ISTANBUL

Global markets focused on the Fed’s policy decision at its March meeting and Fed Chair Jerome Powell’s guidance on Wednesday, while markets enjoyed signs of recovery led by optimism that the Middle East conflict may ease soon.

Middle East tensions, fueled by joint US and Israeli military strikes on Iran and Tehran’s retaliations, continue to threaten the global economy, especially oil supply.

The potential long-term economic impact of the conflict remains to be seen, though some optimism has begun to emerge that tensions may soon subside.

Global energy costs are surging, putting upward pressure on global inflation risks, due to the targeting of oil facilities in the conflict and the effective closure of the Strait of Hormuz, a vital waterway for oil shipments.

Rising inflation risks complicate central banks’ future policy roadmap.

The Fed is widely expected to maintain its policy rate, while its quarterly dot plot will provide insight into the decision and the timing of future policy steps.

US President Donald Trump’s call to monitor the Strait of Hormuz for maritime safety failed to yield the expected response, driving up oil prices.

Brent crude closed at $100.9 per barrel on Tuesday, up 2.9%. On Wednesday, brent crude traded at $98.2, down 2.6%.

Iraqi Oil Minister Hayyan Abdul Ghani announced Baghdad and Erbil had reached a deal to resume oil exports starting Thursday, easing some supply-side risks in the market and reducing upward pressure on prices.

Following these developments, the US 10-Year bond yield fell 3 basis points on Tuesday to 4.2%, standing at 4.18% on Wednesday.

The US Dollar Index continued to decline for a second consecutive day, trading just above its previous close at 99.5 on Wednesday.

Gold is under pressure amid weakening rate-cut expectations and Middle East tensions, extending its decline into a fifth trading day after a limited drop on Tuesday, falling to $5,005 per ounce and trading at $4,989 per ounce on Wednesday, down 0.3%.

Airlines raised their first-quarter revenue estimates amid strong demand, despite rising jet fuel prices.

Delta shares rose 6.5%, while American Airlines shares gained 3.5%.

In light of these developments, the S&P 500 rose 0.25%, the Nasdaq 0.47%, and the Dow Jones 0.1% on Tuesday, while starting Wednesday positive.

In Europe, the eurozone’s February inflation data set to be released on Wednesday is on invester's radar.

The eurozone’s consumer price index (CPI) is expected to rise 0.7% month-on-month and 1.9% year-on-year in February.

The European Central Bank (ECB) and the Bank of England (BoE) will make policy decisions on Thursday, with markets expecting both banks to maintain rates.

European Commission President Ursula von der Leyen said she spoke with Iraqi Premier Mohammed Shia al-Sudani about regional security in the region in a telephone call, praising him for promoting restraint during such turbulent times while extending condolences to those who died in attacks on Iraqi territory.

She emphasized that the EU is a reliable partner, committed to supporting Iraq’s stability and sovereignty, as well as easing regional tensions.

The FTSE 100 climbed 0.33%, the FTSE MIB 30 1.22%, the CAC 40 0.49%, and the DAX 40 0.71% on Tuesday, starting Wednesday on a positive note.

In Asia, markets were mostly bullish, except in China, while the limited slowdown in oil prices and reports that Iran will not block the passage for some countries in the Strait of Hormuz alleviated some risks to energy costs in the region.

Japan posted a foreign trade surplus of $340 million in February on Wednesday, defying estimates, while the country also recorded a trade deficit of $7.2 billion.

US chip giant Nvidia announced it will resume AI chip production in China, boosting risk appetite in the region.

Meanwhile, tech giants in the continent saw their shares rise.

South Korea’s SK Hynix’ shares climbed 5%, Samsung Electronics gained more than 6%, while the shares of Japanese firms Aoi Electronics, Tokyo Electron, and Satori Electric rose 4.4%, 3.3%, and 1%, respectively.

The Nikkei 225 rose 2.9%, the Hang Seng Index 0.1%, the Kospi Index 4%, and the Shanghai Composite Index 0.3%.

*Writing by Emir Yildirim