equity trading, said: “Maybe a few weeks ago such news would have driven a big rally, but today there’s no reaction. No one knows what will happen next. Now the market has a certain level of distrust toward the statements from both the U.S. government and Iran.”

Based on Iran’s current official line, the Strait of Hormuz is not “fully restored to freedom of navigation,” but rather is in a conditional, selective clearance state.

At the same time, while Trump says on the surface that the negotiations are well in hand, privately the U.S. military is still deploying new actions.

According to a report by Xinhua News Agency, on March 29 local time, Trump said that indirect negotiations between the U.S. and Iran were “going smoothly.” Iran has agreed to comply with most of the “15-point plan” for a ceasefire and will deliver 20 tankers of oil to prove its sincerity. He said he wants to “take Iran’s oil” most. But U.S. media reports that the U.S. military has increased its deployment of special operations forces to the Middle East. The total number of U.S. troops currently stationed in the Middle East exceeds 50k.

“To reach an agreement, both sides need to make concessions to each other, so I suggest not being optimistic too early,” said portfolio manager Moriarty. “At this point, it seems the two sides in the conflict still have huge disagreements.”

Citi Group’s U.S. securities strategy lead Scott also noted that the U.S.-Iran conflict has left investors trapped in unsettling uncertainty. “With two sides sending mutually contradictory statements about this conflict, trading has become extremely difficult,” he said. “The market lacks genuine confidence.”